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    Energy Expert: It's Only a Matter of Time Before the Shale Topic Will Be Raised Again in the EU, Lithuania

Summary

Agnia Grigas, a US energy expert who specializes in Russia, Eastern Europe, and the Post-Soviet space, talks about Baltic energy issues.

by: Linas Jegelevicius

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, Shale Gas , Featured Articles, News By Country, Lithuania, Baltic Focus

Energy Expert: It's Only a Matter of Time Before the Shale Topic Will Be Raised Again in the EU, Lithuania

How will the now 'wobbly' Russian gas giant Gazprom measure up in the future? What will the geopolitical climate look like for the Baltics as it cuts loose from the Russian monopoly? What do energy issues look like in each Baltic country? These are questions that can be answered by Agnia Grigas, a US energy and political risk expert with family roots in Lithuania specializing in Russia, Eastern Europe, and the Post-Soviet space. The non-resident Senior Fellow at the Atlantic Council has written the book The Politics of Energy and Memory between the Baltic States and Russia and looks forward to putting out another two, also on energy issues: The New Geopolitics of Gas ( forthcoming in 2017) and Beyond Crimea: The New Russian Empire  (forthcoming 2016). Grigas kindly agreed to take several questions from Natural Gas Europe.

How do you see the Baltic energy market in the short and long-term?

The Baltic energy market is in the process of transforming even though the full results are not yet evident in the short term. After more than two decades of being “energy islands” cut off from the energy markets of EU states and having been fully dependent on Russian gas, the Baltic States are successfully pursuing integration of their infrastructure with neighboring states, diversification strategies, and regulatory reform that weakens Gazprom’s monopoly in the region. Continued political will, EU unity, long term investment strategies, and favorable global energy markets will be important to transform the Baltic energy markets in the long term. 

How do you believe the LNG terminal in Lithuania will play out for the country amidst gas sale difficulties? Regionally, with Estonia pursuing its own LNG terminal? And globally, will US LNG imports hopes live up to the hype?

The primary value of the Lithuanian LNG terminal has never been to fully replace Russian piped gas but rather to serve as a hedge or alternative source in case there are supply disruptions from Gazprom or if the Russia demands political concessions or charges political pricing for its gas. With new improved gas links between the three Baltic States the Lithuanian terminal can also provide a level of security and bargaining strength to the other Baltic countries. Overall, the geopolitical and strategic value of the Lithuanian LNG terminal will remain regardless whether other neighboring countries build their own LNG facilities.

Other regional LNG terminals would nonetheless reduce Lithuania’s Independence terminal's commercial potential of large imports. Likewise, it does not matter if the Lithuanian LNG terminal will never receive American LNG. Most importantly, America’s gas boom has brought large amounts of additional gas to the global gas markets, freeing up more LNG from Qatar, Norway and Algeria for imports by the Lithuanian terminal.

Finally, even if the US does not become a major LNG exporter, its shale gas revolution has enabled it to become self-dependent on gas rather than as was predicted before the shale boom to become significant importer of LNG, which would have resulted in tighter gas markets.

Will Estonia be able to fully satisfy its energy needs from oil shale, which is something the Baltic country plans on?

Oil shale has been an important source of energy for Estonia making it less dependent on Russian gas in its overall energy mix. However, it is questionable to what extent shale can satisfy Estonia’s long term needs especially due to the environmental concerns related to oil shale production. In the medium term it will remain important nonetheless.

How do you see Gazprom's prospects in Eastern Europe and the Baltics both short and long-term?

I believe that we are at a turning point where Gazprom will slowly start losing its dominant position in EU markets, including the Baltic States. While today Gazprom is still a dominant force and it will remain an important supplier of gas to Europe in the long term, its gas supplies will lose much of its political clout and Gazprom will lose its monopolistic position.  The EU’s anti-trust case against Gazprom made it clear that EU wants Gazprom’s gas on its own terms rather than terms dictated by the Russian giant. Likewise, EU “unbundling" regulation already implemented in Lithuania and Estonia and due to be implemented in Latvia in the future will split up Gazprom’s ownership in key energy companies, reducing its monopolistic advantage. Lastly, the growing political will and practical steps to diversify gas supplies either with alternative gas pipelines, LNG terminals, or reverse flow of existing pipelines will transform the gas markets of European, Eastern European states, potentially even those of Ukraine. 

Do you believe the shale gas pursuit in Europe and, specifically, Lithuania, is a matter of the past?

As North America is experiencing a shale revolution and other powers like China are eager to catch up, it is only a matter of time when the question of shale gas will be raised again in Europe and Lithuania. Shale gas development has been able to unlock tremendous resources for energy poor countries and will be naturally appealing for countries like Lithuania. However, before production or even exploration takes off in Europe a number of hurdles need to be passed including Natural Resource Law reforms that would incentivize exploration to land owners - something that primarily exists in the US not in Europe. Europe’s different geological conditions and the high costs associated with shale development are other immediate barriers. Likewise Europe’s concern with environmental impact of shale development may lessen with time as the US improves its own technologies and improves the environmental track record. 

Will Latvia continue solely relying on its vast hydro capacities in the future?

I would think hydro power would remain important to Latvia in the future as the country for now lacks any other domestic energy resources.