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Report on Security of Natural Gas Supply in the European Part of the Unece Area

III. FACTS, FIGURES AND FUTURE

5. Resource and infrastructure availability

As has been described, the physical existence of gas resources will not be a limiting factor in the further development of the gas market. To mobilise these resources for Europe, the required field developments and infrastructure construction have to take place in a timely fashion.

As indigenous production in Western and Central Europe will decrease over time, the percentage of imported gas in this region will increase from about 50% today to about 70% in 2020 and possibly 80 - 90% in 2030. The import dependence as such is not seen as a problem, given that political and economic stability exist to allow for long-term supply planning and fostering the required infrastructure investment.

The costs of gas production (including gas transmission/transportation) are very likely to increase because of three elements:

  • More remote production areas;
  • More difficult climate conditions and physical circumstances;
  • More strict environmental limits.


Although there are also decreasing cost effects from improved exploration and production techniques, the overall trend is an increase in production costs. Nevertheless, resource availability and production capability are the key to security of supply on the gas market.

The increase in costs to produce new sources makes effective financing for producers more and more necessary. The Russian Federation and other producing countries from outside the EU are looking for fair, non-discriminatory crediting arrangements. Involvement of foreign investors and investment risk sharing amongst producers, gas transmission companies and gas consumers is necessary to secure financing. The investments in new transit capacity and storage have to be based on the accommodation of supply contracts, but also on the expectation regarding further market developments abroad and future gas production.

Long-term take-or-pay contracts provide a solid basis for contractual portfolios.
Their continuing existence is a key element in maintaining security of supply. This position is now recognised by the European Commission and reflected in the second Gas Directive and the draft Security of Supply Directive.