Germany is currently the world’s biggest importer of Russian gas but the European Union in the wake of the ongoing crisis in eastern Ukraine has reiterated its call for EU member states to reduce their reliance on Russian energy.
The 300-kilometre-long Arc De Dierrey pipeline being built by grid operator GRTgaz will mainly carry gas from state utility EDF’s new LNG terminal and improve transit to southern part of France.
But its potential as an alternative link for Germany and Switzerland have gained importance since the Ukraine crisis reignited concerns about the transit of Russian gas to Europe.
“Arc De Dierrey is the first step of a grand plan to unify the two French gas hubs,” Olivier Aubert, head of supply at GRTgaz, said in an interview.
“But it will contribute to another service in the future, making France an entry point for gas in Europe. And the most important market, that we all have in mind, is Germany.”
Germany, which relies for 36 per cent of its gas imports on Russia, does not have direct access to an LNG terminal on its coast, although two other terminals, in Belgium and the Netherlands, can supply it with LNG. Liquefied Natural Gas, which is cooled to a liquid for transit by ship, can deliver gas from a diverse list of producers around the world.
In Europe it still struggles to compete with cheap, piped gas from countries such as Russia, but French LNG operators are among those betting that will change.
Faced with the prospect of declining North Sea production, GRTgaz’ majority shareholder GDF Suez and EDF are upgrading France’s three LNG terminals to increase the country’s import capacity.
LNG prices have been swollen by rising Asian demand since 2011’s Fukushima disaster in Japan but new projects are coming on stream in Australia and the United States in anticipation that global gas demand will continue to grow. “It’s totally possible that LNG becomes more competitive and on that day, the question will come up about exporting to central Europe,” Aubert said.
“Germany is a first step,” he said, but other countries further east could also be interested.
“That’s the key point today for these countries which have access to Russian gas only through routes crossing Ukraine,” he said.
The 635 million euro ($866 million) pipeline, whose construction started in March in the plains north of Paris, has received a 77-million-euro subsidy from the EU for its role in diversifying European energy procurement.