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Alexander Medvedev: Natural gas to play a decisive role in СО2 emission reduction

Date: January 25^th 2010 Author: Anastasia Filatova, Moscow Category: Articles
Topic: Natural gas , CO2 emissions

It is no secret that one of the most dangerous problems of humankind today is global warming which is caused by people’s activity and in the first place by the emissions of gases such as CO2, leading to the greenhouse effect.

The speech by Alexander Medvedev, Deputy Chairman of the Management Committee of Gazprom and Director General of Gazprom Export, at the Handelsblatt conference in Berlin on January 21, was devoted to this problem.

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According to Medvedev, there are different ways to reach concrete carbon reduction targets. However, any climate change policy is based on the idea of making carbon emissions more expensive, be it with carbon taxes or under cap-and-trade system like the European Emission Trading scheme. This means that cleaner fuels should become more competitive in comparison to dirtier fuels, therewith reducing the market share of the highest emitters. Nowadays, natural gas is the cleanest of all fossil fuels.

PHOTO: Martina Budal

However, European governments – being afraid of the growing dependence on the Russian gas supplies – are trying to find alternative ways of struggling against climate change, and fail to mention the importance of natural gas as a cleaner alternative to other conventional fuels. Gazprom’s executive finds this surprising.

In his speech at the conference, Medvedev underlined that increasing the natural gas share in the EU energy mix by just one per cent would reduce СО₂ emissions by more than three per cent. And by replacing every second coal-based power plant with modern gas-turbine units, Europe could achieve practically half of its 2020 emission reduction targets in a short period.

In 2009, the demand for Russian natural gas shrank and the overall annual gas consumption decreased by seven per cent across Europe. However, despite the massive economic downturn, gas consumption never really sank below the 2007 level, which puts gloom and doom in some quarters in perspective. Medvedev considers the current gas demand contraction to be a function of the economic cycle and not a sign of a structural crisis. Demand for Russian gas in the second half of 2009 has already bounced back to pre-crisis levels.

In addition, the Russian gas giant stands for long-term contracts though during the crisis, prices on the spot market decreased substantially, making it unprofitable to stick to the existing agreements. Medvedev underlined that European energy security warranted high capital investments in massive infrastructure projects. And only long-term contracts give suppliers and consumers full planning stability to undertake the required investments in upstream and infrastructure. To secure the necessary funding, upstream operators such as Gazprom have negotiated billions of dollars in project financing – which is based on the projected cash flow guaranteed by long-term fixed price contracts.

PHOTO: iStockphoto

“We believe that natural gas will play a decisive role in СО₂ emission reductions and hope that neither prejudice nor misperceptions will tarnish the successful relationship between suppliers of natural gas in Russia and our consumers in Europe,” Medvedev said, summing up his speech.

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