Gas giant keen to strengthen its ties with Gulf

German firm E.ON Ruhrgas leads global scramble to secure new supplies.

Europe's big power and gas utilities have been seeking to reduce their dependence on Russian gas, following disruptions to deliveries in recent years. That has led to a worldwide scramble for new supplies from as far away as the Gulf, even as Europe faces a gas glut. In a recent interview, Dr Bernhard Reutersberg, the chief executive of E.ON Ruhrgas, said the German gas company was broadening its footprint in the MENA region, in part to offset an expected long-term decline in gas supplies from the North Sea. It was also seeking to develop technology for exploiting potential new gas sources close to home and was investing in gas storage to compete more effectively in international markets.

In the Gulf, E.ON is especially keen to strengthen its relationship with Qatar, the world's leading exporter of liquefied natural gas (LNG). The company wants to develop its LNG business as a "third pillar" in its gas supply portfolio, supplementing purchases of pipeline gas from European countries and Russia and its expanding gas exploration and production business. Here, Mr Reutersberg explains some of the thinking behind the company's strategies.

Q. E.ON Ruhrgas is currently importing most of its non-European gas supply from Russia. Are you looking to diversify that supply, and if so, what are the most likely new sources?

A. Although Russia remains an important partner for our company, E.ON Ruhrgas is already the importer with the broadest sources of supply in Germany. We procure natural gas from various countries, including Norway, the Netherlands and Denmark. Additionally, we have been intensifying our upstream business, including exploration and production efforts in the British and Norwegian North Sea, in Russia and in North Africa. Our extensive production portfolio is supplemented by numerous exploration licences in the UK, Norway and North Africa (Algeria and Egypt).

Our overall goal is to diversify the supply portfolio and to thereby obtain up to 10 billion cubic metres of gas from our own sources. Furthermore, we have established ourselves as a player in the liquefied natural gas business with developing efforts in Africa and the Middle East. In the three years since we opened our regional Middle East office in Dubai, which is headed up by John Roper, E.ON Ruhrgas has established additional presence in both Doha and Abu Dhabi, two of the Gulf's LNG producers, and this focus has allowed us to quickly build a productive communication with the key decision makers in good time.

What role will natural gas play in the transition to lower-carbon energy, and how is E.ON Ruhrgas adapting its strategies to that transition?

Natural gas plays a key role in a well-balanced, sustainable and viable energy mix. It is a clean fossil energy and has the potential to replace sources which are putting a higher burden on the environment. By feeding biogas into the gas distribution system, natural gas in itself becomes a storable and renewable source of energy. Together with its market partners, E.ON Ruhrgas is supporting the development and market launch of new technologies. Above and beyond the existing commitments in the sectors of gas heat pumps, fuel cells and power-producing heating systems, their market launch is to be assisted through further laboratory and field tests.

How important is gas storage to E.ON Ruhrgas and does the company have plans to expand its storage facilities?

Storage facilities contribute significantly to an international and competition-driven natural gas market. We therefore strive to develop our capacities in western Europe considerably. With our subsidiary E.ON Gas Storage, which is already ranked among the largest storage corporations in Europe, we are currently working on various expansion projects. We have secured cavern storage with 2.5 billion cu met res capacity in northern Germany, which will be put into operation by 2012.

How does the company cope with the huge price uncertainties in the gas market?

We are currently confronted with drastic market prices changes, which are due to an excess supply of natural gas in Europe. The worldwide crisis has led to a decrease in demand and countries like the USA and LNG suppliers in the Middle East have strongly increased their production capacities. Yet most experts expect the market to consolidate in the medium term as overall demand picks up.