Switzerland’s natural gas supply is ensured thanks to a large portfolio of geographically diversified suppliers, reliable business partners and mostly long-term purchase contracts.
Three-quarters of the natural gas used in Switzerland comes from Western Europe (Netherlands, Germany and Norway).
The Russian gas imported into our country comes primarily from the German company UNIPER, which can guarantee a reliable supply to customers thanks to its sizeable storage capacities. The recurrent political and economic tensions between Russia and some of its neighbours, as described in the press, have never directly impacted continuity of supply into Switzerland, which does not import Russian gas directly. Ever since natural gas was introduced to Switzerland in 1974, the supply has continued uninterruptedly.
Worldwide reserves of natural gas are abundant and will be sufficient to meet the increasing energy demand. Reserves are concentrated in a limited number of countries and fields. Together, Russia, Iran and Qatar have around 56% of global reserves.
At the end of 2016, proven natural gas reserves were in the region of 188,000 billion cubic metres, equivalent to about 58 years’ consumption at the current rate (compared with 40 years for oil).
The rapid development of non-conventional gas production on the North American continent over the past ten years has completely altered the world gas market. New drilling and hydraulic rock fracturing technologies have boosted productivity and cut production costs. Taken in conjunction with falling demand for gas in the wake of the financial crisis, this boom in non-conventional gas has led to a substantial drop in the price of gas in the US, which is now the world’s leading producer of natural gas. With production of 690 billion m3 in 2014, of which 627 billion m3 was shale gas (out of total global production of 3,480 billion m3, according to the International Energy Agency), the US has now overtaken Russia. The IEA predicts that non-conventional gases will account for 31% of gas production in 2014, compared with 17% today.
The increasing importance of non-conventional gas in North America, combined with a cyclical decline in demand for gas, is very likely to result in a gas bubble (i.e. a large gas surplus) in the next few years. This will have a major impact on the structure of gas markets and on gas price formation, especially in Europe.
In this context, the question of whether to abide by the “take or pay” rules specified in long-term gas supply contracts has become a burning one in the past few years. Likewise, provisions allowing prices to be revised have been and will continue to be invoked. In the circumstances, relations between the European gas operators and the major producers have become somewhat strained.
Gaznat, like the other natural gas operators, has therefore undertaken to renegotiate its long-term contracts in order to improve their market indexation and maintain their competitiveness. In 2015, as in previous years, negotiations were held between Gaznat and its long-term gas suppliers, GasTerra (via Swissgas) and Engie. At the end of 2015, 20% to 25% of Gaznat’s supplies were still indexed to petroleum products – a huge improvement compared with the 80% at the turn of the millennium. Most contracts are now linked to market prices, either through the indexing of medium- and long-term contracts, or through wholesale market purchases.
New supply routes
Several projects exist to build new infrastructure that will supply gas to Europe, whether by gas pipeline or LNG carrier.
The principal pipeline projects are as follows:
- Nord Stream directly links Russia to Germany via the Baltic Sea. The first section came into operation in 2011; the second was opened in 2013. Nord Stream AG is a joint venture between Gazprom, BASF SE/Wintershall Holding AG, E.ON, GDF SUEZ and Gasunie. Find out more
- The Turkish Stream project, managed by Russia (Gazprom), will link Russia to Turkey via the Black Sea. In 2015 this project replaced the “South Stream” project, which was originally due to link the Caspian Sea fields to Bulgaria. Construction of the pipeline began in May 2017. Find out more
- The Trans Adriatic Pipeline (TAP) project, which will link Greece and Italy via Albania, was selected by the Shaz Deniz consortium in September 2013 to carry Azeri gas to Europe via the southern corridor. This 870-km-long gas pipeline is expected to come on line in 2018. TAP is a joint venture between Axpo (Switzerland, 5%), Snam (Italy, 20%), SOCAR (Azerbaijan, 20%), BP (UK, 20%), Fluxys (Belgium, 19%) and Enagas (Spain, 10%). Find out more
- EastMed, the Eastern Mediterranean gas pipeline project, is set to be one of the longest in the world, connecting the Eastern Mediterranean with Southern Europe. This gas pipeline, which will cost USD 6.2 billion (EUR 5.8 billion), is designed to carry the gas that has recently been discovered off the coasts of Cyprus and Israel to Europe, thus reducing the continent’s dependence on Russian energy. The gas pipeline is due to come on stream in 2025. Find out more
- The GALSI gas pipeline is due to come into operation in 2018, running between Algeria and Italy via Sardinia. The GALSI pipeline will be the deepest ever laid, at a depth of 2,885 metres. The companies involved with this project are Sonatrach, Edison, Enel, Sfirs and Snam Rete Gas. Find out more
- The Medgaz gas pipeline linking Algeria and Spain came into operation in April 2011. Medgaz is a consortium of five international companies: Sonatrach, CEPSA, IBERDROLA, Endesa and GDF SUEZ. Find out more
Planned LNG terminals
- Most of the planned liquefied natural gas (LNG) terminals will be located in the following countries: UK, Netherlands, Spain, Italy, Belgium and France.
- Projects are also being considered in other countries, including Germany, Poland and Croatia.