Supply

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.

Supply contracts

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:

 

 

Planned LNG terminals