Bergmann's forecast

Gas market participants will have a hard time

The head of E.ON Ruhrgas, 64-year-old Burkhard Bergmann, despite his planned retirement in early March, will continue to represent the interests of the German company in Gazprom. As a Vremya Novostey correspondent was told at the headquarters of E.ON Ruhrgas, Mr. Bergmann has once again been nominated as a candidate for the board of directors of Gazprom. The German top manager is the only foreigner on the board of directors of the Russian concern for eight years. In this capacity, at the end of last year he was awarded the national Russian Director of the Year award. As is known, 53-year-old Bernhard Reutersberg, who currently oversees natural gas sales on the company’s board, will be appointed to the post of Chairman of the Board of E.ON Ruhrgas. E.ON Ruhrgas owns about 6.5% of Gazprom shares. The value of this package has now grown and, according to Mr. Bergmann, is approximately 15 billion euros.

In the meantime, Mr. Bergmann, who has held positions on the board of directors of E.ON and E.ON Ruhrgas for the last 27 years, gave his forecast for the development of the gas industry, which is based on current political trends in Germany and Europe. Thus, the head of the largest German company - an importer of natural gas - expects a significant decrease in demand for hydrocarbon raw materials in the coming years. “Heat consumption in the German market will fall,” Mr. Bergmann said in yesterday's Financial Times Deutschland, “while the share of renewable energy sources will rise sharply.”

Today, the German gas industry is increasingly talking about impending fundamental changes. “The German Federal Government is committed to doubling the level of renewable energy consumption from the current 7% of the overall energy mix to 14% in 2020,” says Mr Bergmann. Energy saving measures, such as improving the thermal insulation of buildings, are curbing the growth of energy consumption. From Mr. Bergmann's point of view, the losses caused by these factors in the gas sales sector in Germany can at best be compensated for by increasing the level of sales abroad. However, here too the head of E.ON Ruhrgas prefers to be realistic. “Others will also try to do this,” he said, referring to increased competition in natural gas sales.

This competition, increasing uncertainty in procurement, as well as legislative innovations are forcing E.ON to reconsider its business model. The hope of compensating for the decline in the heat market by increasing electricity production using gas had to be abandoned, Mr. Bergmann emphasizes. “Currently, almost no new gas power plants are being built in Germany,” laments the chief of E.ON Ruhrgas. “After all, carbon dioxide emission certificates for all new facilities today are issued free of charge.” Thus, natural gas loses its advantage, in particular, in relation to coal. “Only if these certificates have to be redeemed in the future will environmental discrimination against natural gas disappear,” he continues. But if this happens, it will not happen soon: electricity producers have only been required to pay for at least part of their “rights to pollute” the atmosphere since 2013.

An additional factor putting pressure on Germany's largest gas companies is the demand from regulators to sharply reduce network access fees. This, as Mr. Bergmann notes, has a negative impact on the readiness of large concerns to invest in the development of transport networks. “We have a number of projects in which investments are unprofitable,” he says. “If the legislative framework is designed in such a way that no one will invest, this will lead to serious conflicts.”

According to the head of E.ON Ruhrgas, the problem of ensuring the reliability of external gas purchases is also important for large importing companies. “In the next decade, gas production in Germany and the Netherlands will gradually decline. However, we will have to purchase the lost volume of gas somewhere else,” says Mr. Bergmann. E.ON Ruhrgas provided about 60% of its needs through long-term contracts with gas producers in Russia and Norway. However, the lack of final agreements regarding E.ON’s participation in the joint development of the Yuzhno-Russkoye gas field does not add confidence in relations with Russian partners. Essen cannot answer whether Burkhard Bergmann, who in the early 1970s participated in the signing of the first contracts for the supply of Russian natural gas to Germany and Western Europe, will be able to bring the protracted negotiations on the Yuzhno-Russkoye field to a successful conclusion. “We have to get used to the fact that today we will no longer be able to be real participants in all projects,” Mr. Bergmann said. “We have to start five, maybe ten projects so that one of them is realized as a result.”

Yuri Shpakov, Berlin