Marcel Dietsch: LNG Prospects in Europe and Natural Gas Co-operation The European Union’s energy security strategy rests on three pillars: 1. diversification, 2. liberalisation and 3. better energy efficiency. Increased diversification of energy supplies is to be achieved through increased use of a) renewable resources, b) new transport routes and c) new geographical sources of conventional supplies such as oil and natural gas. Liberalisation entails policies aimed at introducing more competition and market mechanisms especially in the existing natural gas market. It also entails deeper integration and better interconnection of national markets in Europe. The increased use of LNG is related in many ways to the first and second pillars of the European energy security strategy. My presentation will examine whether and to what extent LNG can improve European energy security defined as the absence of physical delivery interruptions of affordable and reliable energy supplies. Two issues will be analysed in particular, the first being related to the short-and mediumterm situation and the second being concerned with long-term developments. First, while LNG allows European countries to diversify its sources by buying shipments from e.g. Nigeria and Yemen—i.e. sources that are independent of traditional pipeline routes and suppliers—one must look carefully at dependencies and existing and planned LNG regasification capacities in detail. I will present the countries in Europe with high import dependencies and show where current and future LNG receiving terminals are located to show whether – in the absence of a more comprehensive network of interconnectors between EU member states – LNG actually contributes to improved short-run energy security. The second issue is related to the pricing of gas as an energy security concern. At current import levels of about 15%, LNG contributes to the EU’s energy security as a means of diversification. It also helps reduce market power of dominant pipeline suppliers such as Algeria and Russia, which enjoy vast market shares and even quasi-monopolist positions in some EU countries. LNG is therefore the price limiting supply in parts of Europe. Yet, all of the EU’s LNG suppliers are members of the Gas Exporting Countries Forum (GECF). The GECF represents the world’s leading gas producers and aims to promote their mutual interests in order to derive the maximum value from their natural gas reserves. While not engaging in OPEC-style quotas at the moment, GECF members cooperate by exchanging views and planning to coordinate project development, supply and demand balances, exploration, production and transportation costs. Hence, the moderate use of LNG does contribute to the security and diversity of EU gas supply at present. However, the benefits may not be so pronounced if LNG becomes more widely used in the coming decade since cartelisation of the LNG market (i.e. higher prices) will become a real risk for consuming countries in Europe. I will also mention the recent developments regarding unconventional gas resources in the US and how this might impact LNG and the European market in the long-run.