Europe has barely noticed the loss of Libyan gas since violence flared and workers fled in late February, thanks largely to Russia, but fears remain of wider unrest in the Arab world hitting bigger suppliers.

Russia has eagerly made up for the loss of about 2 percent of Europe's gas since Libyan exports stopped in late February.
Just two winters ago Russia caused Europe's biggest ever energy crisis by cutting off about a fifth of the region's gas supply.

Reduced Libyan oil output, and fears of further contagion in the energy-rich region, drove Brent crude to nearly $120 a barrel on Feb. 24. Prices have since remained at levels not seen since before the global economic crisis in 2008.

But after modest rises when Libyan flows into Italy first stopped on Feb. 22, European gas prices have been fairly stable.
Russian gas export monopoly Gazprom has seized the chance to sell more to Europe, its oldest customer whose appetite has been dampened by depression and a deluge of Qatari liquid gas (LNG).

"Our Russian friends were extremely quick to up supplies and, to be fair, they have been playing this role for decades," Ian Cronshaw, head of energy diversity at the International Energy Agency (IEA)

"That flexibility, because of their sheer size and their ability to move production up and down quite rapidly, is extremely valuable to Europe."
Cronshaw, whose department advises Europe's biggest economies on energy security, said that with the notable exceptions of the Russian gas crises of 2006 and 2009 Moscow had been a reliable supplier.

But even Russia, the world's biggest exporter, would struggle to replace another 50 billion cubic metres of gas a year that Algeria supplies, which is five times more than Libya exports and more than a tenth of Europe's needs.

"If a bit of Algeria suffers some unrest then, even in gas, we have a problem," Thierry Bros, senior European gas and LNG analyst at French investment bank Societe Generale, said.

"If you lose a huge chunk of Algeria there is no limit to the upside (on prices) ... If you can't balance supply and demand it's going to be very difficult."

Russia sent over 184 bcm of gas to Europe in 2008. Its sales fell below 140 bcm last year, as Qatar barged in with cheaper LNG and European demand was subdued.

After making some of its gas cheaper, Gazprom said before Libyan production was shut down that it hoped to sell 152 bcm to Europe this year, but that is still 32 bcm below the 2008 level.

SocGen estimates that Europe has about 33 bcm of spare supply capacity in 2011, a comfortable cushion for most scares.

So even quite large reductions in gas flows from Algeria into Spain or Italy should have limited impact on overall supply. Spain, which is isolated from Russia by France, would need much more LNG on a well supplied global market and Italy may struggle to pump enough gas in from the north.

ALGERIA UNREST
The threat of Algeria going the way of Libya is seen as reduced after President Abdelaziz Bouteflika lifted a 19-year state of emergency in a concession to opposition groups.

"Given the country's vast challenges, Algeria is not safe from potential turmoil," IHS Global Insight analyst Gala Riani said.

The huge importance of Algeria to European supply -- and because nearly all the gas is channeled via one central hub south of Algiers -- is keeping many wary European eyes fixed on the situation, even if they do see it as less likely to explode.

"It is unlikely that Algeria will experience the same problems as Libya ... The president is more sensible and moderate," a gas market analyst at a major European utility said, adding that the country's civil war
"I agree it is a risk but I see it as unlikely."

IMPORT DEPENDENT
The 27 countries of the European Union import nearly two thirds of their gas. Spain and France are almost totally reliant on imports and Italy brings in over 90 percent of its gas, according to EU data.

As a major consumer of both Algerian and Libyan gas, and with more than half of electricity generated from burning it, Italy is the most exposed to supply problems.
Fulvio Conti, the head of Italian power giant Enel has warned that Italy risks blackouts if gas cuts spread to Algeria and the Gulf.

But Italy has huge stocks of gas and Qatar, which supplies just as much LNG to Italy as Libya does pipe gas, seems unlikely to be rocked by violent revolution.

"For the moment we see the gas issue as manageable ... In Egypt, which is also a major gas supplier and transit route for Qatari gas that comes through the Suez Canal, there haven't been any problems there and they had what seems like fairly major political change," the IEA's Cronshaw said. "Qatar is now an important supplier to Europe, we have seen over the last 18 months LNG imports rise by about 30 percent into Europe ... that's an extra bit of supply for Europe and an extra bit of diversity."