Will Soviet natural gas burn West Europe?
Paris — That blue flame of natural gas that cooks food, heats houses, runs factories, and generates electricity - will it save the world from expensive oil for the rest of the century?
Or, as oil prices go down, is it an increasingly expensive and controversial form of energy - which the Kremlin, a major supplier, could use to hold Western Europe ransom for political ends?
Two new concerns have surfaced in Western Europe and in Washington now that Organization of Petroleum Exporting Countries (OPEC) oil prices have begun to fall - and on the eve of the economic summit in Williams-burg, Va., in May.
One concerns availability. How vulnerable is Western Europe to an arbitrary cutoff of natural gas supplies, either by the Soviet Union for political ends, or by Algeria to force up the price?
West European government sources say in interviews here that those who would suffer most from any cutoff are consumers who use gas to cook and to heat rooms and water in residential areas. About 20 percent of all gas used in Europe goes to houses and apartments that have no other supplies.
The other concern is price. Gas prices have been rising steadily since 1980. Demand for gas in Western Europe fell 3 percent in 1980, another 3 percent in 1981, and dropped again last year. As oil prices go down, gas will become uncompetitive unless producers lower their own prices accordingly. The Soviets have been highy conscious of the market in the past, but Algeria has not.
On security, the question is whether West Europe has made a strategic mistake in committing itself to buy large amounts of Soviet (and Algerian) natural gas in the coming decade.
The item is on the agenda for the Williamsburg summit, and the 21-nation International Energy Agency (IEA) is racing to complete a study on Western Europe's vulnerability to gas cutoffs before the summit begins. The study will also recommend what governments might do to protect themselves more.
According to figures from the Organization for Economic Cooperation and Development (OECD), Soviet pipelines from the Yamal region and from Urengoy will be supplying these percentages of energy to West European countries by 1990:
* France: between 30 and 35 percent of natural gas, amounting to 4 percent of total French energy requirements.
* West Germany: 30 percent of gas, or 6 percent of total energy needs.
* Italy: 35 percent of gas, 7 percent of energy needs (if the Rome legislature approves new contracts with Moscow).
* Austria: 80 percent of gas, 15 percent of all energy requirements.
* Finland: 100 percent of gas, which is only 4 percent of total energy needs.
The Reagan administration had the dependence risk in mind, as well as trying to weaken the Soviets by denying them valuable hard currency (foreign exchange), when it tried last year to block West European affiliates of United States companies from supplying pumping stations and other equipment to build the pipeline.
''Four percent of French energy coming from the Soviets sounds a small figure , but it could be a big political problem if the 4 percent of people hit by a cutoff are politically important consumers in their homes,'' as one governmental source here remarks.
French and West German officials reply that the Soviets have proved to be reliable commercial partners in the past. Besides, they say, the Kremlin would not interrupt supplies, since it needs hard-currency revenue from gas exports too urgently.
The attempted Reagan pipeline embargo split the Western alliance, with European governments objecting strongly to President Reagan's methods. They insisted the US has no right to stop existing contracts or to tell other governments what to do, and they accused the US of having double standards because American farmers continue to sell grain to the Kremlin. Recession-hit Western Europe was also under domestic political pressure to provide pipe and pumping stations.
After much debate, European pipeline sales are going ahead. In return, the US wants to extend the list of goods that may not be exported to the Soviets at all.
Reagan officials used the US Export Administration Act to try to block the pipeline. That act expires in September, and West European capitals are lobbying in Congress and in the executive branch to cut back its claimed jurisdiction over countries abroad. A British minister of state in the Department of Trade, Peter Rees, is scheduled to fly to Washington March 23 to press for restrictions to the act.
On the second emerging concern about gas - price - governmental sources point out that gas is already losing out to cheaper fuel oil in generating electricity by steam. Coal and nuclear energy are nudging gas out of contention for generating electricity in general, though gas remains important in residential areas.
Algeria has pushed up natural gas prices sharply by linking them to crude oil prices. According to figures that senior IEA official Robert S. Price presented to the European Petroleum Conference in London late last year, Algerian prices to Belgium, France, and Italy were 23 to 35 percent more expensive than oil.
Soviet contracts for Siberian gas are much more competitive. They start out with a below-market price, but escalator clauses will push prices sharply higher by 1990. Whether that higher price will be competitive with oil by 1990 depends on the state of world demand for oil, and the price of oil.
Sources here say Moscow's track record to date suggests the Soviet Union will not insist on higher prices if they reduce sales. Besides, diplomats understand that the Soviet contracts contain a ''hardship'' clause, under which customers can renegotiate prices if they are seen to be punitively high. As for Algerian contracts with Italy, they are said to be linked with a ''basket'' of crude oil prices. If oil prices go down, so does the gas price - and vice versa.
This could be good for Western Europe in the short run as oil prices fall. But if cheap oil prices lure Western Europe away from alternative energy sources , and Soviet oil prices pick up again toward 1990, Western Europe would have a problem.''
Our concern,'' says a governmental official, ''is that unless gas prices generally are aimed at the marketplace, it will be very difficult for gas to replace oil as an economic source of energy.''
The security and reliability of energy supplies in general are on the agenda for Wil-liamsburg. The IEA secretariat is working on a more general study on oil and gas and on possible alternatives to Soviet supplies.
West European governments turned to increasing supplies of Soviet and Algerian gas in the 1970s to offset the rising prices and the political uncertainties of imported OPEC oil. Large Dutch gas fields are being depleted, and West European demand for gas is pro-jected to rise steadily for the rest of the century.
Despite Algerian cutoffs to the US in 1980 to push prices up, and despite the prospect that the Soviet Union might be tempted to act politically, Europe decided that both suppliers were more desirable than continued heavy reliance on OPEC oil.
The question is whether they were right.