Translated material
With pipes at the ready
The European Union is doomed to search for new sources of raw materials supply
Despite the seemingly successful completion of conflicts with transit countries - Ukraine and Belarus, the idea of a Russian gas threat has taken hold of the minds of Europeans. However, the reason for this is not only the tightening of Moscow’s policy in the field of energy resources. To no lesser extent, such a reaction is caused by fundamental changes in the balance of gas consumption in the European Union.With the expansion of the European Union to include the countries of Eastern Europe and the Baltic republics of the former USSR, the union’s dependence on imports of blue fuel from Russia has already jumped sharply. And with the decline in its own production in the North Sea, it threatens with new unpleasant proportions in the formation of the energy balance. Moscow’s policy of restricting foreign companies’ access to hydrocarbon production in Russia not only caused concern in Brussels, but also forced them to demand additional guarantees from their Russian partners. Problems with Kiev and Minsk only added fuel to the fire and allowed Europeans to start talking about the reliability of Russian gas supplies, which did not cause such debate even during the Cold War.
If we look at the numbers, the transformation of the balance of gas consumption by EU countries looks like this. According to the annual report of BP Statistical Review of World Energy, in 2003 the European Union, which still had 15 members, consumed 405.5 billion cubic meters of gas. Of this, only 18.6% (75.8 billion cubic meters) was imported from Russia. That is, almost twice lower than the maximum 30 percent limit established in the European Union for obtaining energy from a single source. Two years later the picture changed dramatically. In 2005, even the EU-15 countries began to buy significantly more raw materials from Gazprom (95 billion cubic meters, or 22% of total consumption). But if we take into account the new members of the union, which finally joined the EU in May 2004, then the dependence on Russian gas of the united Europe immediately grows to 27.5%. In 2005, 25 countries consumed about 467 billion cubic meters of gas, of which 128 billion were imported from Russia. Thus, the level of dependence has approached the maximum allowed by EU documents. Moreover, in newly arrived countries, Gazprom provides on average almost three-quarters of gas needs.
Thus, the growing concern of Europeans is directly proportional to the increase in the share of supplies from Russia, which is not very hospitable for foreign investors. In official documents of the European Commission, the current situation is so far referred to as “relatively comfortable”, since 46% is still provided by domestic production in the UK, the Netherlands, Germany, Italy and Denmark. Another 15% is imported from Norway, which as a partner does not raise any doubts. About 6% is imported as liquefied gas, and the same amount is piped in from Algeria and Libya.
But the situation will progress. As stated in the draft EU energy strategy, by 2030 gas consumption in the eurozone countries will increase to 635 billion cubic meters. And domestic production, which has remained stable over the past decade, will decline catastrophically. According to Brussels forecasts, in 23 years gas imports to EU countries will double: they will be forced to import 535 billion cubic meters (about 85%). In this context, Europe, willy-nilly, needs to consider and develop the most fantastic projects to increase its gas import capabilities. There are only three large gas transportation projects and the idea of the rapid development of a system for receiving liquefied natural gas.
One of these projects is almost completed - the Langeled pipeline from the Norwegian Ormen Lange field to the UK with a capacity of 20 billion cubic meters. It was put into operation in the presence of British Prime Minister Tony Blair last fall. Due to the fact that the installation of the pipeline was delayed by a year, in the winter of 2005/06 there was an acute gas shortage in the British Isles. Prices on the wholesale market were several times higher than on the continent, and many industrial producers were forced to suspend production. However, this is where the contribution of Norwegian fields to the growth of demand in Europe is practically exhausted.
The second project, without which it is already difficult to imagine a safe energy future for Europe, is an offshore gas pipeline from Russia to Germany with a continuation to the UK, called Nord Stream. It should be said that Europeans are well aware of the lack of alternatives to the dominance of Russian gas in the balance of blue fuel consumption in the Old World. That is why this gas pipeline received TEN (Trans-European Network) status back in 2003, which indicates its priority nature for the energy security of the EU. It is assumed that through Nord Stream the EU will receive 27.5 billion cubic meters of Russian gas in 2011, and two years later, due to supplies from the Shtokman field on the Barents Sea shelf, the volume of supplies will double.
The third source of growth in pipeline gas imports is North Africa, primarily Algeria and Libya. There are two promising projects here: the expansion of GALSI (Algeria-Italy via the island of Sardinia) and Medgaz (Algeria-Spain). The first should be launched in 2008, however, as stated in the materials of the European Commission, it is experiencing serious problems with the timing of commissioning, the second - in 2009. The throughput capacity of these gas pipelines along the bottom of the Mediterranean Sea is planned at 8-10 billion cubic meters per year each. In ten years, to fill them, it is planned to build the NIGAL gas pipeline from Nigeria to Algeria with a capacity of up to 30 billion cubic meters per year.
At the same time, Brussels intends to persistently push for the construction of a new gas import corridor, which is now known as Nabucco. The capacity in Turkey is 25--30 billion cubic meters, and at the final destination Baumgarten (Austria) - 12--15 billion cubic meters. The remaining volume is intended for transit countries (Bulgaria, Romania and Hungary). Initially, it was conceived as a corridor through which Iranian gas would reach the EU through Turkey and the Balkans. Considering that Iran has the third largest reserves of blue fuel in the world, this was a new interesting source of gas supply to Europe. However, military-political problems excluded Tehran from the list of potential gas suppliers for many years. Therefore, an attempt was made to revive the old “American” project of building a gas pipeline to transport Caspian gas from the former Soviet republics (Azerbaijan, Turkmenistan and Kazakhstan) bypassing Russia. Part of this Baku-Tbilisi-Erzurum pipeline has already been built and is about to be put into operation. But today there are no guarantees of its full loading, since Turkmenistan and Kazakhstan are still selling gas to Gazprom, and Azerbaijan does not have enough resources to fill the 30 billion pipeline.
In contrast to this corridor, Gazprom proposed its own option for supplies to Europe through Turkey - the South European Gas Pipeline. According to the idea of the Russian monopolist, by expanding the Blue Stream gas pipeline, additional volumes of gas can be supplied to Turkey to fill a new pipeline to Southern Europe. The proposed route is similar to Nabucco. Only in the Gazprom project, instead of Romania, Russia-friendly Serbia is implied, and Hungary is considered as a gas distribution hub (and in Nabucco - Austria). As you know, Gazprom and the Hungarian state company MOL even created a design company to create a feasibility study.
It should be noted: like Nabucco, the South European Gas Pipeline has a huge flaw - a lack of gas. Even if the capacity of Blue Stream is doubled (from 16 to 32 billion cubic meters), it will not be possible to fill the new pipe through the Balkans. And with the capacity of the future gas pipeline being less than 30 billion cubic meters, it is hardly possible to talk about its economic efficiency, especially since before this Russian gas will have to cover a huge distance, make an expensive sea crossing, and also pass through five or six transit countries.
But even if all these gas transportation projects are implemented in the next 10-15 years, Europe’s needs for imported gas will obviously not be satisfied. In the best case, the EU will receive 120-130 billion cubic meters of additional gas. The rest will have to be obtained from the LNG market. According to the draft EU energy strategy (the so-called Green Paper), by 2010 it is planned to build 16 terminals for receiving liquefied gas and expand the capabilities of three more. If these plans are implemented, the EU will be able to import up to 140 billion cubic meters annually. There are currently 12 LNG regasification points operating in the European Union. In 2005, Europeans purchased about 43 billion cubic meters of liquefied gas. However, it should be noted that today most of the planned terminals do not have guarantees of gas supplies in the long term (20-30 years).