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Stagnation expected in European gas diplomacy

6 March 2015 21:55 (UTC+04:00)
Stagnation expected in European gas diplomacy

By Gulgiz Dadashova

Moscow’s plan to replace the South Stream natural gas pipeline with Turkish Steam has turned into a real “game changer” amid Europe’s rising rush to find new sources for ensuring its energy security.

Following this development Europe has looked at different options, among which the possibility of making the Southern Gas Corridor, which is under construction a permanent reality. Meanwhile, Iran renewed its intention to supply gas to Europe in view of its warming ties with the West.

Now, all supply sources have had their eyes set on Europe, looking to decipher what decisions the EU will make -- standing firm on the Southern Gas Corridor while attracting energy-rich Central Asian countries; accepting Turkish Stream and further depending on Russia which can also end in agreeing on Turkey’s EU membership; achieving nuclear deal with Iran and bringing Iranian gas to Europe.

Gal Luft, co-director of the Washington-based Institute for the Analysis of Global Security, believes the next several months will be a period of stagnation in terms of decision making on this issue.

The expert said there are simply too many uncertainties regarding Russia, Iran, the European gas market and Europe's economy writ large - which of course impacts demand.

In an e-mail to AzerNews, Luft noted that it is also important to pay attention to how China's New Silk Road strategy plays into the story as the objective of this strategy is to enhance energy connectivity across the Eurasian land mass.

“Another main source of uncertainty is pricing. The decline in oil prices is impacting LNG prices and this in turn can have an impact on the negotiations over the price of piped gas,” he wrote.

Commenting on Turkmenistan’s aspiration to reach European market, the expert noted that he doesn’t expect Turkmenistan to challenge Russia on the supply to Europe.

“Their main export market will be China. This is where the growth is and the delivery infrastructure already exists,” the expert noted.

Turkmenistan considers delivering its huge natural gas reserves to the West via the Trans-Caspian pipeline project, a proposed project which would run under the Caspian Sea to reach Azerbaijan, then Georgia, and finally connect with TANAP.

Meanwhile, Brendan Devlin, advisor in the Commission’s DG energy, believes that Gazprom can use the Trans-Adriatic Pipeline, the core link of the Southern Gas Corridor, to move gas, if the Russian export monopoly builds the Turkish Stream pipeline and brings gas to Greece.

Devlin argued that it was unlikely another big pipeline except for the Southern Gas Corridor would appear in South Eastern Europe, because “the markets are too small” in the region.

However, the diplomat told EurActiv that it would take many years before Russia completes the Turkish Stream project. However, Azerbaijan’s Shah Deniz gaz from the TAP pipeline would have priority finding clients, long before eventual Russian gas arrives to the same pipe.

Within the second phase of Shah Deniz project development it was planned it will produce some 16 billion cubic meters of gas, six billion of which will be transported to Turkey and ten billion to Europe.

First gas deliveries to Europe via the Southern gas Corridor are planned in 2020. The cost of the work on all elements of the Southern Gas Corridor has been estimated at almost $45-48 billion, according to preliminary data.

Follow Gulgiz Dadashova on Twitter: @GulgizD

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