Who will make the next gas step?

Who will make the next gas step?


Have a chance new megaprojects in gas supplies to Europe?


Gas processing is an instrumental piece of the natural gas value chain. It is instrumental in ensuring that the natural gas intended for use is as clean and pure as possible, making it the clean burning and environmentally sound energy choice. Once the natural gas has been fully processed, and is ready to be consumed, it must be transported from those areas that produce natural gas, to those areas that require it. The efficient and effective movement of natural gas from producing regions to consumption regions requires an extensive and elaborate transportation system. In many instances, natural gas produced from a particular well will have to travel a great distance to reach its point of use. The transportation system for natural gas consists of a complex network of pipelines, designed to quickly and efficiently transport natural gas from its origin, to areas of high natural gas demand.


Constructing natural gas pipelines requires a great deal of planning and preparation. In addition to actually building the pipeline, several permitting and regulatory processes must be completed.  In many cases, prior to beginning the permitting and land access processes, natural gas pipeline companies prepare a feasibility analysis to ensure that an acceptable route for the pipeline exists that provides the least impact to the environment and public infrastructure already in place. Natural gas offers versatile applications, from chemical feedstock, to heating, cooling, transportation on land and sea – to power generation.


Local content has for long been a major issue in the Europe gas industry.

Russia is not going to stand idly by while the EU is openly pursuing the marginalization of Russia as main gas supplier to Europe. Thus, Russia / Gazprom is actively taking steps to reposition itself by trying to preserve its European gas market share for the future. Overall, the European gas market is poised to become a fascinating battleground – a tug of war between geopolitics, the transition to a low carbon economy, and gas market price signals. Well known is the fact that when the Kremlin decided to invest in some mega project, the economic logic remains in the background. For example- South or Turkish Stream…

The wrong diagnosis on EU energy security will lead to the wrong cure. An expectation of rising demand has led the EU’s energy security strategy to focus on accessing new sources of gas, rather than on alternative approaches such as demand reduction or strengthening internal connections. Overinvestment in gas infrastructure can also create ‘lock in’ to levels of gas consumption that are in conflict with the EU’s de- carbonization goals!?

Nord Stream 2 lobbyists have said it is needed because Norwegian and UK gas production will fall by more than 100 billion cubic meters as fields deplete. The same time, Nord Stream 2 critics have said the pipeline makes no business sense because there is not enough demand for gas.

Moscow, Sofia, Ankara and Athens are involved in an important game for the future of gas flows to the Old Continent. The hope should be for partial diversification rather than total replacement of the Russian supply

The very strong tensions between Turkey and the Russian Federation regarding the Syrian conflict and the future of the Middle East have led to the freezing of the construction of Turkish Stream, the Gazprom-designed gas pipeline under the Black Sea, with a landing place in Turkey, on the border with Greece, to transport natural gas to central-southern Europe and the Balkans. On December 2, 2015, as a result of the shooting down of a Russian military jet by Turkey, Russia, in the words of Energy Minister Alexander Novak, “suspended negotiations with regard to Turkish Stream,”

Russia desperately trying to accelerate the Nord Stream 2 project, its effort to double the transport capacity of the Nord Stream pipeline. Previously, on December 1, 2014, Vladimir Putin had officially terminated the construction of the South Stream gas pipeline due, firstly, to the effects of U.S. pressure on Bulgaria— resulting in the withdrawal of the construction permit—and obstacles imposed by the European Commission- a “non-constructive approach,” in the words of the Russian President—regarding the use of the pipeline.


Art_2 June

In this political context, how can the scenario evolve with regard to energy infrastructure (pipelines) aimed at supplying Russian natural gas to the northeastern Mediterranean? What effects can a changed geopolitical energy context have on Turkey and Greece? A country in search of new supplies Turkey is the fourth largest European natural gas market. According to data provided by Botas, Turkey’s state-owned energy supply company, of the 49.2 million cubic meters of gas that Turkey imported last year, at least 26.9 cubic meters, or 55 percent of the total, came from Russia. This amount seemed destined to grow by virtue of the oft-announced construction of Turkish Stream: a strategic infrastructure that in light of the vicissitudes associated with the Syrian crisis and the negative opinion expressed by the E.U., appears to have suffered a near-final setback.


Ankara’s position between Moscow and Tehran

Iran cannot replace Russian gas supplies to the European Union and Turkey for the following reasons:

  1. 1. It has a growing domestic demand to be met. 13 percent of Iranian families live in rural areas that are still disconnected from the national gas supply system;
  2. 2. It must modernize its energy infrastructure. To do so, Iran must import new technologies to improve the extraction and distribution of natural gas;
  3. 3. It is estimated that Tehran needs approximately $100 billion of investments in the gas industry to reach its goals.

Azerbaijan’s recent problems with regard to natural gas production and the simultaneous need to comply with existing export agreements have led the country to be supplied by the Russian Federation. This situation raises a number of questions in relation to the actual production capacity of the Shah Deniz II gas field. In fact, the Azerbaijani gas field should supply 16 bcm to the Southern Corridor, than to TANAP 6mlr from which gas will remain in Turkey. The remaining 10 billion to be submitted to the Trans-Adriatic (TAP) gas pipeline, which will arrive in Puglia, in southern Italy. As regards the possibility of covering the additional demand through LNG, currently only an additional 6.9 Gmc3 would be importable.

Turkey’s gas supply by building a pipeline from Israel to the Turkish coast in the bottom of the Mediterranean, the US State Department’s Special Envoy and Coordinator for international energy affairs Amos Hochstein has said at forum in Nicosia that while Turkey may not respect the EEZ of Cyprus, the United States does and said without “resolution in Cyprus” no pipelines can go through its EEZ from Israel to Turkey.


An unexpected key role for Athens

Greece, which is not a natural gas producer, could, assume a role approaching energy hub by virtue of the conjunction of three favorable geopolitical factors:

  1. 1. He Russian Federation’s desire to bypass Ukrainian territory, and its intention not to renew the transit agreement with Kiev in 2019 subsequently increased to 2022;
  2. 2. The construction of the Southern Corridor strongly desired by the EU;
  3. 3. Turkey’s interest to become a strategic energy hub from east to west, for Russian and Azerbaijani resources.

The potential Russian-Greek cooperation in the field of energy could theoretically follow the footsteps of that of Russia and Germany – Nord Stream. In this case, the most delicate phase of the project would concern the development of the pipeline in Greek territory, which is governed by E.U. law (Third Energy Package).

As a result of the bilateral agreement of October 21, 2015 between Victoria Nurland, Assistant Secretary of State for European and Eurasian Affairs at the U.S. Department of State, and Alexis Tsipras, Prime Minister of Greece, the government of Athens is considering the possibility of constructing an LNG terminal near Alexandropoulos. Bulgartransgaz recently announced that it will also participate in this project.

The most vulnerable – in terms of energy supply security – countries, which depend heavily on Russian natural gas for heating, are located in Central and Eastern Europe. In fact, a Climate Action Network (CAN) Europe position paper from April 2015 pointed out just that: “The current security of supply concern is first and foremost a heating issue. Indeed, 61% of EU imported gas is used in buildings.” The problem here is not Western Europe but Eastern Europe with its old inventory of buildings – often severely lacking Western energy efficiency standards. To fix this reality will require substantial investments in an often budget-constrained environment. This is probably one of the reasons exactly in this part of Europe is an object of desire for advantage in natural gas supplies.

The months to come will reveal whether a new Trojan horse will be constructed on the Turkish-Greek border, in the form of a hub although it is unlikely such a scenario to be realized. All mega projects look more or less doomed with so many available transmission capacity. What is needed for Europe is flexibility in procurement opportunities rather than new capacity.


By Vasko Nachev

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