As Russia’s market gets weaker, EU gets stronger

Wednesday 11th, January 2017 / 20:15 Written by
As Russia’s market gets weaker, EU gets stronger

Globally, a net increase of LNG importing and exporting states pushed LNG trade to an all-time high of 244.8 million tonnes (270 US tons) in 2015.

Agnia Grigas –
Europe’s Trans Anatolian natural gas pipeline in Turkey has hit a major milestone. It passed the halfway mark to completion at the end of 2016, bringing the Southern Gas Corridor pipeline project closer to its finishing point — and closer to reducing Europe’s dependence on Russian gas.
If the corridor succeeds as planned, the project will bring Caspian gas into the European market for the first time.
Perhaps even more importantly for Europe: The progress of the project will add a new dimension to the sweeping changes currently taking place in the global natural gas markets.
The increase in global natural gas production, the buildup of new gas transport infrastructure, the decrease in natural gas prices, the growth of liquefied natural gas (LNG) trade are all already increasing the options for Europe’s gas importers and reducing the influence of the Russian energy giant Gazprom.
That, in turn, will transform Europe’s energy security in the coming years.
Why is the Southern Gas Corridor project so important? The answer is rooted as much in politics as in fuel.
The EU backed the Southern Gas Corridor to bypass Russian-controlled gas pipelines and to avoid crises like the one that arose when Gazprom cut supplies to gas transit-hub Ukraine in the icy winter of 2009, turning off the heat in EU member states like Hungary, Romania and Poland.
Relations between Brussels and Moscow deteriorated further when Russia invaded Ukraine and annexed Crimea in 2014.
In addition, Russia’s bid to bypass Ukraine as a transit centre by building the Nord Stream II pipeline raised further concerns about the effects on the EU.
By 2020 the Southern Gas Corridor will bring around 10 billion cubic metres (BCM) — about 353 billion cubic feet — of natural gas from Azerbaijan’s Shah Deniz II gas field to Albania, Italy, Georgia, Turkey and Greece. By 2026 that number will increase to 31 BCM.
The Trans Anatolian pipeline that will bring natural gas across Turkey is the second segment of the corridor, after the South Caucasus Pipeline across Azerbaijan and Georgia.
The third segment — the Trans Adriatic Pipeline — extends from Greece and Albania into Italy.
Its future in Italy seems less assured given that local residents’ objections to its route through the region of Puglia could intensify after the country’s failed national referendum on constitutional change led to the resignation of Prime Minister Matteo Renzi last month.
Europe’s energy security, however, is not only about the Southern Gas Corridor; the new realities of the 21st-century gas market may be more important going forward.
Global natural gas production, spearheaded by the American shale gas revolution, rose by 27 per cent from 2005 to 2015.
In turn, this led to the largest natural gas surplus in a decade, totalling 70 BCM of natural gas in 2015.
As a result, gas prices in many markets experienced a sharp decline.
In the United Kingdom, for example, gas prices fell from $11 per mmBtu (million British thermal units) in 2011 to around $4 per mmBtu in mid-2016.
Globally, a net increase of LNG importing and exporting states pushed LNG trade to an all-time high of 244.8 million tonnes (270 US tons) in 2015.
New gas infrastructure has developed alongside supply-side growth and an increase in trade.
In Europe, pipeline interconnectors and LNG terminals, particularly in the northeast, have slowly but steadily been weakening Russia’s pipeline hegemony.
In late 2014, Lithuania launched its LNG import terminal in Klaipda, and in 2016 the winoujcie LNG import terminal in Poland received its first deliveries.
These LNG terminals have allowed Central and Eastern European countries to diversify their gas imports from Gazprom.— Reuters

Share Button

Facebook

Twitter