The tense situation in Ukraine and the deteriorating relations between Russia and Ukraine, the EU, the United States may affect the South Stream gas pipeline project. But a simple analysis shows that even the growing tension between Brussels and Moscow will not affect its completion.
At the same time, some critics note that the position of supranational bodies of the EU threatens the viability of the project. But for now, all the facts are in favor of South Stream.
Natural gas supplies to the EU are now mainly provided by the following suppliers: Russia (about one third of the volume), Algeria, Qatar, Norway and the Netherlands.
Sources of gas supplies to Europe (billion cubic meters)
|Source of gas imports
|Transit through Ukraine
|Liquefied natural gas
At the same time, the Netherlands recently reported that gas production will be significantly reduced, due to environmental reasons and an irreversible decline in reserves, as the country’s authorities intend to maintain the volume of reserves to ensure domestic consumption as long as possible. And the cost of Norwegian gas will grow, as developing new reserves is becoming more and more difficult and more expensive, and the UK, which is Norway’s largest gas importer, plans to increase its supply by 30%.
South Stream, TAP and ITGI Pipelines
At the same time, Qatar is steadily increasing exports to the Asian direction, where it can get almost 80% more due to the price of exporting the equivalent of 1 thousand billion cubic meters. m of liquefied natural gas.
In addition, Algeria is increasing its domestic demand, while it is also trying to maintain close ties with Gazprom for the implementation of future joint projects, and the volume of recoverable reserves in the country seems to have reached a maximum level.
The total volume of reserves in Algeria is about 4 trillion cubic meters. m, which is equivalent to 5-6 years of consumption in Ukraine or in Turkey. That is, these reserves will not exactly solve the EU problems from a strategic long-term point of view.
Azerbaijan itself, although deeply involved in the opening of the Southern Corridor and deliveries to Turkey and the EU through the TANAP-TAP pipeline system, has only 1 trillion cubic meters. m in the form of proven reserves with an increase in domestic consumption. That is, gas can be offered to Georgia, Turkey and even Greece and Bulgaria, but the country will not be able to supply it to the EU in the medium term.
Other major players, such as Turkmenistan and Uzbekistan, are oriented towards the gigantic Chinese market, and are also closely connected with Russia both in terms of economy and in terms of politics.
In fact, only Iran, with proven reserves of 30 trillion cubic meters. m, can play a significant role in the European market. But pressure from Western countries and Saudi Arabia hardly makes fruitful cooperation between Europe and Iran possible, and the country’s authorities themselves consider the Chinese and Indian markets as alternative. In addition, by 2025, domestic consumption could grow to 400 billion cubic meters. m. And the cessation of nuclear energy projects will lead to a further increase in domestic needs.
Gas consumption and production in European OECD countries
Shale gas should also be considered as a strategic direction. There are a number of countries that have the theoretical potential for using shale reserves.
Countries such as Poland, Romania and Ukraine have this potential according to preliminary studies. But you need to understand that preliminary research does not guarantee real reserves, and the shale revolution, which some may dream of, is unlikely to happen again. Europe has a very high population density, a limited amount of fresh water, the economy is closely linked to real estate, tourism, and agriculture, and these sectors can suffer greatly when shale gas production begins.
And if in the USA the cost of developing deposits was offset by a large number of profitable credit lines, then in Europe this will take place against the backdrop of economic problems and difficulties with access to capital.
Limited medium-term prospects may have shale gas exports from the United States to Europe. But so far, out of 20 potential LNG exporters, only six are viable. And they face a number of problems, such as the lack of necessary infrastructure in the US and Europe; gas delivery cost; impact on US domestic prices; higher prices in the Asia-Pacific region, which makes it more profitable for exporters; limited stocks. The United States now shale gas reserves correspond to the 13-year current level of consumption, and this can hardly be used as an argument for a stable long-term reduction in dependence on Russian gas.