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Editorial comment

With the temperature slowly picking up as we move further into spring in the Northern Hemisphere, many will soon be turning their thoughts to relaxing holidays and long weekends away. With its variable climates and broad offerings, one popular tourist destination is Europe. Yet, it’s not all sunshine and smiles for the continent – Europe is suffering as its oil and gas sector faces challenging market conditions.


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At present, it is attempting to retain its position as a powerful trading region. However, although growing wary of its dependency on Russian natural gas, Europe is still a consumer in need of mass energy imports.

The continent receives its natural gas predominantly through pipelines from Russia’s 32.3 trillion m3 of reserves. The country is expected to continue exporting similar volumes of gas to Europe as in 2016, especially with the European Commission’s (EC) decision to increase the gas supply from Russian energy giant, Gazprom, to 80% through Germany’s OPAL pipeline. The OPAL pipeline connects to Gazprom’s Nord Stream export line, which transports natural gas from Russia to Europe via the Baltic Sea. In 2016, Gazprom reported that Nord Stream delivered 43.8 billion m3 of gas to European customers.

While many applaud the EC’s verdict, there are some who openly oppose the increased gas flow. Off the back of this decision, Ukraine’s Naftogaz Ukrainy has filed a lawsuit against the EC. The company is currently seeking to terminate Russia’s increased flow from Nord Stream through the OPAL line, stating that the approval was made without consultations with Ukraine.

Similarly, both Poland and Lithuania have joined Ukraine in protesting the EC’s decision, citing the European Union’s (EU) dependency on Russian gas as their main reason for this. With this newly granted increase in gas flow to Europe, the EU’s reliance on Russia for natural gas will grow, which could potentially threaten the region’s energy security.

Despite Europe’s overall gas consumption decreasing, there has been a surge in the region’s import dependency due to its diminishing domestic production, caused mainly by the shutdown of numerous North Sea fields. However, this might be set to change. By 2020, the North Sea is expected to begin operations on 22 crude oil projects and eight natural gas projects. A GlobalData report1 published in March stated that the North Sea had seen improvements during the market downturn over the past few years. For instance, 10 additional fields are expected to begin production in the North Sea between 2021 - 2023.

So, it appears that, despite tough economic conditions, Europe does have options. Projects are advancing with new ones on the horizon. For instance, Independent Oil and Gas plc has recently signed a sale and purchase agreement for the acquisition of the recently decommissioned Thames gas pipeline, which is located in the southern North Sea. The pipeline will provide a proposed export route for the company’s southern North Sea assets.

vThe Trans Anatolian natural gas pipeline (TANAP), which transports Caspian natural gas to Turkey and Europe, is advancing rapidly. TANAP recently received its delivery of pipes from Turkey’s Toscelik Spiral Boru ahead of schedule, and Sermiax has completed its welding operations for the project too.

 

In Greece, construction operations for the Trans Adriatic pipeline (TAP) project have been making headway. The project is currently on schedule, with construction advancing through two of the three northern Greek regions that TAP will cross: eastern Macedonia-Thrace and central Macedonia.

And finally, Gazprom’s Nord Stream 2 and TurkStream pipelines are steadily progressing. In February, Allseas was awarded a contract for Nord Stream 2’s offshore pipelay work through the Baltic Sea. Similarly, South Stream Transport B.V. and Allseas have been contracted for the construction of the second string of TurkStream’s offshore section, which delivers Russian natural gas to Turkish and European customers. This month’s regional report discusses Europe’s need for extensive oil and gas imports, and considers the region’s economic climate and ongoing pipeline projects. Turn to p.12 for a more in-depth account.

1 https://www.globaldata.com/store/report/gdge0169mar--h1-2017-production-and-capital-expenditure-outlook-for-key-planned-upstream-projects-in-north-sea-norway-to-lead-in-crude-oil-production/?utm_source=email&utm_medium=pr&utm_campaign=170411a_gd_og_pr_h1_north_sea_oil&utm_nooveride=1


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