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Gas woes in Europe – part 1

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World Pipelines,

Europe consumes a lot of natural gas. According to the US Energy Information Administration (EIA), the European continent (including all EU members plus Turkey, Norway, Switzerland, and the non-EU Balkan states), consumed18.7 trillion ft3 of natural gas in 2013, or approximately 51 billion ft3/d.

Roughly one-third was produced internally. Norway, which is not an EU member (but belongs to NATO) supplies about 23%. But the single largest external supplier is Russia, with about 30% (5.7 trillion ft3, or 15 billion ft3/d).

And there lies the rub. For many years, the majority of exports from Russia to the EU came through the Ukraine. However, in 2006 arguments over pricing and payments of gas consumed in the Ukraine led to current periodic cessations of onward deliveries to European consumers.

The EIA estimates that 16% of all gas consumed in the European continent passes through Ukraine

“There are a lot of politics and geopolitics involved,” says Tim Boersma, an Acting Director in the Energy Security and Climate Initiative. “In light of the Ukrainian concerns, there is a sentiment to diversify away from Russia. It is not a vital issue to many European countries, but there are some in Eastern Europe where it is a real important issue because they have few alternative supplies.”


In addition to abundant oil, Northern Africa is blessed with huge reserves of natural gas: a partial alternative. Europe is already served by a series of pipelines that cross the Mediterranean and deliver over 5 billion ft3/d of gas to Spain and Italy.

Since the Arab Spring, the above-ground risks in countries such as Libya have risen. The Galsi project is a proposed 700 million ft3/d line that would run from Algeria through Sardinia to northern Italy. Sardinian environmentalists have objected to the impact the multibillion line would have on the island’s local ecology. More trenchantly, backers in Algeria are concerned that competition from other lines might undermine the economics of the scheme, and are waiting to see what might transpire with competitors.

Shale gas

An alternate source also exists within Europe: shale gas. In 2013, the UK Department of Energy and Climate Change (DECC) issued a British Geological Survey that estimated the Bowland shale and Hodder shale (north England) held 1328 trillion ft3 in place. Similarly, according to the EIA, the Ukraine contains 42 trillion ft3 of shale gas.

But shale gas development in Europe faces several hurdles, as many environmentalists and local residents are concerned about development. The Ukraine has seen exploration agreements fall by the wayside as fighting drags on. Other barriers, including the lack of a continent-wide pipeline network and jurisdictional agreements, pushes out its arrival to market by at least a decade.

The most efficient and economical vehicle for supplying Europe’s long-term need for natural gas rests with tapping into large conventional fields and delivering that gas by large-diameter pipeline.

Several front-runners have emerged.

A mix of economic and geopolitical factors are driving a host of gas pipeline proposals in the Mediterranean region. The proposed Mediterranean region pipelines are:

  • South Stream Transport – proposed by Gazprom and Austria’s OMV as a route that would bypass Ukraine. The project would have over 5 billion ft3/d capacity and would run 910 km across the Black Sea from Russia to Bulgaria. However, President Putin announced the cancellation of the project in December 2014.
  • The Turkish Stream project – announced by President Putin in December 2014, the same time that the South Stream project was cancelled. The route will cross the Black Sea and terminate in Turkey, also connecting to the TANAP network. However, at present, the construction for the pipeline has been suspended due to Turkish air forces downing a Russian warplane over the Turkish-Syria border.
  • Trans Adriatic Pipeline (TAP) – will have a capacity of approximately 2 billion ft3/y and will deliver supplies to Bulgaria, Albania, the former Yugoslavia, Italy, and possibly Germany, France, and Austria. With first gas sales to Georgia and Turkey targeted for late 2018, first deliveries to Europe will follow approximately in early 2020.
  • East Mediterranean – over 30 trillion ft3 of gas in offshore regions controlled by Israel and Cyprus have given rise to various monetisation schemes. The East Mediterranean pipeline is a proposal to connect the fields to Italy through an offshore pipeline that passes through Greek Waters. Although the EC has expressed interest, the 675 km line would cost in excess of US$20 billion, making it economically unviable.

Thus, Azerbaijan is the most viable gas source. The Shah Deniz gas field sits offshore in the Caspian Sea about 70 km southeast of Baku. Discovered in 1999, the field is estimated to hold up to 40 trillion ft3 of gas and produces almost 1 billion ft3/d.

Phase 2 of the Shah Deniz gas field is currently underway. When completed in 2018, the US$28 billion project will add an additional 16 billion m3/y of gas to current production. Of that, 6 billion m3/y will go to Turkey, and 10 billion m3/y to Europe via TANAP through Turkey, which is currently being upgraded and extended at a cost of approximately US$17 billion.

Part 2 coming soon!

Written by World Pipelines' correspondent Gordon Cope, and edited from published article by Stephanie Roker

To read the full version of this article, please download a copy of the August 2015 issue of World Pipelines.

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