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Gas woes in Europe – part 2

Published by
World Pipelines,

Economics vs politics

In Europe, pipelines and politics are inextricably intertwined; the economic rationale for a project is frequently suborned to political considerations.While Greece stands to benefit from TAP as a secure source of gas and a source of jobs, its parlous state of finances means it is in divestiture mode. Azerbaijan’s SOCAR recently purchased a 66% stake in Greece’s transmission network operator DESFA for US$609 million. According to reports, approximately half the proceeds have been earmarked to aid Greece’s economy.


One of the aspects that may have scuppered South Stream is the EU ‘Third Energy Package’ policy that prohibits one company from both owning the pipeline and its contents. Russia has been recently touting Turkish Stream, circumventing the EU policy. According to reports, Russia has been wooing Greece’s support for the project with a US$5 billion incentive.


Italy has benefited tremendously from African gas. It is one of the EU’s largest consumers (almost 7 billion ft3/d) and collects healthy tariffs for transmission to jurisdictions further north. As a stable member of the EU with an established gas line network, it also stands to benefit from further projects, such as TAP.

Italy’s gas sector has recently been under allegations of bribery. Eni (Italy’s largest energy company) and Sonatrach (Algeria’s leading energy firm) are under investigation by prosecutors in Milan. Italy, which relies on Algeria for about one-third of its gas needs, and Algeria, which relies on oil and gas exports for one-third of its GDP, are worried that revelations might sour their vital relationship.


Turkey sees itself as an energy hub in the Middle East. It already hosts the BTC (Baku Tbilisi Ceyhan) oil line, the Trans Caucasus line that runs from Azerbaijan, and the 1.4 billion ft3/d Blue Stream line that runs from under the Black Sea to Turkey. It is also greatly expanding its TANAP network. In addition, it rests astride European onshore access for potential supplies from Iran, Kurdistan and other Middle Eastern producers.

Although it is a member of NATO, Turkey maintains a friendly relation with Russia. In December 2014, it hosted a state visit from President Putin where it underscored its pragmatic approach to geopolitics. While Russia’s incursion into Crimea has high political ramifications with NATO, Turkey’s concerns are focused more to the south, where ISIL is overrunning Iraq, Syria is convulsed with an extended civil war, and an independent Kurdistan acts as a beacon for Turkish Kurds. Energy projects with Russia, such as expanding the Blue Stream line or building the Turk Stream line, are strictly business. “Turkey and Russia are increasing co-operation in order to stimulate economic growth and supply affordable energy,” says Boersma.


Bulgaria consumes approximately 250 million ft3/d of natural gas, 95% of which comes from Russia. Bulgaria began seeking to diversify supply sources after suffering a two-week cessation of deliveries in 2009 during a dispute between the Ukraine and Russia. The cancellation of the South Stream project, which would have crossed the Black Sea and made land-fall in Bulgaria, eliminated a non-Ukraine route.

Bulgaria is thus keen to construct the Interconnector Greece-Bulgaria (IGB). The IGB is a proposed 182 km, 32 in. dia. spur line with a capacity of 300 million ft3/d that will run from the partially completed Interconnector Turkey Greece Italy (ITGI) pipeline system, designed to carry gas from Turkey to Greece and, eventually, under the Adriatic to Italy.

Bulgaria already has an agreement with Azerbaijan to purchase up to 100 million ft3/d, and is looking to add to its commitments from Phase 2 of the Shah Deniz field. However, Bulgaria is a corrupted country. According to the European Anti-Fraud Office (OLAF), more than one-third of all probes into alleged corruption involving EU cash occurred in Romania, Hungary and Bulgaria. While the issue, per se, does not affect delivery of gas to the rest of Europe, if payment problems and opaque contracts take hold within Bulgaria’s borders, then financial complications may ensue.

Part 3 coming soon!

Written by World Pipelines' correspondent Gordon Cope, 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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