• 11 hours Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 12 hours Oil Gains Spur Growth In Canada’s Oil Cities
  • 12 hours China To Take 5% Of Rosneft’s Output In New Deal
  • 13 hours UAE Oil Giant Seeks Partnership For Possible IPO
  • 14 hours Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 14 hours VW Fails To Secure Critical Commodity For EVs
  • 15 hours Enbridge Pipeline Expansion Finally Approved
  • 16 hours Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 17 hours OPEC Oil Deal Compliance Falls To 86%
  • 1 day U.S. Oil Production To Increase in November As Rig Count Falls
  • 1 day Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 2 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 2 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 2 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 2 days Aramco Says No Plans To Shelve IPO
  • 4 days Trump Passes Iran Nuclear Deal Back to Congress
  • 4 days Texas Shutters More Coal-Fired Plants
  • 5 days Oil Trading Firm Expects Unprecedented U.S. Crude Exports
  • 5 days UK’s FCA Met With Aramco Prior To Proposing Listing Rule Change
  • 5 days Chevron Quits Australian Deepwater Oil Exploration
  • 5 days Europe Braces For End Of Iran Nuclear Deal
  • 5 days Renewable Energy Startup Powering Native American Protest Camp
  • 5 days Husky Energy Set To Restart Pipeline
  • 5 days Russia, Morocco Sign String Of Energy And Military Deals
  • 5 days Norway Looks To Cut Some Of Its Generous Tax Breaks For EVs
  • 6 days China Set To Continue Crude Oil Buying Spree, IEA Says
  • 6 days India Needs Help To Boost Oil Production
  • 6 days Shell Buys One Of Europe’s Largest EV Charging Networks
  • 6 days Oil Throwback: BP Is Bringing Back The Amoco Brand
  • 6 days Libyan Oil Output Covers 25% Of 2017 Budget Needs
  • 6 days District Judge Rules Dakota Access Can Continue Operating
  • 6 days Surprise Oil Inventory Build Shocks Markets
  • 7 days France’s Biggest Listed Bank To Stop Funding Shale, Oil Sands Projects
  • 7 days Syria’s Kurds Aim To Control Oil-Rich Areas
  • 7 days Chinese Teapots Create $5B JV To Compete With State Firms
  • 7 days Oil M&A Deals Set To Rise
  • 7 days South Sudan Tightens Oil Industry Security
  • 7 days Over 1 Million Bpd Remain Offline In Gulf Of Mexico
  • 7 days Turkmenistan To Spend $93-Billion On Oil And Gas Sector
  • 7 days Indian Hydrocarbon Projects Get $300 Billion Boost Over 10 Years
Alt Text

With A World Awash In Oil, Kazakhstan Faces Fuel Crisis

Kazakhstan is struggling with a…

Alt Text

Aggressive OPEC Pushes Oil Prices Up

Oil prices are once again…

Ukrainian Crisis Sparks EU Efforts to Improve Energy Security

Russia’s incursion into Ukraine has sparked concerns over disruptions in natural gas supplies to Europe. Russia has previously shut off the taps for geopolitical leverage, and perhaps they would do so again to gain an advantage in the standoff over Crimea. That is a possibility, but it wouldn’t be a smart choice by Putin. As I wrote last week, Russia needs to sell its gas more than the European Union needs to buy it. Europe is not as beholden to Russia as many believe, and indeed, the situation in Ukraine will likely lead to greater energy security for Europe in the coming years.  

On March 10 EU Energy Commissioner Guenther Oettinger decided to delay discussions with Russia over the South Stream pipeline in response to Russia’s involvement in Ukraine. The pipeline would travel from Russia, underneath the Black Sea to Bulgaria, then on to Western Europe. The South Stream project will supply 64 billion cubic meters of natural gas when it is fully operational in 2018, accounting for 15% of Europe’s annual gas consumption. “I’m not accelerating our talks regarding pipelines such as South Stream. They will be delayed,” Oettinger told German newspaper Die Welt.

The pipeline is Russia’s way of increasing its energy ties to Europe while bypassing Ukraine. It was also conceived as a means to box out the Nabucco pipeline that would have taken Caspian gas to Europe. Nabucco itself was beat out by the Trans-Adriatic Pipeline, but Russia is still moving forward with South Stream despite its $45 billion price tag.

Related Article: Ukraine fallout: how to deal with South Stream and Nord Stream

In the short-term Europe’s move to delay talks on the South Stream project probably doesn’t mean much. It is likely just a temporary move ahead of the Crimea referendum as a way of pushing back against Russia. Europe has 40 billion cubic meters of natural gas in storage – 10% of annual consumption – which is much more than last year. This puts Europe in a stronger short-term position than it has been in the past. Still, if the EU can avoid a confrontation over energy with Russia, it will. Gazprom hasn’t really flinched at the news. Alexei Miller, Gazprom’s Chairman, reiterated on March 12 that South Stream is “steadily progressing.” The pipeline is already under construction and work is continuing despite Russia’s row with Western Europe over Ukraine.

Over the long-term however, the EU will look more aggressively for ways to diversify away from Russia. It has already been pursuing such a strategy, but the latest flare up in tensions will likely accelerate the EU’s efforts. EU leaders plan to meet on March 20-21 to discuss how Europe can reduce its dependence on Russia. This will likely include pressing the U.S. for more LNG exports. It also means that EU member nations may try to develop their own shale resources. The U.K. and Poland appear the most interested, but have thus far failed to get their shale industries going in any significant way. Germany prefers adding clean energy, but Poland has taken the opposite view – it argues that more coal and nuclear power should be used.

Related Article: Ukraine: Vultures of Political Capital Descend

Polish Prime Minister Donald Tusk also suggested the EU should purchase gas from Russia as a block rather than individual countries. This would give it greater leverage in negotiations with Russia. "If the EU as a whole decided that we will buy gas and then divide it according to the needs of each European country, then no-one, including Russia, could disregard such a customer that buys such a gigantic amount of gas," Tusk said, according to Platts. German Chancellor Angela Merkel expressed some skepticism. “It’s not the German government that buys gas,” Merkel said. “It’s EON, it’s RWE, it’s BASF.”

The EU is often plagued by the inability of its member states to coalesce around a single strategy. That might not be the worst thing in the world however - it may just mean that different countries pursue different strategies. Either way, the Ukraine crisis appears to have convinced European leaders to step up their efforts to improve energy security. Whether it’s clean energy, nuclear power, coal, or shale gas, adding more generation will displace Russian gas. Russia may hold some leverage over Europe in the short-term (the extent to which, is debatable), but over the next few years the European Union will chip away at Russia’s energy grip.

By Nicholas Cunningham of Oilprice.com

Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News