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European Resistance to Gazprom is Futile

By Daniel J. Graeber | Wed, 26 June 2013 21:49 | 0

Russian energy company Gazprom said it was looking to get a liquefied natural gas facility launched on the Baltic Sea within the next five years. It's already sending natural gas overseas via the twin Nord Stream natural gas pipeline to the coast of Germany. Gazprom supplies European energy consumers with about 25 percent of their gas and aims to do even more by linking Great Britain to the Nord Stream pipeline. The company said it wants to expand its regional presence further by sending 10 million tons of LNG from the coast of Finland. With Europe on the cusp of getting alternate natural gas supplies from Azerbaijan, one of the largest natural gas companies in the world is already putting its chess pieces back on the European board.

Gazprom said Wednesday it wants to get operations at a LNG facility on the Baltic Sea under way by 2018. Last week, the Russian gas monopoly announced similar plans for the Gulf of Finland. That project would have the capacity to deliver up to 10 million tons of LNG per year. Presumably, both projects would add to the footprint already established with the twin Nord Stream natural gas pipeline for Europe.

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Gazprom has focused its recent efforts on Asian economies, where demand expectations are far greater than from the beleaguered European economy. Gazprom, along with Royal Dutch Shell, runs the only LNG plant in Russian service on the Far East island of Sakhalin. The company last week said it was expanding its presence in the Asian market with a memorandum of understanding with Japan for LNG.

Gross domestic product for EU member states is in decline, suggesting there's no short-term end in sight to its economic woes. That means lower demand for energy resources. Gazprom provides Europe with about 25 percent of its gas, though EU leaders are working to add diversity to the European energy sector by securing natural gas from Azerbaijan. Austrian energy company OMV announced this week a BP-led consortium working offshore Azerbaijan selected the Trans-Adriatic pipeline as its conduit to ship natural gas to Europe. TAP would carry about 10 billion cubic feet of natural gas to European consumers by 2018, the same year Gazprom says it will get its LNG projects launched from the Baltic Sea.

LNG deliveries are free from the geopolitical confines of lengthy pipeline negotiations. TAP was envisioned 10 years ago and went through lengthy multilateral diplomatic negotiations before getting this far. Europe won't be in perpetual recession, however, and demand expectations for natural gas are expected to grow and rekindle competition between Western and Russian projects.

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Last week, Gazprom made more of its own pipeline overtures by courting the British government on the prospects for closer ties in the energy realm. In California, meanwhile, British Foreign Secretary William Hague was touting the benefits of multilateral coercion in a 21st century threat environment where economic might matters just as much as military power. Hague said Western powers "should be fired up" with the prospects that economic recovery can lead to a peaceful and interconnected world.

"We know that capitalism and free markets only work properly when there are safeguards against monopoly of power," he said.

A weakened European, however, might not be able to throw off the reins of gas monopoly Gazprom as easily as it thinks.

By. Daniel J. Graeber of Oilprice.com

About the author

Contributor
Daniel J. Graeber
Company: Oilprice.com
Position: Senior Analyst

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