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Natural Gas Prices At Highest Level In Two Years

Natural Gas Prices At Highest Level In Two Years

Natural gas has posted significant…

Global Energy Advisory December 2nd, 2016

Global Energy Advisory December 2nd, 2016

The successful OPEC production cut…

Nord Stream Pipeline Expansion Inches Forward Despite EU Opposition

A recent speech by the European Commission’s vice-president in charge of energy Maroš Šef?ovi? has added fuel to an ongoing debate about the second part of the Nord Stream gas pipeline project.

Nord Stream 2, like the initial pipeline, is planned to pass from Russia to Germany, under the Baltic Sea. The project, involving the construction of two new pipelines, should double the current capacity of the pipeline by adding 55 billion cubic meters annually to its throughput. Russia’s state gas monopoly Gazprom is the operator, in consortium with German energy leaders BASF, Wintershall, and E.ON, plus Anglo-Dutch oil giant Shell, Austria’s OMV, and French utility Engie (formerly GDF Suez).

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Naturally, the main reason for the opposition is the persistent worry among EU members that any further gas transportation capacity built by Gazprom will only strengthen its foothold on the continent, which already gets between a quarter and a third of its gas from Russia. The stronger this foothold is, according to the opponents, the less space there is for effective competition, and the greater the EU’s dependence on Russian gas will be.

In his speech, Šef?ovi? focused on the safety and environmental aspects of the project, stating that it should comply with the European Union’s strict legislation in these respects, and hinted at the geopolitical implications of a new Russian pipeline (read: a greater opportunity for Russia to manipulate Europe through gas supplies).

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Ukraine has already complained loudly about Nord Stream 2 because it will redirect part of Europe-bound gas supplies from the transit route that goes through its territory, cutting its revenues. Nine EU member states, including the three Baltic countries, Poland, Croatia, the Czech Republic, Slovakia, Hungary, and Romania, in March sent a letter to EC president Jean-Claude Juncker calling for the suspension of Nord Stream 2 because it would undermine the energy security of the continent. Again, read that as “we depend too much on Russia for our gas and, what’s more, these pipelines will not pass through our land, so we can reap at least some benefit from them.”

The overdependence on Russian gas is a valid argument, and Europe is taking pains to solve its diversification problem: the start of construction on the Trans-Adriatic Pipeline could begin later this year, which will transport gas from the Caspian Sea to Europe. The North Sea is also still a major gas supplier for the EU. In other words, diversification measures are ongoing. So, why such a heated debate?

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The reason is simple. Whenever someone depends on someone else for an essential commodity, the likelihood of a great love and friendship blossoming between supplier and consumer is slim. Putting aside political sentiments and criticism about the state of Russia’s democracy, or lack thereof, the plain pragmatic truth is that Europe hates being so dependent on a single gas supplier, whom it has to regularly shake its fist at for being undemocratic, corrupt, etc.

Europe and Russia are in a complicated relationship, and whatever one or the other does, it will remain complicated for the observable future. Nord Stream 2, however, will most likely go ahead as planned, as some of Europe’s energy giants throw their weight behind it and make sure it is compliant with anything it needs to be compliant with.

By Irina Slav for Oilprice.com

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  • sdfd on April 14 2016 said:
    "...whom it has to regularly shake its fist at for being undemocratic, corrupt, etc.

    Europe and Russia are in a complicated relationship, and whatever one or the other does, it will remain complicated for the observable future. Nord Stream 2, however, will most likely go ahead as planned, as some of Europe’s energy giants throw their weight behind it and make sure it is compliant with anything it needs to be compliant with."

    "shake its fist at for being undemocratic, corrupt" " make sure it is compliant with anything it needs to be compliant with."

    The above is called doublethought.
  • Bob on April 13 2016 said:
    Is South Stream dead?
  • Cantal on April 13 2016 said:
    "Europe and Russia are in a complicated relationship". You bet it's complicated. The USA is complicating it. Otherwise it's fine.

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