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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Russia Goes For Global Gas Dominance

MBS Putin

Despite the newly announced U.S. sanctions against the Nord Stream 2 project, Russia says it will build and launch next year the natural gas pipeline that has divided Europe for half a decade.   

With Nord Stream 2, Russia’s President Vladimir Putin will have several major natural gas projects completed in the past few years, Bloomberg Opinion’s Europe columnist Leonid Bershidsky writes.

These projects will complete Putin’s plan to have Moscow not only continue holding a large share of gas supplies to Europe, but branch out Russian gas exports to the fastest growing gas import market, China, and seize a growing share of the global liquefied natural gas (LNG) market.

Nord Stream 2 is the latest project in Putin’s plan for energy and geopolitical dominance in the world. Russia already holds a third of Europe’s gas imports. Nord Stream 2, when completed—because Russia believes it will be completed next year despite the sanctions—is set to further solidify Moscow’s reach into the north European market bypassing Ukraine.

Before Nord Stream 2, Russia will have launched TurkStream, through which Russia’s gas giant Gazprom will carry pipeline gas to Turkey and south and southeastern Europe—a region already heavily dependent on Russian gas supplies. Putin and Turkish President Recep Tayyip Erdogan are set to officially launch the TurkStream gas pipeline on January 8.

Early in December, Gazprom—which also leads the Nord Stream 2 project to carry Russian gas to Germany—launched the huge Power of Siberia pipeline project to deliver gas to China, whose gas consumption and imports are only set to increase over the coming years and decades.   Related: The One Region Oil Markets Can’t Ignore In 2020

While Gazprom is launching new pipelines east and west, Russia’s largest private gas producer Novatek is boosting its presence on the global LNG market. Novatek, which already exports LNG from the Yamal LNG plant, gave in September the go-ahead to its second large LNG project, Arctic LNG 2 on the Gydan Peninsula.

This year, Russia has supplied large volumes of LNG to Europe, apart from its pipeline supplies which account for a third of the European Union’s (EU) gas imports.

In Q2 2019, thanks to the LNG supply glut and converging prices, the EU’s LNG imports jumped by 102 percent on the year, with Russia accounting for 19 percent of LNG imports, second only to Qatar with 30 percent, and ahead of the U.S. with 12 percent, the European Commission’s Quarterly Report on European Gas Markets shows.

Between January and November, LNG imports into Europe including Turkey hit a record high, beating the previous record from 2011, the EIA said in its latest natural gas update. The U.S., Russia, and Qatar boosted their LNG supplies to Europe this year, and the U.S. beat Russia in volumes supplied to Europe in the latter part of the year, EIA data shows.

While Russia and the U.S. compete for gas market share in Europe, the U.S. hit Russia’s Nord Stream 2 project with sanctions this month, delaying the completion of the project with at least several months.

Following the announcement of the sanctions, Switzerland-based offshore pipelay and subsea construction company Allseas immediately suspended Nord Stream 2 pipelay activities.

“The United States will impose sanctions unless related parties immediately demonstrate good faith efforts to wind-down. Related parties need to finish wind-down within 30 days,” the State Department said on Friday, noting that the United States’ intention is to stop construction of Nord Stream 2. Related: Big Banks Turn Bearish On Oil Next Year

Putin and German Chancellor Angela Merkel confirmed in a telephone conversation their commitment to further support the Nord Stream 2 project, the Kremlin said on Sunday. The U.S. sanctions on the project have divided Europe, with Germany criticizing the U.S. interference in Europe’s energy policies and projects.

Before the sanctions were imposed, the Nord Stream 2 pipeline was expected to come on stream in the middle of 2020, Russia’s Deputy Prime Minister Dmitry Kozak said in November, adding that construction of the project was 80 percent complete.  


Russia’s Energy Minister Alexander Novak said on Friday that Gazprom would launch Nord Stream 2 by the end of 2020. One of Gazprom’s options to continue pipelaying while under sanctions is using a vessel that is currently in the Far East, Novak said, noting that retrofitting the ship could take “some time.”

Despite the now inevitable delay of Nord Stream 2, Russia looks beyond the next few months as Putin has laid the foundations of global gas export dominance.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on December 30 2019 said:
    From the first day of his presidency, President Putin has set his eye on making Russia the superpower of Energy with sharp nuclear teeth. Not only this goal has been achieved but Russia has also emerged as the world’s superpower of natural gas since it has the largest proven gas reserves in the globe and is also the largest exporter of gas. Furthermore, it accounts for 40% of the European Union’s (EU’s) growing gas market and is now on the way to becoming the largest supplier of natural gas to China, the world’s largest energy market.

    Russia’s supremacy in gas supplies will be further enhanced by the completion early
    next year of both the Nord Steam 2 and Turk Stream gas pipelines which will be bringing more Russian gas supplies to the EU under the Baltic and the Black Seas respectively.

    Russian position will be also strengthened by the Power of Siberia gas pipeline which was inaugurated in early December and which will be supplying 38 bcm of gas annually to China for the next 30 years.

    And Putin’s plans don’t stop here. While Russia’s gas giant Gazprom is launching new pipelines east and west, Russia’s largest private gas producer Novatek is boosting its presence on the global LNG market. Novatek, which already exports LNG from the Yamal LNG plant in the Arctic gave in September the go-ahead to its second large LNG project, Arctic LNG 2. Now Novatek is a major exporter of LNG to China and it already accounts for 19% of the LNG market in the EU.

    The United States has been trying to derail Nord Stream 2 first by President Trump threatening Germany with sanctions if it goes ahead with building the gas pipeline and now by threatening to impose sanctions on companies involved in its construction. But with President Putin at the helm and with support from the Iron German Chancellor Angel Merkel, Nord Stream 2 is unstoppable.

    And despite claims by the United States that Nord Stream 2 undermines Europe’s overall energy security and stability, the Europeans see US opposition as a crude attempt to force them to buy US LNG.

    While the sanctions may delay the completion of Nord Stream 2 by a few months, this will not affect Russian natural gas supplies to the EU. Russia could continue its gas shipments to the EU through Ukraine particularly after the recent agreement with Ukraine to settle their differences regarding the amount of Russian gas that will pass through Ukraine on its way to the EU and the transit fees that Ukraine will earn.

    Still the United States’ projected LNG exports to the EU could be seriously affected. Germany may decide to shun US LNG exports altogether in retaliation against the United States’ interference in its energy affairs and the EU’s and buy Russian or Qatari LNG instead.

    Moreover, previous US sanctions against Russia have proven a failure. Russia’s economy has emerged far stronger and more resilient from the 2014 US sanctions with Russia's foreign-exchange and gold reserves climbing by nearly one-fifth over the past year to almost $550 billion. This means that Russia could finance the completion of Nord Stream 2 on its own using its home-grown pipe-laying technology.

    The reality of the 21st century—as President Putin sees it—is that energy is a political instrument. Political alliances and the rise and fall of the international importance of particular countries will change in accordance with the energy supply routes.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Douglas Houck on December 30 2019 said:
    What is left out of this article is the recently completed negotiations between Russia and Ukraine, which are part of the larger negotiations from the recent Normandy format talks between Russia, Ukraine, Germany and France earlier this December. These talks were to address not only the transport of natural gas through Ukraine but how to deescalate the tensions in the Donbass region.

    In 2018 Ukraine transported 87 bcm of natural gas from Russia to Europe. With the completion of Nord Stream 2 (55 bcm) and Turkstream (15 bcm) it was expected that Ukraine would only be used to transport 10-15 bcm of natural gas with the resultant decrease in export fees which make up a significant source of revenue for the Ukraine government.

    The recently signed agreement requires Russia to export a minimum of 65 bcm in 2020 and 40 bcm in the subsequent years of 2021-2024 through Ukraine with a payment of $7 billion. These values correspond to little to no use of Nord Stream 2 in 2020 and only one barrel in the subsequent years. The biggest winner is Ukraine, then Europe and possibly to Russia. The biggest loser is the US and its desire to export LNG to Europe.

    With this agreement and the extra year Russia and Germany have to complete Nord Stream 2 with Russian equipment, no decrease in Russian natural gas to Europe is expected. Where Russia has the potential to come out ahead is from the expected increase in natural gas that Europe will need as the Netherland gas fields come to an end of production and Germany shuts down its nuclear power plants. The actual amount of natural gas needed in the future is dependent on how much renewable energy Europe can bring on-line. Still, it is expected that Europe will need more gas than they are using now. To meet this need Russia had talked about building a third Nord Stream pipeline.

    With a more secure and friendlier pipeline through Ukraine, Russia can easily export whatever amount of natural gas through Nord Stream 2 and all the other pipelines Europe will need in the near to mid-term future. Europe has secured its natural gas needs and with the prisoner swap, etc. helped stabilize Ukraine.

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