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Energy Security Trumps Climate As EU Agrees To Pipeline Expansion

The European Commission and the Azeri government have sealed a preliminary deal for expanding the Trans-Adriatic Pipeline that brings Azeri gas into Europe as part of the EU’s efforts to reduce its dependence on Russian gas.

“The Sides aspire to support bilateral trade of natural gas, including through exports to the European Union, via the Southern Gas Corridor, of at least 20 billion cubic metres of gas annually by 2027, in accordance with commercial viability and market demand,” the draft memorandum of understanding said, as quoted by Reuters.

The Trans-Adriatic Pipeline, or TAP, is the final section of the 3,500-km Southern Gas Corridor from the Caspian Sea to Italy, which is projected to have an annual capacity of 20 billion cubic meters at some point in the future. Last year, Italy and other European countries received 8 billion cubic meters from Azerbaijan via the TAP.

The draft mentioned “long-term, predictable and stable contracts” that would provide gas suppliers with security for future demand. This is a marked departure from the European Union’s favor for gas spot markets that have prevailed in the past decade as the EU tries to prevent any fossil fuel commitments that would interfere with its climate goals.

The draft document made a note of the EU’s emissions-cutting ambitions, saying that gas deliveries along the Southern Gas Corridor would need to be aligned with Paris Agreement targets.

For context, the EU received 158 billion cubic meters of natural gas from Russia last year, per Germany’s deputy finance minister Joerg Kukies. Of this, 30 billion cubic meters could potentially be replaced with liquefied natural gas from the United States and Qatar.

In addition to these two, Azerbaijan has been among the main alternative sources of gas under consideration in the EU, along with several African countries with LNG export capabilities, such as Nigeria, Egypt, and Algeria.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on July 14 2022 said:
    The EU is clutching at straws in its failing attempts to replace Russian gas supplies. It is deluding itself and conning its own people that it can replace Russian gas supplies. It won’t manage this now of for the foreseeable future because there are no alternatives to Russian gas.

    The combined LNG exports of the United States, Qatar, Australia and Algeria couldn’t replace Russian gas supplies now or in 15-20 years from now. The maximum volumes of LNG both the United States and Qatar could supply the EU are 30 billion cubic metres (bcm) annually compared to 158 bcm of piped gas and 16 mt of LNG (equivalent to 22 bcm) that Russia supplied last year.

    The EU has recently been turning its gaze towards African gas and LNG suppliers. However, the major obstacle in tapping Africa’s energy reserves is overcoming underdeveloped infrastructure. The two relatively significant African LNG exporters are Algeria - currently exporting 29.3 million tonnes (mt) - and Nigeria – with an export capacity of 22.2 mt. The rest of Africa’s producers have limited production and export capacities with neither LNG plants nor gas pipelines.

    In desperation, the EU and the Azerbaijan government have sealed a preliminary deal for expanding the Trans-Adriatic Pipeline (TAP) that brings Azeri gas into Europe via the Southern Gas Corridor (SGC). The target is to bring at least 20 bcm of gas annually by 2027.

    The major obstacle is that Azeri gas is in decline. Since its launch, the SGC with an annual capacity of 20 bcm has never been able to ship gas to its full capacity. There was even talk that part of Russian gas shipped to Turkey via the Turk Stream could be transferred to the TAP gas pipeline to make it cost-effective.

    Therefore, I very much doubt that the EU will receive any increased volumes of Azeri gas by 2027 beyond the 8 bcm it has been already receiving annually.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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