Russia’s dominance of Europe’s natural gas market, widely seen as threatening European energy security, is likely to be increasingly challenged as new suppliers establish a foothold in the region.
Russia remains the European Union’s largest gas provider, Liquefied Natural Gas
(LNG) from the US and other sources, such as Qatar, coupled with the emergence
of Azerbaijan as a major gas supplier, is creating real competition, reducing
member states’ dependence on Russia.
has long sought to encourage the EU to diversify its supplies of gas, worried
that Russian energy supremacy allows it to wield political and economic
influence over the bloc. Russia counters that these concerns betray a desire to
increase its stake in the world’s second-biggest single gas market after the
US. The Kremlin has also accused Washington of using energy as a political
weapon. Igor Sechin, the CEO of Russia’s state-controlled oil producer Rosneft,
claimed last June that the US wanted to curb cheap Russian gas exports to Europe
to undermine Russia and slow the European economy.
sanctions Nord Stream 2
escalation in tension culminated late last year, when America sanctioned the
almost-complete $11 billion, 1200 km Nord Stream 2 pipeline, set to deliver
Russian gas to Germany and other European markets. The US action has forced
Russia into using one of its own pipe-laying vessels, which is likely to set
back the pipeline launch to the end of this year or early 2021, with a
coronavirus-related reduction in demand possibly adding to delays.
years ago Russia cancelled the South Stream pipeline, which would have supplied
Southeast and Central Europe via the Black Sea, after the EU deemed that it
breached the bloc’s competition rules. The cancellation came amid strained
relations with Europe following Moscow’s annexation of Crimea and support for
separatists in the east of the country.
Stream 2, which will double the existing Nord Stream pipeline’s capacity, has
raised concerns in a number of eastern European countries that it will
undermine their energy security. Ukraine, the main corridor for Russian gas
exports into Europe, is particularly vulnerable as Russia will be much less
reliant on it. That could squeeze Kiev’s substantial transit fees and possibly leave
the country exposed to politically-motivated cuts in supplies to its domestic
market. Moscow’s efforts to bypass Ukraine went a stage further in January with
the launch of the $7.8 billion 930 km TurkStream pipeline, which follows
roughly the same route as the jettisoned South Stream project.
while much attention has focused on Russia’s designs on the European gas market
and use of supply to exert influence, its dominance might be under threat as
other sources of gas increase competition in the bloc.
gas production has turned America into a major LNG exporter, the third-largest
in the world, with supplies to the EU surging last year, surpassing exports to
Asia. That flow, however, is showing signs of a decline due to falling demand
resulting from the pandemic, with reports that a number of US cargoes scheduled
for June may be cancelled.
Trump administration has branded Europe-bound shipments “freedom gas”,
reflecting its view that they are helping to undermine Russia’s dominant
position in the European market. It is perhaps too early to tell how US
supplies will be affected by the pandemic in the long term – but, overall,
LNG’s contribution to EU energy now seems well established. The bloc received
record deliveries last year, 75 per cent higher than 2018, representing 27 per
cent of all natural gas imports.
pipeline close to completion
same time, Azerbaijan is emerging as a major gas exporter to Europe. The
EU-backed Trans Adriatic Pipeline (TAP), the final stretch of a network of
pipelines linking Italy to the Caucasian republic’s Caspian Sea fields, is
expected to be ready later this year – though the economic impact of the
coronavirus might delay plans. TAP is
the European leg of the $40 billion, 3,500 km Southern Gas Corridor (SGC), its
longest section, the Trans-Anatolian Natural Gas Pipeline (TANAP), launched in
2018, already delivering Azeri gas to Turkey.
gas and LNG supplies have already helped the region to reduce its dependence on
Russia. In the first half of 2019, Russian gas exports to Turkey and eight
other Southeast European countries fell by more than a quarter, according to
have suggested that EU rules allowing producers to use European pipelines other
their own could allow Russia to utilize TAP, reducing the amount of gas
Azerbaijan can supply. But Vitaly Baylarbayov, deputy vice-president of SOCAR,
the State Oil Company of Azerbaijan, told Euractiv that possible Russian use of
the pipeline will not affect delivery plans.
pointed out that the capacity of SGC can be expanded, and that in future it may
be used to carry Central Asian gas to Europe. Moreover, the Baku leadership is
confident that Azeri supplies, currently sourced from Shah Deniz field, will be
supplemented by other domestic offshore reserves. Indeed, Europe is reported to
be considering expanding its purchases from Azerbaijan on the back of possible
new finds in the Caspian.
Europe is not in a position to start cutting back on Russian supplies just yet.
EU officials helped to broker a December deal between Russia and Ukraine under
which gas from Russia would continue to be pumped via Ukraine to Europe for the
next five years. While the agreement is a welcome sign of cooperation, it could
be put to the test once Moscow’s options for reducing its reliance, or even
bypassing, its western neighbor are fully operational.
Chazan is the head of content at Alaco, a London-based business intelligence