Russian Gas Supplies Through Ukraine Turned Off

European Union countries’ ongoing drive to increase natural gas supply diversity – and lessen reliance on Russia – hinges on new pipeline projects, particularly the Southern Gas Corridor that would transport gas from the Azerbaijan to the European continent.

During the recent Caspian Forum held in New York City, EU Special Representative for Central Asia, Patricia Flor, twice mentioned accessing natural gas supply from Turkmenistan in her brief comments.

“The European Union is the largest integrated energy market in the world,” she said, and the proposed pipeline needs to be large enough to accommodate future Azeri supply and supply from others. Flor said she would like to see a trans-Caspian pipeline link to Turkmen gas.

Turkmenistan and China made headlines in recent years with the speed in which large-capacity, long-distance natural gas pipelines were agreed, sited and constructed to bring Turkmen gas to hungry Chinese markets. The majority of Turkmenistan’s gas exports now go to China – 21.3 billion cubic meters of the country’s total 41.1 Bcm of 2012 exports were delivered to the Chinese.

caspian_routes_map

Europe also wants access to Turkmen gas. The former Soviet satellite transports almost 10 Bcm per year to Russia, some of which is likely re-exported to European buyers, but Europe would like to buy direct from Turkmenistan.

European gas consumers are thinking long term, as indigenous production declines and the reliability of major suppliers Algeria and Libya is called into question due to local and regional conflicts. European markets were flooded with LNG in recent years when cargoes were redirected from North America, where shale gas production is booming. However, Asian gas demand is expected to significantly increase over the coming decades, creating stiff competition for LNG in Europe, where landed LNG prices lag Asian prices.

If constructed, the Southern Gas Corridor would bring an incremental 10 Bcm of gas per year to Europe, but with indigenous European production declining, more gas will be needed. And sourcing that gas from a diverse group of suppliers enhances energy security, even if it leaves consumers reliant on pipeline transport.

“[The Southern Gas Corridor] diversifies supply, but does not change reliance on pipelines,” said Flor. “We might see a global gas spot market in the future, but are still reliant on supplies from countries like Azerbaijan and hopefully Turkmenistan.”

 

 

Comments