“The results of 2017: Europe lost the fight for independence from Russian gas

According to analysts, the EU has not many alternatives to Russian gas, the main asset of which are low price

Photo: Reuters

The European Union in 2017 has thrown all forces of the power unit to reduce dependence on Russian gas, but the results have turned out to be the opposite: despite all the efforts and financing of EU projects, Russian gas exports to Europe continued to grow.

According to the estimates of Interfax Global Gas Analytics, Gazprom in 2017 has set a new record in terms of natural gas supplies to Europe is 193 billion cubic meters. The share of Russia in the European gas market has increased from 35% in 2016 to 36% in 2017.

The main asset of Russian gas prices remain low, says expert Interfax Global Energy Sylvia Tavasoli. Huge gas reserves and continued backup power will allow Russia to keep control of the cost and may improve the impact on the European energy market, she said.

“Common cause”

Towards the end of the year the European Commission published the list of projects of common interest the EU (Projects of Common Interest, pcis), which are expected to allow Europe to achieve energy targets and combating climate change. This document is updated every two years.

This time in the list of 173 cross-border project, and the goal of many of them is the diversification of energy imports in the participating countries of the EU. Recent years the EU has been increasingly involved in small infrastructure projects rather than large-scale initiatives such as the TRANS-Adriatic pipeline (TAP). However, the TAP remains on the list.

In 2017 the special attention paid to the interconnectors and reverse-flow projects, since such decisions reinforce the interconnectedness and liquidity of the European gas market, especially the Eastern part.

There is no choice

At the moment Europe are not many alternatives to Russian gas. A PCI is stuck at the planning stage, and the deficit private investors prevents the transition to the funding phase.

For example, Croatia is still looking for investors for the construction of floating storage terminals and regasification (FSRU) and Greece have not managed to find someone willing to participate in the construction of an LNG terminal.

Meanwhile, “Gazprom”, despite some resistance, in 2017, has made progress on two important projects – “Nord stream 2” and “Turkish stream”.

“Gazprom” since may 7, put total on two strings of the pipeline “Turkish stream” more than 650 km of highways, said the head of the company Alexey Miller at the final conference.

The European partners “Gazprom” under the project “Nord stream 2” – Engie, OMV, Shell, BASF and Uniper – fulfilled liabilities on financing in 2017, he added.

It is expected that both projects will be completed by the end of 2019, expanding export opportunities “Gazprom”.

The increase in exports of “Gazprom” in Europe in 2017 is a “regulatory failure with which to understand”, says a senior research fellow at the Oxford Institute for energy studies (OIES) Thierry Bro. He hinted at the possibility of artificial restrictions on the supply of Russian gas to Europeans due to the introduction of limits on imports. At the moment this step is probably the only opportunity for the EU to reduce its dependence on Russian gas, the expert believes.

LNG from the US is unlikely to be the salvation

In the long term the US will be able to significantly increase supplies of LNG, but analysts do not believe that for Europe, this option would be a realistic alternative to Russian gas.

In August 2017 Lithuania received its first spot LNG supply from the US. Poland in November signed a contract for the purchase of American gas for a period of five years.

However, in the next few years, European countries are unlikely to increase LNG imports from the United States due to technical difficulties, said in November the adviser to the U.S. Department of energy at the European command of the Armed forces of the United States Russell’s Mouth. One of the reasons is that us LNG is significantly more expensive than Russian pipeline gas.

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