Russia has enough gas for everyone

Russia has enough gas for everyone

The June 26 speech by Alexey Miller, the chairman of the board of Gazprom, at the annual general meeting of shareholders proved to be a cold shower for all those who hoped that Russia would pull out of Europe’s gas markets. Despite the fact that much of his report was devoted to Gazprom’s operations in the Russian Far East, the data Miller provided confirmed that Russian gas will not be squeezed out of Europe’s energy balance. Moreover, in the coming years Russian gas supplies will continue to play a steadily larger role in ensuring European energy security.

The cold, hard facts are a key factor in this. Statistics show a downward trend in Europe’s gas consumption in recent years, declining nearly 20% between 2010 and 2014. But at the same time there has been a significant decrease in the amount of gas shipped to Europe, which includes liquefied natural gas. «During this time period only Gazprom and Norwegian producers were able to increase their shipments, although Gazprom’s figures show that it exported five times as much as its Norwegian counterparts,» stated Miller. The head of Gazprom continued, «What’s even more impressive is that Gazprom’s market share in Europe has risen over the last ten years, although demand for gas there has been dropping. That growth totaled nearly 7% just between 2010 and 2014. This is a long-term trend that will work in Gazprom’s favor, regardless of European or global economic developments».

Given the decline in domestic production in Europe, in the coming years the European Union will have to resolve the problem of how to make up for these «missing» quantities. That is why the head of Gazprom stressed that «the quantities of Russian gas shipments, as well as - in absolute terms - its market share in Europe, will only grow».

Speaking of the routes by which Russian gas is shipped to Europe - in 2014 about 35% of the total quantity was transported via the Blue Stream and Nord Stream pipelines. And in the near future these quantities could expand even more, given the agreements Gazprom has already signed with E.On, Shell, and OMV to build the third and fourth branches of a gas pipeline between Russia and Germany, traveling under the Baltic Sea with capacity of 55 billion cubic meters of gas per year. There are also plans for BASF/Wintershall to become involved in this project.

The gas pipeline already known as Nord Stream-2 should be in service before the end of 2019. By that time the Turkish Stream pipeline will be up and running along the «southern flank» of these energy routes. The first branch of that pipeline, which was designed to supply Turkey’s domestic market, will be operating at full capacity by December 2016.

Gazprom is confident that «the increase in the amount that can be transported across the Baltic Sea, plus the construction of Turkish Stream, will diversify the channels by which Russian gas can be exported and will strengthen Europe’s energy security». «This fiscal year has once again convinced us that neither economic crises nor tensions arising from foreign policies can hinder our plans to move forward».

There is no doubt that the Turkish Stream project will go through, regardless of the configuration of the new ruling coalition in Turkey. Erdal Tanas Karagöl, an analyst for the Turkish Foundation for Political, Economic and Social Research (SETA), has shown that the political landscape that emerged in Turkey after the June 7 elections - as well as the process of creating a coalition government - will not be able to negatively affect «major energy projects» like Turkish Stream.

Hüsnü Özyeğin, the owner of the Turkish company FİBA Holding, agrees with him. He stresses the need for his country to continue «giant» joint projects with Russia, like the updates to the Akkuyu nuclear plant and the construction of Turkish Stream, regardless of the process of forming a coalition government in Turkey. «This project belongs to the entire country, not to just one political party,» Özyeğin notes.

One important factor that should certainly not be overlooked is the constructive relationship being established between the leaders of Russia and Turkey. The meeting between President Vladimir Putin and Recep Tayyip Erdoğan, held in mid-June in Baku «on the sidelines» of the first European Games, gave a strong boost to their bilateral cooperation. Discussing the results of the Baku meeting, President Erdoğan and the minister of energy and natural resources, Taner Yıldız, stressed the need to affix signatures to their joint projects ASAP. As Taner Yıldız stated, «Russia and Turkey are indispensable to each other». And President Erdoğan emphasized the need to bridge this «period of uncertainty» as quickly as possible and to do all that is needed to build the Turkish Stream gas pipeline, in accordance with the relevant intergovernmental agreement.

And finally, one more factor that favors the construction of the Turkish Stream pipeline is, paradoxically, an external one - the Greek-Turkish conflict. For various reasons both countries now have an equally strong interest in cooperating with Russia - and in the meantime are enviously monitoring each other’s successes. Greece’s response to the negotiations between Russia and Turkey in Baku was to sign a Russian-Greek intergovernmental memorandum on Turkish Stream in June in St. Petersburg at the St. Petersburg International Economic Forum.

Even the Turkish mass media - such as the newspaper Radikal, for example - was forced to admit that Greece’s involvement made it possible to take a «a giant step forward» toward realizing the project. Even Bulgaria in recent weeks has signaled its interest to Russia about a new project - specifically by proposing the creation of a gas storage facility on Bulgarian soil to support Turkish Stream’s operations.

So the new architecture of Europe’s energy security, based on stable supplies of inexpensive and growing shipments of Russian gas, in addition to a far-reaching regional infrastructure, is starting to look increasingly realistic. Commenting on this issue, the Turkish newspaper Dünya emphasizes that «despite all the political arguments in favor of energy security, the price of the gas that is sent to Europe remains the major determinant». And from that standpoint Russia has no competitors.