EU: Trans-Adriatic Pipeline Next Step in Diversifying Europe’s Energy Supply

EU: Trans-Adriatic Pipeline Next Step in Diversifying Europe’s Energy Supply

In January 2009, Russia accused Ukraine of tapping into the natural gas pipelines which run across its territory and abruptly cut off supply in retaliation. The dispute was caused by a simple disagreement over price: In late 2008, the Ukrainian state-owned energy company Naftogaz was paying an average of only $179.50 per 1,000 cubic meters. By comparison, Western Europeans were paying around $400 for the same volume. Ukraine’s contract for 2009 would have seen the price rise to $250, however Gazprom unexpectedly reneged on this agreement and instead upped the price to $450. At the time, Ukraine – whose economy was suffering greatly because of the global financial crisis and sagging steel prices (its main export) – would have likely been unable to even make good on the much lower initial price agreed upon for the 2009 contract.

Europe relies heavily on natural gas to meet its energy needs and imports must increasingly make up for the gap left by dwindling domestic production. By 2015, it is estimated that Europe will only produce about 31 percent of the gas which it consumes. In 2011, 79 percent of the EU’s gas imports come from just three countries: Russia (36 percent), Norway (29 percent) and Algeria (14 percent). In 2012, Norway edged out Russia to become Europe’s primary gas import partner. Most of the natural gas which reaches the EU from Russia goes through pipelines which traverse Ukraine. When Gazprom cut of supply in January 2009, it left much of Western Europe starved for energy at a critical time of the year.

In the wake of this incident, it became abundantly clear to EU politicians that a strategy was needed to slowly but surely wean Europe off of its reliance on Russian energy imports. The Southern Gas Corridor, which envisioned bringing natural gas from the Caspian Sea by a southern route, eventually became a cornerstone of this effort.

Last week, the Shah Deniz II consortium – as the group of companies which operate the Shah Deniz field are typically referred to – reached a final agreement on which route their product would take to Europe. They chose the Trans-Adriatic Pipeline (TAP), which won out over others (most notably Nabucco / Nabucco West) because it is shorter and can reach larger markets more quickly. The TAP begins at the Greek-Turkish border where it interfaces with the Trans-Anatolian Gas Pipeline (TANAP), proceeds across Greece, to Albania and then into the Adriatic Sea. It finally comes ashore in Southern Italy – Europe’s third-largest gas market – and can also reach France and Germany with comparative ease.

According to the TAP’s website, the pipeline will also be able to supply countries in southern Europe such as Bulgaria and Croatia. However in reality, this is unlikely to happen at any point in the foreseeable future. Moreover, South Eastern Europe actually depends heavily on Russian natural gas which calls into question the extent to which the TAP will actually help diversify the energy supply where it is most needed.

One important contribution which the TAP does make (and which could prove essential in the face of another crisis) is that it brings Europe closer to developing an integrated energy market. According to the EU, the internal energy market should be completed by 2014 and by 2015, EU member states should all be connected to a unified grid system.

Major Gas Pipelines Supplying Europe – The Southern Corridor

Read More:

Europe’s southern gas corridor: The great pipeline race – Euractiv.com

Dimitar Bechev – Sofia view: southern gas corridor goes TAP – The European Council on Foreign Relations

Günther H. Oettinger – The Shah Deniz decision: More gas for Europe – Hurriyet Daily News

Michael Ratner, Paul Belkin, Jim Nichol and Steven Woehrel – Europe’s Energy Security: Options and Challenges to Natural Gas Supply Diversification – Congressional Research Service

Karafillis Giannoulis – Barroso welcomes Shah Deniz II choice for TAP – New Europe

Europe faces energy crisis as Vladimir Putin cuts Russian gas supply – The Telegraph

Florian Willershausen – A European Energy Crisis: Why Ukraine Needs Help in the Gas Row – Spiegel Online International

Aida Sultanova, Art Patnaude – Shah Deniz Project Selects TAP As European Gas Pipeline – The Wall Street Journal

EU Commission welcomes decision on gas pipeline: Door open for direct link to Caspian Sea – European Commission Press Release

(Images courtesy of the TAP Project)

About the Author:

Sebastian Andrei is NABATAEANS’ editor for EU - Middle East Trade and Political Relations. He completed his undergraduate studies at the University of Vienna, where he majored in journalism with minors in political science as well as business and economics. Sebastian is responsible for reporting on the European Union’s external trade relations. He also writes about economic development and investment opportunities in Europe as well as about policy changes which affect the EU common market.

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