REVENGES OF THE EUROPEAN COMMISSION. Searches
at Gazprom offices is the European reaction to South Stream and
poor prospects of Nabucco
The searches at German and Czech Gazprom
subsidiaries that took place in the end of September are seemingly
the revenge of the European Commission for South Stream and poor prospects
of Nabucco. In reality the EU should have better consolidated
partnership with Russia as long as our country has the largest gas
deposits in the world — the cleanest kind of fuel.
Last year European gas consumption went 7%
up, while gas import increased by 13%. Statistics indicates that gas,
being the cleanest fuel of all, rapidly improves its positions at all
markets, which is non-surprising.
According to the majority of expert forecasts, the 21st
century will be the age of gas (just like the 19th century was the
age of coal and the 20th century was the age of oil). This
June International Energy Agency published a report, stating that for
at least 25 years more the natural gas will remain the key
to satisfying the global demand for energy resources. The report marked
out that by 2035 the demand can make up 5.1 trillion cubic meters,
which is 1.8 trillion more than in 2010, thus the growth is 50%.
This is a brilliant opening for Russia, having the largest proven gas
deposits. It’s quite characteristic too as long gas ousts the oil products
even from its home field — vehicles. Since 2000 to 2010 natural gas
consumption as an engine fuel has gone up 12.5 times.
BP officials forecast that in the nearest 20 years the gas
consumption in the Middle East will increase drastically, where
it will oust oil from the energy balance. This will considerably injure
the export potential of the Middle Eastern countries at the gas
market. As for the «shale revolution», BP believes that it will
take place in the USA too. As a result, by 2030 more
than 50% of American production will fall for shale and coal gas.
In Europe share of their production will remain insignificant due
to the ecological risks. We have to comprehend, though, that
American authorities won’t be able to brush the substantial
ecological risks aside. Right now several lawsuits against the U.S. shale
gas-producing companies are processed. Farmers accuse gas industry officials
of polluting water intakes and spoiling the water supply system because
of the hydraulic fractures between layers. If these facts are proved,
plans for drastic increase of shale gas production would be left
hanging up in the air.
Pace of gas consumption rise will be the swiftest in Asia
(especially in the PRC). Today China satisfies about 70% of its
energy needs producing its own coal. Yet, that has already caused ecological
catastrophes in the major Chinese cities. According to the WTO and
World Bank estimates, 20 out of 30 most polluted cities are
situated in China. At that, among the rest of these
top-polluters cars are considered to be the main contributors.
In China the number of cars per capita is 25 times less
than in the USA and it is exactly the coal power plants that are
considered the main cause of pollution. Steady economic growth gave birth
to the Chinese middle class, which also triggered the car sales. Today
Chinese customers buy more cars than anyone else in the world, which means
that soon enough there will be literally nothing to breath
in the Chinese cities.
This problem may be solved by switching the coal power plants
to a considerably «greener» natural gas and cars —
to a gas fuel.
Not a long time ago the leading Chinese company PetroChina forecasted that
by 2020 Chinese gas consumption will make up 300 billion cubic meters
(in 2010 it was les than 109 billion). The bugbear is that
there are not enough gas fields in China in order to satisfy its
needs. Recently the information that China is going to apply American
technologies of shale gas production has been leaked. Yet, quite
a number of specialists paid their attention to the fact that
a great amount of water is necessary to create the
hydraulic fractures and produce the gas from the shale rock and Russia
is somewhat short of water sources. Half of the national water
resources were polluted with industrial wastes, which makes
it undrinkable, and a quarter of them are unfit even for
industrial use. Many rivers have just vanished from the face of earth.
It is commonly known that special chemical solutions are added into
the water for hydraulic fractures.
In Europe and North America natural gas will start ousting coal from the
energy balance, which is provided with the plans of carbon dioxide
emission reduction. By the way, BO believes that bio-fuel consumption
will ratchet up quickly enough (especially in Brazil and the USA).
Everybody knows that food prices break all the records these days and this
trend will hardly change, as long as the planet population inevitably
increases. In conditions like that wasting the food resources for engine
fuel is barely reasonable. Most likely bio-fuel will lose the competition
for the car engines to gas.
Prospects of alternative energy (wind and solar energy) remain dubious.
First of all, these project develop thanks to state grants
(in Europe mostly). Yet in the nearest years to come European
countries are to face the need to considerably pump the retirement
payments up. Since 2010 to 2020 the number of retired Europeans
will increase almost 3% a year, while the number able-bodied
population on the contrary, will be 1% less each year. Given the
budget deficit, politicians are to have a hard time convincing
population of the need to waste the taxpayers’ money
on upholding the inefficient alternative-energy projects. Mind that
there’s a cheaper way of reducing the harmful emissions —
by switching the coal power plants to gas and switching car engines
to the gas fuel. That’s why there’s nothing surprising in the fact
the European governments have already started closing the alternative energy
subsidizing projects. This happened in Spain, for example.
Accidents at the Japanese nuclear power plants have made this country buy
more gas abroad. Besides, many countries have reconsidered their attitude
to nuclear energy. Germany in particular has shut down 7 power
plants and scheduled shutting the rest of them down by 2022. They’re
to be substituted with the gas mostly.
Year after year European own gas production inevitably decreases. This trend
will remain further on. Therefore, import of natural gas will
be increasing furthermore. Where will it come from if not
Russia? Middle Eastern consumption itself will grow — besides,
it is still one of the most unstable regions in the world.
The same thing is applied to Africa. Might it be that
Nabucco project saves Europe?
Council of Europe has approved the EU mandate for holding
negotiations with Azerbaijan and Turkmenistan regarding the construction
of Trans-Caspian gas pipeline. At the same time Europe keeps fighting
for the right to conclude international contracts for energy carriers’
supply. For now only the EU state leaders managed to defend this
right of theirs. Yet, the European Union leadership keeps trying
to lay its hands on the international «gas» policy-making. And
on the 12th of September Euro Commission managed
to get a mandate for the negotiations with Azerbaijan and
Turkmenistan on the subject of Trans-Caspian gas pipeline
construction — it is to become a substantial part
of Nabucco project. However, joy of the EU leaders hasn’t lasted
long. As soon as on the 16th of September
leaders of Gazprom, ENI (Italy), BASF (Germany) and EDF (France) have
signed a treaty on the joint construction of South Stream gas
pipeline — the direct competitor of Nabucco. Now European Commission
will have to compete with the leading EU countries: Germany, France
and Italy.
It seems that the EU leaders have deliberately authorized the
European Commission to negotiate about the Trans-Caspian gas pipeline,
disbelieving into its prospects. The matter is that this project
is discussed for about 20 years, although there’s little progress
still. Only Russia, Kazakhstan and Azerbaijan have signed the treaty
on the division of the Caspian Sea, while Turkmenistan and Iran
refused to do so. Turkmenistan and Azerbaijan keep arguing about
a number of Caspian shelf deposits — back in the beginning
of 2000s it even triggered several clashes of their military
ships. In conditions like that we may hardly expect reaching
a quick agreement on the construction of Trans-Caspian gas
pipeline. All the more, Russian and Iranian authorities have already voiced
up their objections against this gas main.
We also have to understand what will be Trans-Caspian gas
pipeline filled with it’s ever built. Today Turkmenistan sells its gas
to Russia, Iran and China. At that, it plans to quickly
build up the volumes of the PRC supplies. So where do they
get some spare gas for Europe from? Recently discovered South Oilton gas field
(which deposits allegedly exceed 10 trillion cubic meters of gas)
is named as the resource base for the Trans-Caspian gas pipeline.
This, however, is a very complicated deposit to develop —
similar to the Astrakhan one that Gazprom works with.
Volume of the Astrakhan deposit makes up approximately 2.5 trillion
cubic meters, allowing to produce about 100 billion cubic meters annually.
Now, however, merely 15 billion are produces. Why is that so?
As a matter of fact, this gas is very expensive, due
to lying at great depths (more than 4 kilometers) and containing
plenty of harmful admixtures (hydrogen sulfide and acid gases).
In order to bring Astrakhan gas to a market-approved state
it has to be purified from the admixtures
at a gas-refining factory. In the Soviet era, when the
development of Astrakhan deposit has just started, sulfur (rather than
natural gas) was considered the key product here. Therefore, prior
to developing the South Iolotan gas field, Turkmenistan has to build
a large gas-refining complex. According to McKinsey estimate,
production costs at South Iolotan will be one of the largest
in the world (considerably more expensive than the indices for
poorly-accessible Shtokman deposit, situated at the Barents Sea shelf).
Thus, we may state that the goal of the EU — to beat down
the price for Russian gas via securing the supplies from Turkmenistan —
is unachievable (new Turkmen gas cannot be cheap
by definition).
Assuming that the Trans-Caspian gas pipeline is built and at least
20 billion cubic meters are pumped through it annually, combining
it with 10 billion cubic meters of Azerbaijani gas it would
allow to fill Nabucco up. Europe then will end up with
an independent (from Russia) source of supply. However, this main
will go through an utterly unstable territory with a number
of smoldering conflicts (Nagorno-Karabakh in Azerbaijan, South
Ossetia and Abkhazia in Georgia, Kurdish separatists in Turkey). It’s
hardly a secret that terrorists regularly blow the gas pipeline,
connecting Iran and Turkey. European Commission assumed an unbearable
burden and if it succeeds in settling all the contradictions and
actually bringing the Nabucco project to life, its leader will
be free to set monuments in their own honor. The chances for
this, though, are diminutively small.
The searches at German and Czech Gazprom subsidiaries that took place
in the end of September are seemingly the revenge of the
European Commission for South Stream and poor prospects of Nabucco.
In reality the EU should have better consolidated partnership with
Russia as long as our country has the largest gas deposits
in the world — the cleanest kind of fuel.
In order secure the supply of this energy carrier it’d be only
wise of European Companies to create the joint ventures with Gazprom.
They strive for that indeed. First of all, we may name the largest
buyer of Russian gas — Germany. Gazprom and BASF subsidiary
Wintershall have organized a joint venture called WINGAS, which constructs
the gas transit infrastructure and sells the gas to end customers. Thanks
to that today WINGAS is one of the leading players at the
German gas market. Besides, it acts at the foreign markets too:
in Great Britain, Belgium, Holland, France, Denmark, Czech Republic.
Gazprom in its turn granted Wintershall shares in the development
projects at the South-Russian deposit and Achim deposits of the
Urengoi gas field. Another German concern (E.ON) will also take part
in its development.
In cooperation with Italian ENI and ENEL Novatek and Gazprom explore the
Samburg, Evo-Nohin, Yaro-Yahin and Severo-Chasel deposits. French Total and
Norwegian Statoil got an access to the giant Shtokman deposit.
Besides, Shell Corporation will take an active participation in the
Sahalin-2 venture.
New gas pipelines Nord Stream and South Stream are also the joint enterprises
of Gazprom and European companies. It turns out that Europe and
Russia shouldn’t seek for casus belli but rather deal with the matters
of energy security together. Mind that Russia is interested
in uninterrupted gas supplies no less than Europe itself.
By Sergey Pravosudov
Sergey Pravosudov is the Director of National Energy
Institute
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