The pipelines needed to transport oil and gas over thousands of kilometers often travel through politically unstable regions or countries that are sometimes even engaged in war. The transit of Russian gas through Ukraine, which has fueled recurring geopolitical crises over the last 10 years, is one such example.
Despite the high level of uncertainty surrounding current estimates, the International Energy Agency (IEA)An independent, intergovernmental organization founded within the framework of the OECD... has forecast that the European Union (E.U.) will increase its gas imports (including from Norway) by 35% between 2014 and 2035 due to the rapid depletionIn the oil industry, depletion corresponds to the gradual decline in production from an oil or gas well... of North Sea gas fields1. While Europe can diversify its supply by importing more liquefied natural gas (LNG)LNG is composed almost entirely of methane. Liquefying the gas reduces its initial volume by a factor of around 600... and expanding its list of supplier countries, Russia will still remain a major partner. Europe imported 45% of its gas from Russia in 2015, compared with 29% from Norway and 8% from North Africa2. However, dependence on Russian gas varies significantly across the continent, ranging from high in Central and Eastern Europe and the Baltic states to more moderate in Western Europe. Germany, for example, imports some 40% of its supply from Russia while France sources 20%.
Ukraine Transit Down
1,220 kilometers: The length of the Baltic Sea Nord Stream pipeline
For years, 80% of Russian gas flowed through the large Brotherhood pipelinePipeline used to transport gas over a long distance, either on land or on the seabed. built in 1967 in what was then the Soviet Union. The pipeline runs through Ukraine to Slovakia, where it splits into two branches to supply northern and southern European countries. The volume of gas supplied through Ukraine has declined rapidly, however. In 2015, only 39% of European deliveries transited through Ukraine. This percentage is expected to shrink further, eventually to as low as 25%. Russia has even warned that it might stop delivering gas to Ukraine once the contract between the Russian giant Gazprom and Ukraine-based Naftogaz expires in 2019. This situation is very worrisome for Ukraine, which depends on Russia for 60% of its domestic gas consumption and still generates a substantial amount of revenue from transit fees (approximately $2 billion in 2014)3.
The decision to "bypass" Ukraine was made following a series of disputes in 2005, 2008 and 2009 between Moscow and Kiev over gas prices and late payments. In January 2009, 18 European countries experienced disruptions or cut-offs in their gas supplies from Russia.
Northern Route: Yamal-Europe and Nord Stream
Two major pipelines transport gas to Europe along northern routes:
- Yamal-Europe, a 4,200-kilometer-long conduit with a capacity of 33 billion cubic meters a year, first delivered gas to Germany via the Belarus-Polish corridor in 1997. In 2015, the pipeline carried 22% of Russian gas imports.
- Nord Stream, a veritable natural gas highway, was inaugurated in 2011 at a ceremony attended by European leaders still smarting from the 2009 gas dispute. Stretching 1,220 kilometers under the Baltic Sea, the pipeline today has an annual capacity of 55 billion cubic meters and transports an ever-increasing volume of gas (23% of imports in 2015). A Nordstream 2 project is currently being developed to duplicate the existing pipeline, which would involve laying a second conduit with the same capacity, also under the Baltic Sea. The project has, however, met with some reticence, notably from Poland and its Eastern European neighbors, who fear becoming dependent on Russia for energy.
Southern Route: From South Stream to Turkish Stream
To avoid third country transit issues, Gazprom, together with Italian partner Eni, built a pipeline underneath the Black Sea called Blue Stream that was inaugurated in 2005. The 1,200-kilometer-long link, which has an annual capacity of 16 billion cubic meters, runs from Russia to Turkey and across Europe through Bulgaria.
The percentage of Russian gas supplied to the E.U. via Ukraine could eventually drop to 25% from 80% in 2010, and deliveries could even come to a standstill.
To increase its deliveries to Southern Europe, Russia had initially planned to build a southern corridor that would have given Gazprom a second link circumventing Ukraine. The 3,600-kilometer South Stream project, whose partners included Italy's Eni, would have delivered Russian gas to Bulgaria, via the Black Sea, and then across the Balkans to Europe. In December 2014, Russian President Vladimir Putin suddenly announced that the project was being abandoned due to E.U. competition rules. Brussels had requested that other producers be allowed to use the future pipeline, but Gazprom refused citing its huge investments in the project.
In a spectacular policy shift, Russia then announced that it was planning to build another pipeline, dubbed Turkish Stream, which would transport Russian gas to a new major energy hub located on the Turkish-Greek border. As one Russian analyst put it, "Since you want to tell us how to operate our pipelines, build them yourselves." In September 2016, Turkey and Russia signed an agreementOil contract under which the oil that is produced is shared between the state and the oil company... to build Turkish Stream despite geostrategic disagreements on several regional issues. Provided the E.U. gives the green light, the project will see two pipelines laid under the Black Sea – one serving Turkey, the other Europe.
(1) IFRI (in French only)
(2) Gas in Focus