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A gas pipeline runs in Sevastopol, 4 March 2014. Russia’s seizure of Ukraine’s Crimea region has shaken political relations between Moscow and Brussels and further accelerated plans to boost diversification of gas supplies.

EU Eyes East Med Gas South Stream Alternative

11.03.2014 - 13:56

On 11 March, the European Commission welcomed the tendering of a study on the technical and financial feasibility of a proposed pipeline to carry gas from Israel and Cyprus, a Commission spokesperson told New Europe.

Greece’s state-run natural gas distributor DEPA will be launching an international tender for the study for the proposed East Med Pipeline to transport natural gas from deposits in the Eastern Mediterranean through Crete and mainland Greece to the rest of Europe through the IGI-Poseidon pipeline, led by Italian utility Edison and DEPA, Greece’s Ministry of Energy Environment and Climate Change said in a press release on 10 March.

From an EU perspective, the gas resources in the East Mediterranean can play a very important role in helping both producing and neighbouring countries to address their energy security problems and, more broadly, support EU gas supply diversification objectives, the Commission spokesperson said, adding that the European Commission doesn’t have specific view on the best solution to export them to the European market.

“This is why the projects related to the East Med in the Project of Common Interest (PCI) list are related to both the LNG (liquefied natural gas) and the pipeline export options,” the spokesperson said. “In the light of the apparent challenges associated with the pipeline, the Commission welcomes the tendering of a study that will demonstrate the actual technical and financial feasibility of such an export option.”

A pipeline project linking the gas resources from the East Med to Cyprus, Crete and Greece Mainland is included on the first EU-wide list of PCIs.

However, the spokesperson explained that being on the list does not automatically mean to be eligible for Connecting Europe Facility (CEF) funding of almost €6 billion till 2020 – first call for proposal still this year.

Julian Lee, a senior energy analyst at London’s Centre for Global Energy Studies (CGES), told New Europe on 11 March that an East Mediterranean Gas Pipeline looks like an expensive solution to monetising Israeli and Cypriot gas. “It remains a customer-led, rather than a producer-led, solution and may end up being the new Nabucco,” Lee said.

The European Union is looking for ways to reduce dependence on Russia which provides the EU for a quarter of its gas supplies. Brussels dealt a blow on 10 March to the Russian-backed South Stream gas pipeline, in the latest sign of strains in the energy links between Moscow and the EU.

Russia’s seizure of Ukraine’s Crimea region has already shaken political relations between Moscow and Brussels.

Russia has begun building the South Stream pipeline project to carry up to 63 billion cubic metres of Russian gas to Europe via the Black Sea by 2018. But the pipeline still lacks important approvals to comply with EU legislation.

EU Energy Commissioner Guenther Oettinger told German newspaper Die Welt on 10 March that discussions with Russia on the link were suspended. “I won’t accelerate talks about pipelines such as South Stream for the time being; they will be delayed,” Oettinger was quoted as saying.

But the Commission spokesperson told New Europe on 11 March that technical discussions of the Working Group South Stream will continue. “A working group on purely technical level on South Stream is currently being foreseen in March. EU Energy Commissioner Oettinger simply pointed out in the interview that negotiations on political level are not speeding up,” the spokesperson said.

However, Lee pointed out that Oettinger’s comment and the launch of the feasibility study for the East Mediterranean Pipeline “tell us quite a lot about the European reaction to events in Ukraine”.

Russian President Vladimir Putin would like the response to be that Ukraine is once again shown to be an unreliable transit route because of the “coup” in Kiev and that the need for South Stream is stronger than ever, Lee said. “Unfortunately for him, Europe has taken a different view, that Russia is an unreliable partner and that diversification of gas suppliers, rather than just of delivery routes from Russia, is more urgent than ever,” he told New Europe.

It is interesting to note, however, that Bulgaria’s Ministry of Economy and Energy has insisted that South Stream must be built because the project is essential for the security of supply to the country, a factor that Russia will, no doubt, seek to capitalise on, Lee said.

“Oettinger’s comments will slow the pace of reaching agreements on South Stream’s compliance with the Third Energy package, but this may have little immediate relevance until the line is ready to be put into operation. As a result, it may do little to slow construction work,” Lee said.

Meanwhile, Gazprom said in a statement posted on its website on 11 March the South Stream project is steadily progressing. “Contracts for laying the first string as well as for procuring pipes for the second string will be signed before the end of this March. In less than two years the first gas supplies will be carried to Europe via the new route protected from transit risks,” Gazprom CEO Alexey Miller said.