Pipelines and Infrastructure: Upstream Geopolitical Trends and Implications for European Utilities

Pipelines and Infrastructure: Upstream Geopolitical Trends and Implications for European Utilities published by Datamonitor in May, 2009. This report consists of 24 pages and the price starts from US $ 2795.

Introduction

Abstract

Introduction

In the past 6 months Europe' s upstream energy landscape has undergone important changes, with implications for downstream players. The consequences of the 2009 Russia-Ukraine Gas Crisis were immediate and far-reaching. The episode provided a tangible example of the perils of over-dependence, galvanizing collective European will to finance improvements in both internal & external security of supply.

Scope of this research

• An Overview of the causes of the January 2009 Gas Crisis, the new landscape which emerged and an assessment of the prospects for renewed confrontation
• An examination of individual states' and the collective EU response to the crisis in the short, medium and long term
• A wider analysis of Europe' s overall energy security situation and how new projects stand to impact supply.
• A summary of recent how geopolitical developments in the Caspian region are affecting the prospects of Nabucco & South Stream

Research and analysis highlights

The underlying sources of conflict behind the January 2009 Gas Crisis remain, implying further potential supply disruptions

The Crisis has added new momentum to EU efforts aimed at improving internal security of supply, implying deeper market integration at a faster pace

The Crisis and recent geopolitical developments have brought both Nabucco and South Stream closer but it is still unclear whether either will actually be built

Key reasons to purchase this research

• Exploit the results of the January 2009 Gas Crisis and prepare for future episodes
• Prepare for a faster pace of market integration than witnessed over the past decade
• Ascertain the likelihood of new energy transit projects into Europe coming to fruition

Table of Contents

DATAMONITOR VIEW

• CATALYST
• SUMMARY

ANALYSIS

• Russia supplies 35% of Europe' s total gas demand but relies on a series of transit states to reach lucrative western markets
  • The origins of the January 2009 gas dispute are rooted in the weak, corrupt institutions which emerged from the collapse of the Soviet Union
  • The January 2009 Crisis was catalysed by Ukraine' s high levels of debt and ambiguous contractual arrangements with Russia
  • Although Russia supplies 35% of total European demand, individual states in the east rely proportionally more on Russian imports
  • South Eastern European states' position prior to the crisis varied across the region, affecting their response
  • The crisis was resolved on January 19th with a new bilateral contract
  • The new contract obliges Ukraine to receive too much gas at too high a price, increasing the chances of debt accumulation
  • There remains a strong possibility that gas supplies will be disrupted again as the problems which catalysed the first crisis are still in place

• The Crisis has added new momentum to EU efforts aimed at improving internal security of supply, implying deeper market integration
  • More damage was done to Russia' s reputation as a reliable supplier, and Ukraine' s as a transit partner than had been anticipated by either Moscow or Kiev
  • The January gas crisis has galvanised EU action on security of supply, precipitating new funding for internal connections
  • The majority of the new EU funding will be spent on connecting “stranded markets” encouraging the development of a pan-European market
  • Better interconnections and security of supply implies closer market integration, intensifying competition across Europe

• The Crisis and recent geopolitical developments have brought both Nabucco and South Stream closer but it is still unclear which will actually be built
  • European demand for gas will rise as its role in the generation mix expands and overall generation capacity increases
  • Nord Stream will bring 55BCM/y into Europe, dwarfing all other projects and reducing market space for rival pipelines
  • Assuming planned projects are completed on schedule, competition to supply Europe through the Southern Energy Corridor is a Zero Sum Game
  • South Stream & Nabucco will seek to supply the same markets in South Eastern Europe and should be seen as rivals
  • There is a strong possibility that Nabucco will secure an Inter-Governmental Agreement in June 2009 - a critical step towards construction
  • Securing upstream assets remains Nabucco' s Achilles' Heel.....
  • .....but Geopolitical developments have buoyed Nabucco' s prospects
  • As Nabucco' s prospects have improved, so Gazprom has sought to deliver a “knock out blow” through South Stream with increasing urgency
  • In the long-run, the Gas Crisis has served to stimulate construction of new connections, presenting opportunities to European Utilities

• Appendix
• Effects of the Gas Crisis and Nation States' Response
  • Austria
  • Bulgaria
  • Greece
  • Czech Republic
  • Poland
  • ITGI Poseidon will provide a further link between European markets and Caspian reserves if transit fee disputes can be resolved
  • Medgaz and GALSI will boost North African supplies to Europe but without improved internal connections, will have limited impact on overall security

• Further reading
• Ask the analyst
• Datamonitor consulting
• Disclaimer

FIGURES

• Figure: Gas Flows to Europe
• Figure: Map of Ukraine and neighbours
• Figure: Russian gas as a proportion overall energy consumption
• Figure: Reliance on Russian Gas and Response to January 2009 Crisis
• Figure: Consequences of the January Gas Dispute: On average 45% of Europeans disapproved of Russia' s performance during the Crisis
• Figure: Electricity Interconnection Projects to receive EU funding 2009 - 2010
• Figure: New Gas Interconnectors to receive EU Funding
• Figure: Increased gas-fired generation will account for the majority of overall capacity growth
• Figure: Nord Stream will supply 55BCM/yr to Europe
• Figure: By 2025, EU gas demand will outstrip capacity but only by 30 BCMe
• Figure: South Stream and Nabucco Compared
• Figure: Proposed route for Nabucco
• Figure: Dependency on Russian Supplies and short-term responses
• Figure: Pipelines to Europe
• Figure: North Africa will play a greater role in supplying Europe

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