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Are Russia and the EU planning a zombie pipeline network?

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The question being raised in Europe is many of the new gas pipelines being planned by both Moscow and Brussels may not be required. Since 2008, overall demand for power has contracted by 1.2 % per …

The question being raised in Europe is many of the new gas pipelines being planned by both Moscow and Brussels may not be required. Since 2008, overall demand for power has contracted by 1.2 % per year, reports European Commission's “Quarterly Report on European Electricity Markets."
Demand for gas is likely to fall further due to increased usage of coal and renewables for power generation. Europe has still not recovered from its economic crisis. The arrival of LNG from the United States and domestic production of shale gas.

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  • 1. A look at new gaspipeline plansBy Nicholas NewmanNicnewmanoxford.comMay 2013Nicholas Newman nicnewmanoxford.com 1Are Russia and the EU planning a“zombie” pipeline network?
  • 2. Pipeline Projects Project leader State of Progress Capacity per yearin billion cubicmetersEstimated dateof CompletionNordstream 1&2 Gazprom Completed 27.5 2012Nordstream 3&4 Gazprom Awaiting Regulatory Approval 27.5 Date unknownNabucco EU Awaiting Regulatory Approval 23 Date unknownSudstream Gazprom Awaiting completion of Feasibility Study.Construction may start in 2014.63 Date unknownYamal-Europe 2 Gazprom Awaiting completion of Feasibility Study.Memorandum of understanding signedbetween EuRoPol GAZ and GAZPROM, butPolish PM Tusk has not yet given approval for itto be built through Polish territory..15 2019Trans Adriatic Pipeline EU Awaiting full political go-ahead 20 Date unknownPolish- Lithuania EU Awaiting completion of Feasibility Study. 2 2018North South Corridor(Poland Slovakiasection)EU Awaiting completion of Feasibility Study. 7.5 Date unknownSource: various sources including Financial Times, Bloomberg, RT.comSome current gas pipeline plansNicholas Newman nicnewmanoxford.com 2
  • 3. European Pipeline MapNicholas Newman nicnewmanoxford.com 3
  • 4. Gas demand is expected to increase from 438 mtoe in 2005to 625 mtoe in 2030, which is an increase of 43%, estimatesEurogas (2006)The IEA’s ‘World Energy Outlook 2012 ’ forecasts that,because of declining EU gas production, Europe will needto increase its imports of gas from 302 BCM in 2011 to 554BCM by 2035Much of this increase in demand is forecast to come fromEurope’s power generation sector, from 123 mtoe in 2005to 239 mtoe in 2030The case for more gas pipelinesNicholas Newman nicnewmanoxford.com 4
  • 5. Improved energy securityImproved integration of Europe’s gas marketIncreased demand and new sources of supplyReduced transport costsReplacing life expired pipelinesReasons for needed new capacityNicholas Newman nicnewmanoxford.com 5
  • 6. Since 2008, overall demand for power has contractedby 1.2 % per year, reports European Commissions“Quarterly Report on European Electricity MarketsDemand for gas is likely to fall further due toincreased usage of coal and renewables for powergenerationEurope has still not recovered from its economic crisisThe arrival of LNG from the United States anddomestic production of shale gas.The case againstNicholas Newman nicnewmanoxford.com 6
  • 7. In 2012 Gazprom exported 203.22 bcm of Russian gasto Europe. If all the proposed Russian pipelineprojects are completed capacity is expected to reach380bcm, reports Rovshan Ibrahimov, Head ofInternational Relations at Qafqaz University,Azerbaijan,(2013)Gazprom is facing a gap in demandNicholas Newman nicnewmanoxford.com 7
  • 8. Delays in starting construction are likely because ofcontinued uncertainty about future growth indemand.Increased difficulties of pipeline consortiums to raisemoney from Europe’s financial markets.Doubts about the actual need for many of thesepipelines.The question of delaysNicholas Newman nicnewmanoxford.com 8
  • 9. Many of the proposed pipelines are unlikely to justifytheir business case.Reduced demand means there is already surpluscapacity.Europe should focus on investing in pipelines that arepart of the TENS programme to fill in gaps in theexisting network , so as to ease of switching of gasacross Europe.Thank you!ConclusionNicholas Newman nicnewmanoxford.com 9