EU secures more and cheaper energy supplies

Last Friday 28 June the Commission welcomed the selection of route for the Azeri natural gas flow to Europe that the Caspian country’s producers made on that same day. Of course it is the ‘Southern Corridor’ through Greece and Albania and under the Adriatic Sea to Italy, then to many EU countries. It’s the Trans Adriatic Pipeline-TAP. This pipeline is owned by the Swiss AXPO (42.5%), the Norwegian state entity Statoil (42.5%) and the German gas distributer E.ON Ruhrgas (15%), all of them quite reliable European ‘giants’. The Azeri gas will reach the eastern Greek borders through the Trans Anatolian Pipeline. Its shareholder structure comprises the Turkish giants Botas and TPAO (20%) and Socar, the Azeri state gas and oil company (80%). All those firms have huge vested interests in offering high level services to their EU customers. The Shah Deniz II Consortium of Azerbaijan which will be producing the new gas supplies to be delivered to the European Union, is made up by British Petroleum, Socar and the French Total. In short the new gas deliveries to the EU will be completely reliable and uninterrupted, given the fact that producers and transporters are absolutely devoted to their tasks and have a quite clear EU business agenda. Natural gas crisis Everybody remembers the January 2009 crisis, when the Russian natural gas supplier Gazprom cut off deliveries to a number of European Union countries, letting them out in the cold. At that time this single company could hold the entire EU as hostage, being its unique supplier of natural gas. From that moment onwards the European Union has been looking very actively to diversify its energy sources, with enough success as this last development proves. The European Sting had predicted as from the early hours of Monday 24 June that the ‘South corridor-TAP’ would be the preferred route of the Shah Deniz producers to deliver their gas to EU. The Sting writer Maria Milouv estimated that, “Now the fact that the Greek authorities have agreed with the Azeri government to sell the Greek operator of the country’s natural gas system DESFA to Socar, it is easy to imagine which option of pipeline Baku will make. It will be obviously the Southern Gas Corridor-TAP pipeline”. Strategic issues This is not only a business affair. It has a lot of strategic dimensions apart from the obvious results in helping to reduce the energy cost in many EU countries. It’s very characteristic that in Greece the cost of natural gas delivered by the country’s only supplier, Gazprom, is at least 30% higher than the EU average, thus crippling the competitiveness of the entire Greek productive machine. Most of the major sectors of the Greek economy like industry, agriculture and tourism depend heavily on energy. Also Italy is forced to pay dearly for its gas supplies with similar repercussions. Understandably the effects of the ‘South Corridor-TAP’ choice for the flow of the Azeri gas to southern Europe will be felt long before and after being operational. EU Commission President Manuel Barroso stated: “I welcome today’s decision by the Shah Deniz II Consortium selecting the Trans-Adriatic Pipeline (TAP) as the European route of the Southern Gas Corridor. This is a shared success for Europe and a milestone in strengthening the energy security of our Union. I am confident that today’s decision, which builds on the strategic Joint Declaration I signed with President Aliyev of Azerbaijan in January 2011, will provide further momentum to the full and rapid realization of the entire Southern Gas Corridor as a direct and dedicated link from the Caspian Sea to the European Union, which should be expanded over time.” More sources The prospects of additional gas supplies reaching the European Union from other sources/regions have become much more concrete during the past months. The Israeli and Cypriot gas deposits in the Eastern Mediterranean Sea are expected to give very tangible and sizeable production. This prospective wider diversification of the EU’s natural gas supply sources has already undermined the Russian monopoly. Over the past few months Gazprom has accorded important price reductions to a number of big European buyers. There is no doubt that the European Union slowly but steadily and surely is working its way through to more and cheaper gas supplies. In this way the traditional handicap of Europe’s lack of cheap energy sources may be mitigated and thus increase the overall competitiveness of the Old Continent.