Gazprom pipelines and export capacity

Газопроводы Газпрома и экспортные мощности

Gas pipelines of West Siberia

Газопроводы Западной Сибири

Export flows of Gazprom

Экспортные потоки

Spot, Gazprom, Brent

Цены на нефть и газ

End-use price of gas

Russia and USA

Daily gas production

Суточная добыча


South Stream to put TAG pipeline out of business


The South Stream project of Gazprom is designed to replace TAG (Trans Austria Gasleitung) pipeline as the route of supply of Russian gas to Italy.

Italy imports natural gas via four pipeline systems and two LNG terminals. The combination of pipelines and LNG terminals provides secure supply of gas in case of the outage of one supplier. It was proved by the events of January 2009 and the current shutdown of gas flows from Libya.

Mid- and long-term plans anticipate the construction of four new import pipeline projects and up to 13 new LNG regasification terminals. The combined import capacity of all existing and new projects may more than double. However, market projections foresee a moderate demand of imported gas from 70 to 94 bcm/year (EU Energy Trends to 2030 - Updates of 2009 and 2007, respectively).

Gas Import Capacity of Italy, bcm/year

 

2010

2025

Pipelines:

 

 

TransMed (Algeria-Italy)

33.5

33.5

Green Stream (Libya-Italy)

11.0

11.0

TAG (Trans Austria Gasleitung)

37.4

37.4

Transitgas (Switzerland-Italy)

19.9

19.9

Subtotal existing pipelines:

101.8

101.8

TAP (Trans Adriatic Pipeline)

-

20.0

TGI (Turkey-Greece-Italy)

-

11.5

Galsi (Algeria-Italy)

-

8.0

South Stream from Slovenia

-

24.0

South Stream from Greece (a)

-

10.0

Subtotal new pipelines:

-

73.5

Total import pipelines:

101.8

175.3

LNG terminals:

 

 

Panigaglia (La Spezia)

3.5

8.0

Adriatic LNG Terminal (Porto Levante)

8.0

8.0

Subtotal existing terminals:

11.5

16.0

Livorno / Toscana (under construction)

-

3.7

Brindisi (under construction)

-

8.0

Taranto

-

8.0

Porto Empedocie

-

8.0

Priolo Augusta

-

8.0

Senigaglia / Ancona

-

5.0

Gioia Tauro

-

12.0

Ravenna - Atlas LNG

-

8.0

Ravenna - Rosignano

-

8.0

Zaule (Trieste)

-

8.0

Alpi Adriatico (Montefalcone/Trieste Offshore)

-

8.0

Subtotal new terminals:

-

84.7

Total LNG terminals:

11.5

100.7

TOTAL IMPORT CAPACITY:

113.3

276.0

Minimum capacity with South Stream (b)

 

163.5

 

 

 

Import projections (c)

 

70-94

(a) Estimation;

(b) No new projects except South Stream and Livorno and Brindisi terminals;

(c) EU Energy Trends to 2030 - Updates of 2009 and 2007.

Sources: ENI, Edison, OLT, GIE, RBK.

The table above shows that the South Stream project can be implemented only as a replacement for the TAG pipeline, that delivers Russian gas to Italy via Austria. The northwestern section of the South Stream pipeline ends at the Austrian - Italian border near Arnoldstein. TAG delivers gas to the same place. Even in case of the South Stream pipeline and the two LNG terminals under construction being the only completed projects, there is no need for supplies via the TAG pipeline.

According to Gazprom, direct sales of Russian gas to Italy plunged from 22.3 bcm in 2008 to 13.1 bcm in 2010. The oil-indexed price of Russian gas has become too high and Gazprom's managers failed to give discounts on time. In 2009, Gazprom has reduced the price and lowered the minimum take-or-pay volume for ENI, its major partner in the South Stream project. Apparently, the price discount was not big enough. Average daily flow of Russian gas in January 2011 was 50-60% below the average winter level of the pre-crisis years. So, the Libyan flow shutdown was very timely for Gazprom. It is worth noting that the average load of TAG pipeline in the period from March 1 to 24  is reported at 65%.

Observing the declining sales and a surplus of export capacity, Gazprom still plans to increase the capacity at the Italian border by another 30-34 bcm/year. Note that Gazprom is unwilling to further reduce the price of gas. According to Sergei Komlev of Gazprom-export, the Russian gas giant "would rather sell less gas at higher price than more gas at a lower price".

To pay out, South Stream pipeline needs to be fully loaded. It is absolutely unclear, if the market conditions would allow Italy to raise imports of expensive Russian gas to the record level of 30 bcm/year. However, one thing is clear. If South Stream is built, there will be no Russian gas coming via the TAG pipeline.

Mikhail Korchemkin

East European Gas Analysis

Malvern, PA, USA

April 6, 2011

 

 


Last modified: 12/07/14                    East European Gas Analysis 2006-2014                                           Email: info@eegas.com
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