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Gazprom has significantly reduced
its projections of European gas demand in 2020-2030. According to
the South Stream booklet of Gazprom Export, "Europe's
annual natural gas import requirements will grow by 70-100 bcm by 2020". In November 2008,
Alexander
Medvedev, head of Gazprom Export, estimated the 2020 demand for new pipeline
gas from Russia alone at 65-105 bcm (excluding gas from other exporting
countries).
Note that according to the
International Energy Agency (IEA), in January-May 2009, OECD Europe and Turkey
imported 27 bcm of gas less than in the same period of 2008. Imports from Russia
dropped by 23.1 bcm, but in the same time imports from Norway, Qatar, Iran,
Trinidad and Azerbaijan increased by 9.5 bcm.
The reduction of the future European
demand accompanied by the growing "gas independence" of the US leads to an
increasing competition between pipeline gas and LNG in the European markets.
From the standpoint of investors, Qatari LNG is a way more attractive than
pipeline gas from Russia. Per 1 bcm/year, the capital cost of the Qatari gas
chain from gas well to the European gas transmission pipeline (production, LNG
plant, tankers, LNG import terminal) is three times lower than the investment
cost of the production-transmission chain from the Yamal peninsula to the Black
Sea and the South Stream pipeline. Investment cost of projects for production
and delivery of Azeri, Turkmen and North African gas to Europe is also much
lower than that of Yamal and Shtokman.
Most likely, major share of the new
(or incremental) gas market in Europe will be divided without Gazprom's
participation. If the EU succeeds in fulfilling just a third of its
Energy
Security and Solidarity Action Plan, then there will be no space left for
Gazprom. It means that the new export pipelines of Gazprom will not increase gas
export volumes and will not generate additional profits.
The reduction of the future gas
demand in Europe leaves just one option for Turkmenistan to export gas to
European markets - via the Nabucco pipeline. Gazprom is very unlikely to reduce
its own exports to re-export Turkmen gas at no profit. On the other hand,
Turkmenistan will not agree to sell gas at the domestic price of the Russian
Federation.
Despite the reduction of European
market forecast, Gazprom still plans to commission the Nord Stream (capacity 55
bcm/year) and South Stream (63 bcm/year) pipelines by 2015. Gazprom Export
claims that "South Stream and Nabucco are neither competitors nor mutually
exclusive pipeline projects. Projections show that Europe will need more
additional gas than the combined capacity of South Stream,
Nabucco and Nord Stream" (South
Stream booklet).
In fact, the 118 bcm/year of combined capacity of the
two Russian projects exceeds the total projected European demand for additional
imports in 2020. Gazprom estimates the 2030 import deficit in Europe
at 205 bcm, which is higher than maximum projections of IEA and EIA. Apparently,
Gazprom's booklet is a message that the Nabucco pipeline is not needed until
about 2025.
It is worth noting that
in 2008 Ukraine shipped 117 bcm of Russian gas to Europe. In my
view, it is not just a coincidence that the combined capacity of the
two "diversification pipelines" of Gazprom matches the volume of gas
transit via Ukraine.
Mikhail
Korchemkin
August 21, 2009
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