Over the past few years, the European Union (EU) has sought to enhance its energy security by implementing the Third Energy Package, proposing an Energy Union, holding Russia’s state-owned energy giant Gazprom to competition rules, and actively pursuing the Transatlantic Trade and Investment Partnership (TTIP).
Despite these efforts, the EU still has a long way to go. Lack of infrastructure currently prevents large quantities of liquefied natural gas (LNG) from reaching the Baltic states and the Central and Eastern European (CEE) region where dependence on Russia is the highest. The European Commission (EC), and most importantly its member states, needs to take more practical steps towards creating a real Energy Union in order to fully utilize LNG’s potential and prevent serious consequences in the event that Russia cuts off gas supplies.
The EU needs to face the reality that under existing plans, the Southern Gas Corridor will not in and of itself resolve European gas diversification.
The Southern Gas Corridor is an important component of Europe’s overall diversification efforts and in the future it may be able to import greater volumes of Central Asian, Middle Eastern, and Eastern Mediterranean gas. Yet for the time being it will only provide two percent of Europe’s gas needs, thus it will not make a significant dent in the dependence on Russia.
Wanted: An LNG strategy
LNG is a critical component for increasing non-Russian gas supplies to Europe.
A detailed LNG strategy—especially in the CEE region—is necessary. The EC could provide the overall strategic vision and analysis that provides information on priority projects. It should then provide financial support and foster regional cooperation as well.
Most European LNG terminals are located in Western Europe and have a 203 bcm regasification capacity. Only a few are in the CEE region—Lithuania’s floating LNG terminal in Klaipėda, Greece’s Revithoussa LNG Terminal, and Poland’s not yet operating Świnoujście LNG Terminal. These add up to only 14 bcm.
Plenty of new LNG terminal plans are announced from time to time:
- Croatia’s Adria LNG Terminal was proposed almost two decades ago, yet it is still far from realization in the absence of genuine regional cooperation;
- Finland and Estonia agreed to build two LNG terminals at the end of 2014 with a plan to decrease dependence on Russian gas;
- Ukrainian Prime Minister Arseniy Yatsenyuk announced a possible Ukrainian LNG terminal, which would be built by a US company and import Georgian gas to supply his country’s energy needs.
Western European LNG capacity is significantly underutilized. The EC has to first address the questions: Can excess LNG reach the CEE region, and is more investment in infrastructure required for it to do so? It is important to realize that building an LNG terminal requires serious regional cooperation and stable demand.
Given its significance, Croatia’s LNG terminal is probably the most likely and reasonable project to implement. The Central Eastern and South-Eastern European Gas Connectivity (CESEC) initiative set it as a priority project at its July 10 meeting. If built, this new LNG terminal’s planned 4-6 bcm capacity could cover some of the region’s natural gas demand, which is approximately 40 bcm, excluding Romania and Ukraine. Eighty percent of this demand is currently imported, mostly from Russia. Replacing part of this through diversified sources, therefore, could enhance the region’s supply security.
More interconnectors, less new pipelines
The EC and its member states must focus more on interconnectors and less on building new pipelines. The EC has to co-fund and member states have to carry out these projects, which are of strategic importance. Member states must recognize that these small projects are more critical to their overall energy security than building new pipelines, particularly those linking to Russia.
Certain member states hold the mistaken belief that new pipelines or pipeline enlargement plans (Turkish Stream, Tesla, and Nord Stream expansion) from Russia bring energy security. These projects do not increase security of supply because of the lack of diversified sources. Instead, they allow Gazprom to solidify its dominance and maintain its share on the European market.
Interconnectors, on the other hand, have had the most dramatic and quickest impact on increasing the liquidity of the natural gas market. Germany is capable of supplying Austria and Poland, thus enabling Western European gas to reach the CEE region. The Slovak-Hungarian gas interconnector pipeline only started commercial operation in July, but it will enable Hungary to access Poland’s LNG terminal and Slovakia to receive natural gas through the Southern Gas Corridor. Hungary can also send gas further to Croatia, Romania, and Serbia, just to name a few interconnection points.
Enabling reverse gas flows on existing pipelines is also crucial. The best example is perhaps Ukraine’s supply from its neighbors: Slovakia, Hungary, and Poland. That helps Ukraine reduce its dependence on Russian gas and would give it room to maneuver in negotiations with Moscow.
What can be done?
There’s much more to be done. Building the North-South Corridor of energy, transportation, and telecommunications to connect the Baltic Sea to the Adriatic and Black Seas, and thus integrating Eastern Europe, is one of the most important examples of what can be done.
As David Koranyi, Director of the Atlantic Council’s Eurasian Energy Futures Initiative, and Ian Brzezinski, a Resident Senior Fellow in the Council’s Brent Scowcroft Center on International Security, point out in Completing Europe–From the North-South Corridor to Energy, Transportation, and Telecommunications Union, building the bidirectional Backbone Pipeline between the Świnoujście LNG terminal in Poland and the proposed Adria LNG terminal in Croatia through the Czech Republic, Slovakia, and Hungary is of critical importance.
Ending the Baltics’ isolation, developing the Ionian Adriatic Pipeline, and implementing large capacity flows to Ukraine should be other top priorities. The EC recently granted $830 million to Poland to build missing interconnectors to, for example, Lithuania and the Czech Republic. It is essential that besides verbal endorsements, EC member states make political and financial commitments to these projects.
Ilona Dózsa is a former intern in the Atlantic Council’s Eurasian Energy Futures Initiative.