TOO MANY PIPELINES. (Troppe pipeline)

Europe may not be able to sustain all its proposed gas supply pipelines but will need to build at least some soon to ensure security of supply in the latter half of this decade.

Scarred by the Russia-Ukraine gas row of 2009, which cut about a fifth of Europe's supply in mid winter, major European gas consumers plan many pipelines to promising producing regions in central Asia, North Africa and the Middle East.

With China competing to woo producers, Europe will likely struggle to secure enough gas to fill all the new connections and would be unable to use it all if they do get filled.

"If every project that is discussed is built then there will be way too much supply, so I think the best projects will be developed and marginal ones delayed, or not built," said Graham Freedman, a senior analyst at UK consultancy Wood Mackenzie.

"But I don't think anybody doubts the fact that Europe is going to need more gas because domestic production is falling. It is going to be an importer for many years to come," he said.

Wood Mackenzie forecasts that gas demand in the European Union, Turkey and former Yugoslav states could rise from 551 bcm in 2010 to 653 billion cubic metres in 2020.

Under what it says is a bullish demand scenario, this would leave a supply shortfall of 125 bcm by the end of the decade unless far more is produced at home or brought in from overseas.

But if all major new pipelines were built and filled to capacity, gas flows to Europe by 2020 could far outstrip demand.

Since the Russia crisis, Europe has been comfortably supplied with gas for power generation, heating and industry through existing pipelines and an increasing number of liquefied natural gas (LNG) tankers. The Medgaz link from Algeria to Spain could further increase supplies into the Iberian Peninisula by 8 bcm/year, if the repeatedly delayed pipeline opens this winter.

The 55 bcm/year Nord Stream pipeline under the Baltic Sea is expected to bring more Russian gas to western Europe, bypassing Ukraine by the end of next year.

Russia is pushing on with its South Stream project to bring up to another 63 bcm under the Black Sea via the Balkans.

The European Union is also championing the 31 bcm alternative Nabucco plan that would bring Caspian and Middle East gas via Turkey, excluding Russia.

But Italy also hopes that its projects TAP and ITGI for around 10 bcm capacity each can compete for mainly Caspian gas market share with South Stream and Nabucco, giving it more options via the "Southern Corridor" to Europe.

In all, the maximum capacity of these pipelines, some of which were conceived prior to the economic crisis which brought a gas price slump, adds up to 177 bcm to Europe's supply.

Pipeline supplies would also face competition from liquefied natural gas (LNG), which has become much more readily available because of a surge in North American shale gas production, with unconventional gas finds in Europe posing another threat to both types of external supplier.

"Some projects make sense from a security of supply perspective, because of the diversification of gas sources that they would bring," said Nigel Harris of UK consultancy Kingston Energy. "But with plenty of gas available from existing sources, there's no commercial benefit from diversification."

Nord Stream and South Stream are just additional routes for Russian-controlled gas flows, he said, while alternative sources from Azerbaijan, Turkmenistan and Iran remain uncertain.

The International Energy Agency (IEA) thinks global gas demand may recover from 2011, but it still expects supply to outstrip demand until 2020..

Some gas suppliers are more optimistic, pointing to buoyant demand in the Middle East, China and India which could leave less gas for Europe. Phillipe Boisseau, president of France's Total Gas & Power, told the recent European Autumn Gas Conference in Berlin that the "supply bubble will disappear in three years."

Speakers agreed that current gas prices in consuming countries would not support all Europe's proposed supply lines, although they expect demand for power generation to contine to rise as Europe looks to back up its increasing wind power capacity with gas-fired plants.
(FuturesPros.com via Reuters)

BULGARIAN MAJORITY. (Maggioranza bulgara)

Russia and Bulgaria signed on Saturday accords to push ahead with the South Stream natural gas pipeline aimed to deliver gas to central and south Europe and cement Moscow's hold on European energy supplies.

Russian Prime Minister Vladimir Putin and his Bulgarian counterpart Boiko Borisov attended the signing of accords to set up a joint venture for the Bulgarian section of the project aimed at shipping Russian gas under the Black Sea to Europe.

'Today, a shareholder accord and a charter of the joint venture were signed. By doing this, we made one more serious step towards implementation of mutual agreements,' Putin told a news conference in Sofia where he arrived on a working visit.

The South Stream pipeline, controlled by Gazprom and Italy's ENI is planned to transport up to 63 billion cubic meters of gas to central and south Europe, bypassing countries such as Ukraine, at the end of 2015.

The link, in which French EDF is set to get a stake of no less than 10 percent, is a rival to the European Union-backed Nabucco pipeline, designed to bring gas from central Asia and the Middle East and reduce Europe's dependence on Russian deliveries.

Russia, the world's largest energy exporter, supplies Europe with a quarter of its gas needs. Analysts estimate European demand for Russian gas could rise to 30 percent by 2030.

Brussels and Moscow have been competing to sign up potential countries and suppliers for their projects.
The European Union member Bulgaria supports both projects, which are planned to run through its territory and has expressed concerns over delays in the Nabucco pipeline development.

'We are also working on the Nabucco pipeline with the same speed ... Bulgaria's interest is to transit gas through both pipelines,' Borisov told reporters.

His government, which put on review all Russian-backed energy projects last July, pledged to speed up work on South Stream after Gazprom promised to lower gas prices for Bulgaria, almost fully dependent on Russian gas supplies.

The Balkan country agreed to further accelerate work on the project in October, when Gazprom indicated South Stream could bypass it and run through Romania.

South Stream has also secured backing from Austria, Croatia, Greece, Hungary, Serbia and Slovenia.

Gazprom and state-controlled Bulgarian Energy Holding, which will have 50/50 stakes in the new venture, have already opened a tender to seek contractors for a feasibility study for the Bulgarian section, estimated to cost $835 million.

Bulgaria secures about 70 percent of its energy needs through imports. It gets almost all of its gas from Gazprom, its only nuclear power plant Kozloduy is Soviet-made and its only operational oil refinery is owned by Russia's LUKOIL.

Putin said LUKOIL was set to invest up to $2 billion more in its Bourgas-based oil refinery, Lukoil Neftochim.
Bulgaria and Russia also discussed the Belene nuclear power plant project, which Sofia had also put on hold due to a lack of funding and strategic partners.

Sofia has said it will push ahead with the 2,000 megawatt plant, for which it has contracted Russia's state Atomstroyexport, only if backed by strategic European investors.

Borisov has indicated Bulgaria is close to finding a partner in Germany for Belene, estimated to cost over 7 billion euros.

Bulgaria's warming towards the projects has irked Washington and Brussels which are encouraging Bulgaria to lessen its heavy energy dependence on Russia.

Belene froze last November, when German energy giant RWE , which had agreed on a 49 percent stake, pulled out.

Sofia wants to build Belene so as not to lose hundreds of millions of euros it has already invested and to avoid paying hefty compensation to the Russian contractor, Atomstroyexport.
(XE, via Reuters)