Caspian Report - Issue 06 - Winter 2014

GARETH M. WINROW
18
ers seeking to reduce their energy
dependence on Russia, the expected
decline in North Sea gas production,
and the real possibility of long-term
IDENTIFIED AS A “PRIORITY PROJECT” BY BRUSSELS, THE
SGC WOULD TRANSPORT GAS FROM THE CASPIAN BASIN,
CENTRAL ASIA, THE MIDDLE EAST AND THE EASTERN
MEDITERRANEAN TO EUROPE.
instability in North Africa in the wake
of the Arab revolutions, the SGC could
become an increasingly important
conduit for the supply of gas to the EU
market. In a communication released
in November 2010, the European
Commission stated that the SGC could
carry as much as 45-90 bcm annually
by 2020. 1 Brussels is hoping that the
SGC could become a significant channel
through which hydrocarbons are
transported to satisfy the EU’s growing
gas demand.
It is exceedingly difficult to predict the
future gas needs of EU member states
given the uncertainties concerning
growth in European economies, questions
over the possible impact of the socalled
shale gas revolution, and doubts
over the future of nuclear energy.
.It seems, though, that gas will be an
important “bridging fuel” over at least
the next two decades until renewable
forms of energy becomes more
mainstream. with imports currently
accounting for about 64 percent of the
eu’s gas needs, the european commission
has forecast that imports could
constitute up to 80 percent of europe’s
gas demand by 2030. According to
the International Energy Agency, the
annual gas demand in Europe could
increase from the current 526 bcm to
622 bcm by 2030.
At present, approximately one-third
of the EU’s gas needs are met by imports
from Russia. Mostly indexed to
the price of oil, Russian gas is becoming
more expensive. Disputes between
Moscow and Kyiv over gas pricing resulted
in the interruption of deliveries
of Russian natural gas to Europe at the
start of 2006 and 2009. Heavily dependent
on Russian gas imports, states in
Central and Eastern Europe remain
concerned that Moscow may in future
threaten to suspend gas deliveries in
order to secure political leverage. Energy
dependence on Russia would be
further increased if Gazprom and its
partners succeed in realizing the South
Stream project, which would bypass
Ukraine and deliver an additional 63
bcm to customers in Europe each year.
However, Brussels and Moscow must
first resolve problems with regard to
provisions of the Third Energy Package
– ie. on the “unbundling” of the
ownership of natural gas production
and transmission lines, third party access
to pipelines, and the setting of tariffs
– before the South Stream project
can be advanced.
Given that gas will remain an important
component of the energy mix
in Europe for the foreseeable future,
the realization of the SGC, could enable
EU member states to import gas
from alternative sources and thereby
help reduce energy dependence on
Russia. However, at least in its initial
envisioned phase, the SGC will not
1
. Energy Infrastructure Priorities for 2020 and beyond – A Blueprint for an Integrated European Energy
Network, European Commission, Brussels, 17 November 2010, COM (2010) 677 Final, p.32.