In recent months, Gazprom has been able to notch up some successes for its South Stream gas pipeline project. If the project is implemented, however, it poses risks for sustainability, competition, and supply security in the European energy market. The EU member states therefore need to adopt a more consistent approach for regulating the gas market and commit themselves to closer cooperation.

The events at Fukushima have also contributed to re-energizing the debate on energy security. About a quarter of the EU’s primary energy requirement is met through gas, which is considered a relatively clean and cost effective fuel. At the same time, gas transported through pipelines can easily be exploited for political ends. Russia demonstrated this by cutting off supply during its dispute with Ukraine in 2006 and 2009. The EU states are therefore keen to tap the huge gas reserves around the Caspian Sea. The Nabucco Pipeline, a prestigious EU project, will transport the gas via Turkey and Southeast Europe. It will be financed and operated by an independent consortium. Gazprom’s South Stream is to follow a similar route, but Gazprom is reluctant to give up control over South Stream and relinquish its political leverage. Russian Prime Minister Putin secured support from Serbia and Slovenia in March this year. Moreover, BASF subsidiary Wintershall announced that it will participate in financing the project.

South Stream’s impact on energy policy must not be underestimated. Market analysts doubt that South Stream and Nabucco can both operate profitably. If the Nabucco project falls through, the envisaged competition will not materialize. This is precisely why the EU needs to stand firm on its energy strategy of unbundling pipeline operators and gas producers. Only then can it ensure that there will be no problems in transporting gas from other sources through South Stream. Supply security can be further improved through depoliticisation by augmenting infrastructure for emergency reserves and liquefied natural gas (LNG) and by increasing cross-border gas trade between EU countries. This would be in the interest of all member states, but it will happen only if the EU states finally speak in one voice. (Stephan Wolters)

More information on the European Commission’s strategy "Energy 2020 - A strategy for competitive, sustainable and secure energy" can be found athttp://ec.europa.eu/energy/strategies/2010/2020_en.htm.

An overview of the pipeline projects can be foundhere.  

Published in: ECC-Newsletter, 2/2011