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Main page > Conferences > Competition of Russian and European Pipeline Projects: Unnecessary Risks

Competition of Russian and European Pipeline Projects: Unnecessary Risks

Konstantin Simonov’s speech presentation at The 2010 Mediterranean Oil &Gas Conference

Àthens, Greece, June 29, 2010.

1.Competition of Russian and European Pipeline Projects: Unnecessary Risks Konstantin Simonov Athens June, 29 2010 2.Useless Competition EU and Russia entered into competition in the South of Europe As a result we are making rash decisions. EU and Russia make concessions to transit countries and gas producers We are in a hurry and that is why Moscow and Brussels can be in loss-loss situation Now the winners are Ankara and Baku 3.In Nabucco We Trust Nabucco as the main S aviour from energy dependence from Moscow But even if the project will be successful it will not solve the problem of decline of European Production of conventional gas 4.Gas Import of Europe Source: IEA – 2010! 5.Stake on Azerbaijan There is no other guaranteed gas Azerbaijan will try to make some political and economical be nefit from this situation Ilham Aliyev has already announced putting off the passing of the decision by Azerbaijan on the beginning of the development of the second stage of the Shah Deniz gas field until 2016-17. This statement cause real panic in Europe and an assumption of a ruin of Nabucco Nabucco – 2014? Shah Deniz -2 – 2016? What will be the margin of Azerbaijan? 6.Iran Kazakhstan Uzbekistan Turkmenistan China Infrastru-cture Political Risks Reserves 7.Problems of Possible Gas Suppliers Sourse: NESF 8.Problems of Possible Gas Suppliers 10 June: Uzbekneftegaz and CNPC enter into a framework agreement on supplies of 10 billion cubic metres of gas to China While the Russian Federation and Western players are “at war” over the routes in the Southern Transport Corridor to Europe (South Stream vs. Nabucco), it is China which in practice enables Central Asian states to diversify their hydrocarbon export, demonstrating readiness to build pipelines quickly and at its own expense 9.Problems of Possible gas Suppliers Sourse: Neftegazovaya Vertikal 10.The Road of South Stream 11.Compromise with Turkey During the recent negotiations between Vladimir Putin and his Turkish counterpart Recep Erdogan the Russian prime minister actually verbalised plans for Russia’s final abandonment of the Blue Stream 2 gas pipeline project This gesture is made exactly at the time when Turkey is actively calling for sanctions against Israel Turkey is currently going through a period of considerable transformation of its home and foreign policy, which is due to the reinforcement of the positions of Islamist forces in the country, represented by the ruling Justice and Development Party and its leader Recep Erdogan. As prime minister, the latter has managed to achieve serious success in fighting the main opponents of the Islamists in Turkey - the army generals oriented towards secular development principles. The prime minister needs to consolidate his positions, which is facilitated by the policy of confrontation with Israel he has chosen Sourse: Trud 12.Fee for South Stream Russia’s consent to building joint pipelines with the Turks makes it significantly less interesting to carry out similar projects with Balkan states (like, for instance, Burgas-Alexandrúpolis) with which Russia has historically had well-established political and economic connections Russia confirmed its intention to join the Samsun-Ceyhan oil pipeline project. Although there is a high probability that it is Kazakh oil that will be pumped through it, which can hardly strengthen the export positions of Russian companies. Besides, the construction of Samsun-Ceyhan makes unnecessary the Burgas-Alexandrúpolis project Sourse: Expert 13.Fee for South Stream It was Moscow that once initiated that project, as it needed to bypass the Turkish straits the Bosporus and the Dardanelles. Difficult relations with Ankara (which was playing up the problem of the Bosporus being “overloaded”) just three years ago suggested a course to as much independence from Turkish transit “services” as possible and to closer relations with Greece and Bulgaria Now it turns out that all the efforts to win Athens and Sofia over were unnecessary: two pipelines of a comparable capacity are simply more than needed to bypass the Bosporus. Avoiding country-specific risks, i.e. getting rid of dependence on Turkish oil transit, will now also be impossible 14.Fee for South Stream As it promotes South Stream Moscow risks trading one inconvenient transit partner (Ukraine) for another (Turkey). After all, the Turks persist in delaying the issuance of the final permission, periodically raising the issue of the possibility of granting them the right to re-export gas, as well as bringing down the price for their internal consumption and relaxing the take or pay clause which is disadvantageous for the buyer P laying up to Turkey in areas that are politically important to it may not always be easy for Russia either. This concerns not only the above-mentioned Middle Eastern subjects. Problems may also arise in relation to policies in the Caucasus and Central Asia where Ankara has its own interests and ambitions (different from those of Russia). By the way, some of Russian experts already suggest ideas like joint management of the Caucasus (including North Caucasus) simultaneously by Russia, Iran, and Turkey 15.Summary EU and Russia must think about cooperative strategy May be it’s possible to return to the idea of integration of Nabucco and South Stream We must find collective solution to the problem of gas transit countries.

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