Week 45 Overview
The last days further turned the spotlight on two areas: the East Mediterranean and the Baltic countries, with some more relevant news coming from Croatia, Russia and the United Kingdom. The current debate about European legislation made the headlines too.
The most unexpected news has to do with some declarations about Eni’s participation in the South Stream project. The Italian company will continue to engage in South Stream if required investment does not exceed 600 million euros, otherwise it will consider leaving the project, Eni CEO Claudio Descalzi said on Tuesday.
South Stream is the bone of contention between Budapest and Brussels. Hungary will continue supporting European sanctions on Russia, while preserving its political and economic ties with the Kremlin on issues such as the Russia-led South Stream natural gas pipeline project.
Pavel Zavalny, President of the Russian Gas Society and Deputy Chairman of the State Duma Committee on Energy, sent his views on the issue to Natural Gas Europe. According to Zavalny, the project would be a real pan-European project, facilitating the integration of the regional gas markets.
European integration had been debated also in other contests. The topic was the main topic of a conference in Berlin, in which speakers suggested that signs of market integration are often underestimated despite the problems. ENTSOG also added that opposite interests are hindering its efforts to come up with a Network Code on Harmonised Transmission Tariff Structures for Gas (TAR NC), a cornerstone of the integration process.
ENTSOG said that some positive signs come from the way European TSOs are involved in early implementation practices in issues related to Network Code on Capacity Allocation Mechanisms (CAM NC).
The Baltic countries are moving forward with their plans to step up integration efforts. The fact that Finland is becoming the majority shareholder of Gasum clearly indicates that the geopolitical dimension of the European still matters.
The attention paid by Finland’s Alexander Stubb and Estonia’s Taavi Rõivas is a further proof. The two countries inching towards an agreement on laying a gas pipeline between the two countries and building an LNG terminals on both sides of the Gulf.
Similarly, also the East Mediterranean are progressing with the negotiations. For instance, partners in the Tamar field agreed with Union Fenosa Gas (UFG) on continuing negotiations for supplies of natural gas. They see a deal within six months.
An eventual renewed interest on the area would also have an impact on the role of Greece. Its geostrategic location on the map offers a number of advantages, which can translate to an economic competitive advantage, as well as to an upgrade of its geopolitical role in South-East Europe.
It comes as no surprise that Azerbaijan’s SOCAR is committed to its plan to acquire a majority stake in DESFA. SOCAR said the Commission is opening a “Phase II” in-depth investigation into the proposed transaction, with a final decision to be taken within 90 working days.
Croatia is trying to take advantage of the situation with its first offshore licensing round. Over the last days, Zagreb said that it will decide the best offshore bidders by mid-December. The country is intentioned to cut its gas import needs, despite some hurdles on the way hindering Croatian efforts.
On the other hand, the British took advantage of its experience. The UK government announced 134 licences covering 252 block in the 28th offshore licensing round, adding that an additional 40% could be added later on after environmental assessments.
Against this backdrop, Ukraine and Russia remain at loggerheads.
Naftogaz clarified that it will prefer gas from the EU to Russian gas. Only in case of excess demand will we make use of our right to buy gas from Gazprom, Naftogaz’ CEO Andrei Kobolye, commented.
Russia in the while is trying to maintain its centrality on the European gas markets, strengthening its ties with Azerbaijan and starting price negotiations with PGNiG.
Sergio Matalucci
Sergio Matalucci is an Associate Partner at Natural Gas Europe. Follow him on Twitter: @SergioMatalucci