Forbes: European Gas: How Not To Do Pipeline Politics

Over in Europe, we’ve had the world’s longest debate over the smallest amount of gas ever. It pivots around what Brussels has coined the ‘Southern corridor’ – designed to bring Central Asia gas directly to European markets. After a decade of huffing and puffing, ‘brace’ yourself for what’s been at stake: 10bcm of gas. Yep, you read that right. A measly 10bcm of Azeri gas expected to come online by 2017, for a continent that consumes around 600bcm of gas a year. Worse still, it’s still highly uncertain which pipeline projects will win out from the Shah Deniz II development in Azerbaijan.

So why all the fuss? It relates to greater ‘diversity’ and ‘elasticity’ of supply from Europe’s historical supplier of choice, Russia. The Kremlin holds a tight grip over the vast bulk for South East European and Eastern Europe gas supplies, in some cases extending to 100% dependence. Pumping Central Asian and Middle Eastern gas into this ‘Molotov cocktail’ was deemed a good idea – not just for Europe – but to open up new supply relations for producers as well. Few would disagree. 

The problem has been the economic and political execution. Europe’s pipeline of choice (Brussels bureaucrats wouldn’t fess up to this now) was always the 31bcm Nabucco pipeline, a vision that would supposedly draw on copious amounts on Central Asia and MENA gas to feed European markets, spanning a staggering 3,900km of pipes. But as cost estimates went up, prospective gas ‘throughput’ dropped, and the politics became down-right embarrassing MORE