Bulgarian President Plevneliev’s visit to Qatar on 10 March was, if nothing else, well timed. While he was meeting Emir Sheikh Tamim Bin Hamad Al Thani, touring the Museum of Islamic Art and holding talks with officials at Qatar Holding closer to home the crisis in Crimea was escalating. So the most important part of his visit may well have been discussions over possible gas sales. Russia’s actions in Ukraine have reawakened the fear among European governments that one of their main energy suppliers is an unreliable partner. According to the Oxford Institute for Energy Studies, Europe gets around 30% of its natural gas from Russia and more than half of that passes through Ukraine. That has caused plenty of problems in the past. Most recently, there were disruptions to supply in 2009 because of payment disputes between Ukraine and Russia. Ukraine is a key transit point for supplies heading further west and it currently owes around $2bn to Russia so there is a clear risk that disruptions could happen again.
If they do, southeast Europe will find itself particularly exposed. In 2012 Bulgaria relied on Russia for 99% of its gas, while the figure for the Czech Republic was 80%. Slovakia and Greece also get more than half of their gas from Russia and Hungary and Romania are not far behind.
So Europe could clearly benefit from some alternative energy sources. For Plevneliev, Qatar looks like a good candidate. In a meeting with the Qatar Chamber of Commerce & Industry in March he reiterated his country’s interest in Qatari gas, possibly importing it via a new LNG terminal in Greece. “The trade may quickly increase if this project is implemented,” he said.
At the moment Greece has one LNG terminal, which opened in 2000 and is supplied by Algeria’s Sonatrach. If another terminal was built, or the existing one expanded, the beneficiaries could include the host country as well as Bulgaria, Czech Republic, Hungary, Poland, Romania and Slovakia.
As that suggests, the key will be a cooperative approach among European countries. At a meeting on 21 March, EU member states agreed to draw up a comprehensive plan by June to reduce their energy dependence.
After the meeting Herman van Rompuy, president of the European Commission, said “Europe is stepping up a gear to reduce energy dependency, especially with Russia, by reducing our energy demand… by diversifying our supply routes to and within Europe, and expanding energy sources.”
But these grand ambitions are being held back by a lack of infrastructure. An intricate web of gas pipelines criss-crosses Europe but the gas inside them generally only goes from Russia westward. Even more east-west routes are planned, such as the South Stream pipeline from Russia under the Black Sea to Bulgaria. That will reduce the dependence on gas coming via Ukraine but do nothing to diversify the ultimate source of supply.
What Europe needs is pipelines fed by other countries. One that is being developed is the Trans Adriatic Pipeline (TAP) from Azerbaijan through Georgia and Turkey and on to Greece. But these things tend to move slowly. The TAP plan has been on the drawing board since 2003 and the first deliveries to Europe are not expected until 2019.
That project forms part of the southern gas corridor, which the European Commission advocated in a 2008 strategic energy review. The initiative involves working with a number of countries inside and outside the Middle East, including Iraq, Azerbaijan and Turkmenistan. Once political conditions allow, the Commission suggested Iran and Uzbekistan could be brought into the fold too.
The Galsi pipeline from Algeria to Italy could be another piece in the jigsaw. The 850km link has been discussed for a long time but as yet no decision has been taken on whether to proceed. In addition, the EU also needs more interconnectors between member states.
Once the pipelines and interconnectors are in place, the situation will be markedly different. A few days after his trip to Qatar, Plevneliev was in London where, in a speech to the Chatham House think-tank, he spoke about the potential benefits from the planned new pipelines. “That might also be a game-changer because from Greece we could get gas from Qatar, from Turkey we might get gas from Azerbaijan, Iran or Qatar,” he said.
Iraq is another obvious potential source, not least from the Kurdistan region bordering Turkey, although the testy relationship between Erbil and Baghdad could scupper any deal. If and when Libya manages to stabilise it too will be of interest. Both could help Europe to have a more diverse list of energy suppliers.
Iran could also play an important role, and although it is a complex potential partner some European governments appear keen to explore what could be done. In December Slovak Prime Minister Robert Fico visited Tehran and in a meeting with First Vice-President Eshaq Jahangiri said his country was willing to broaden cooperation in a number of areas, including energy. In March, Greek Foreign Minister Evangelos Venizelos visited the Iranian capital where energy cooperation was again on the agenda.
In the background to all this there are increasingly strong commercial ties developing between Gulf states and countries in southeast Europe. Etihad now owns 49% of Air Serbia and the UAE’s Al Dhara Agricultural Company has invested in Serbian farmland. Saudi Arabia’s United Farmers Holding Company has done a similar deal in Ukraine.
Regular gas sales would of course be of a different order of magnitude to such investments, but no matter how willing both sides are it will inevitably take some time before any new supply deals can start. In the meantime the competition from other energy sources, both within Europe and from elsewhere, is likely to increase. If relations with Russia continue to deteriorate it could lead to a resurgence in the use of coal in Europe and greater investment in renewable energy. And LNG suppliers as diverse as the US, Australia and Papua New Guinea will all be looking to see where they can get the best price for their gas. Middle East suppliers will be welcome in Europe, but they certainly don’t hold all the cards.
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