The Winning Edge in Europe’s Southern Gas Corridor

Michael Carnegie LaBelle discusses the results of a survey on supply diversification in Europe’s Southern Gas Corridor

The topic of European gas diversification has all the elements of great sporting events: big name players, money, international bosses, timelines and good sportsmanship masking the underlining competiveness to be the winner. If you want to know who is likely to win a sporting event, you only need to consult the betting websites to find the odds. In the arena of energy and geopolitics you can only read opinions and ask your fellow professionals. I decided to take a more rigorous approach by setting up an internet survey that would help quantify not just the winning percentage, but identify the reasons and the impact on supply diversification in Europe’s Southern Gas Corridor (the full analysis of the results can be downloaded).

The survey was launched in November 2010 and closed in January 2011. In total there were 28 respondents that fully completed the questionnaire. This is not a particularly high number for a survey, but most of the respondents did indicate they worked in the energy sector. Overall, the sample size and the opinions expressed resemble a room of energy professionals gathering together to give their opinions.  Therefore the results are valid and interesting to understand the current perspectives and future possibilities of gas transit projects.

The results demonstrate that both Nabucco and South Stream are viewed as effective projects that offer more security of supply for the Central Eastern and South East European region. Respondents had differing views over the ultimate reason, whether economic or political, for constructing transit pipelines. The chances that each of these projects will be built was viewed about equal. The results below indicate only a 10% difference perceived by respondents between the two big projects of Nabucco and South Stream, for best meeting the needs of the CEE and SEE regions. What is interesting about this result is that regardless of which one is built there does exists a sufficient level of understanding and support for both projects, they both deliver on their promise of boosting security of supply and meeting future gas demand. While supporters of both projects say they are not competing against the other, if only one is built diversification occurs thereby European energy security is improved.

The opinions expressed for the smaller projects, the Azerbaijan–Georgia–Romania Interconnector (AGRI), the Interconnector-Turkey-Greece-Italy (ITGI) and the Trans Adriatic Pipeline (TAP), indicated less was known about these, although it was perceived their impact is minimal for improving regional security of supply. Politics and geopolitics emerge as central elements in gas route diversification. It should not be surprising to see upstream gas supply as being the highest ranked challenge for Nabucco while downstream gas demand, geopolitics and financing emerge as the key challenges for South Stream.

Finally, since the end game is to see these gas transit projects built, the likelihood that they would be built needed to be assessed. Respondents were more certain about Nabucco but overall viewed South Stream as more likely to be built. The smaller transit projects had a much higher level of uncertainty which also reflected the overall lack of awareness of the technical details of these projects by respondents. Again, it should be noted that this is a small sample size but does give an informative glance of the perceptions held by energy professionals.

To be honest, some of the results of the survey did surprise me. I have my own doubts about how well South Stream serves the interests of European gas consumers. But I think my own prejudices are equal to the respondents in the survey. As in most sporting events, you have your favorite team and know their strengths and weaknesses along with those of the competing team. There is the same sporting knowledge over Nabucco and South Stream, along with the smaller projects which hold the potential to usurp their larger competitors. One of the main personal factors for me to conduct the survey was to address my own bias. I am glad I did this. The results show regardless of which team ‘wins’ the European gas consumers should expect to benefit. While the stakes are certainly higher than a sporting event – the control over an important portion of European energy supplies, ensuring that the European consumers are the true winners is probably the most important element of the game. Hopefully, we can leave that to the European referees regulating how the game is played.

This article has been reprinted with the kind permission of Michael Carnegie LaBelle. Dr. LaBelle is an independent energy consultant and researcher at Limax Energy Consulting. His blog can be found at www.energyscee.com