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Energy Security of the Balkan States: is there any alternative to Russian gas?
04.04.2016
Energy security is an expression used every day but one which we cannot precisely define. In political theory and security studies, is there no clear answer to what energy security means? In the famous classification of Barry Buzen, there are five security sectors: Societal security, Political security, Environmental security, Military security and Economic security. The question is: where does energy security belong? Or, if we want to put energy security in a separate sector, the question is whether in the same way can we also classify water security, security of arable land and so on? Security means the absence of threats, and, consequently, energy security meant the availability of energy sources. In this lecture I will speak in this context.
Because the Balkan countries have modest energy resources, the level of analysis cannot be national or only narrow regional. We must refer to the wider regional level. The problem with the wider regional level is: how widely to define the region? The Balkans is a part of Europe, part of the Mediterranean basin, part of the Greater Near East. Because of its geographic position and geopolitical factors the best framework is to look at the Balkans as a part of Western Eurasia.
The Balkans is located in an area important for the transport of oil and natural gas from the Middle East and Central Asia to western markets. This is the reason why since 1993 there were plans for eight energetic corridors to be built over the Balkans: "South stream" pipeline, then its successor the “Turkish stream”, “NABUCCO”, the “Trans-Adriatic pipeline”, “AGRI” and “East ring”, as well as the oil pipelines “AMBO” and “CPOT”. None of these projects were ever realized. The South Stream would connect Russia with Western Europe through Bulgaria, Serbia, Hungary and Slovenia. Without any doubt, it is the most important project. It is the only sustainable project. Under the current circumstances it is difficult to expect the realization of the Turkish Stream. NABUCCO was ambitious but unrealistic, and all other gas pipelines-TAP, AGRI and East Ring had a dual function. First, they were to influence the decline of consumption of Russian gas by the EU market. And secondly, to demonstrate to the leaderships of the Balkan states that the issue of energy security could be solved by relying on other projects, in which there is no participation of Russia. Both of these tasks are debatable.
The biggest western energy project in the last two decades that concerned the Balkans was the Nabucco pipeline. Although the construction of this pipeline was a political priority for the United States, it turned out that it cannot be be competitive to the “South Stream” pipeline. First, the capacity of Nabucco is supposed to be between 31 billion cubic meters of gas per year, which is only half of the capacity of the “South” or the “Turkish” stream. In addition it remained unclear from where Nabucco would be withdrawing the said amount of gas, as the source from Azerbaijan's Shah Deniz can only fill the pipeline with a maximum of 16 billion cubic meters per year. Another open question is the price of the distributed gas, because of the length of the pipeline, and the associated costs of providing for the pipeline that would go through unstable areas. Therefore, even if it came to realization, it would not be possible to provide a significant alternative to Russian energy through Nabucco, nor can it reduce the energy dependence of Europe from Russia. The same goes for “Trans Adriatic”, AGRI and East Ring. The "Trans-Anatolian" pipeline as a Turkish project should be completed by 2018 and is supposed to initially bring about 16 billion cubic meters of gas per year to the "Trans Adriatic" pipeline.
The same question arises in the case of the “Trans Adriatic” pipeline as in the case of “Nabucco” pipeline – there is an ongoing concern if the gas from Azerbaijan can be an alternative to the basic reserves of gas from Russia. It is not certain that the reserves in Azerbaijan are large enough. First of all, the ownership of Shah Deniz, the biggest and the most important gas field in Azerbaijan is very complex. BP has 28,8 percents of shares, Turkish TPAO 19, Azerbaijan SOCAR 16,7, Malesian Petronas 15,5, Russian Lukoil 10 and Iranian National Oil Company 10 percent. The gas field "Shah Deniz" is located in Azerbaijan, but it is not in Azerbaijan ownership. The second thing is that Uzbekistan has two times bigger and Turkmenistan has 20 times bigger proven reserves than Azerbaijan. On the list of the countries by natural proven gas reserves Azerbaijan is in the 28th position. Proven gas reserves in Azerbaijan are not enough to be any realistic alternative to Russian gas. This question is even more important when it is known that gas reserves in Azerbaijan are supposed to be used also in two new alternative routes. One of them is the “East Ring” that should connect Turkey, Bulgaria, Romania and Hungary and the second one was the announced as the AGRI project – a pipeline for LPG that would connect Azerbaijan, Georgia, Romania and Italy. LPG would be transported by tankers from Georgia to Romania, and from Romania to Italy; the pipeline would stretch through Serbian and Croatian territories. Both of these projects, however, have only been announced so it is still not known who would finance the entire job, how profitable it would be, and what selling price would be at the end destination. One thing about prices: today, natural gas price is around 230, and LPG is at 470 USD, and if we compare prices in 2014 natural gas was around 350 and LPG 1000 USD. So, LPG is two to three times more expensive than natural gas.
It is appropriate that the EU wants to reduce its energy dependence on Russia and other producers. Therefore, the EU initiated a number of programs with an aim to increase the share of energy from renewable sources. However, this process is slow and at least in the first half of the 21st century, fossil fuels will remain a key energy source. More than 70 percent of energy in Europe comes from fossil fuels.
When it comes to fossil fuels, it is necessary to underline that coal reserves are being exhausted rapidly, and there are numerous ecological problems with excessive use of oil. This is why gas is becoming the more popular and more acceptable energy source. As in the case of the EU, the Balkan countries are basing their energy strategy on the availability of energy sources. It is appropriate that in the countries of South East Europe, except Albania and Moldova, energy security is currently based on coal. However, coal reserves are quickly exhausting, and it is necessary to look for a sustainable alternative. According to the latest research of "Elektroprivreda Srbije", lignite in the Kolubara basin can be exploited until 2060. Excluding hydro potential, other renewable resources are used in a negligible percentage. In 2015, the South East European countries signed an agreement with the EU on the so-called Third Energy Package, which defines the rights and obligations of countries on the common energy market. However, as in the case of thet Migrant crisis, when it turned out that the Schengen and Dublin agreements are not a sufficient legal framework for problem solving, the same has happened with the common energy market in 2016, when the European Commission recently informed Serbia that they are thrown out from the plan for emergency gas supply for that year. Of course, without any acceptable explanation. The question of energy supplies largely remains a part of the national question.
According to numerous analyses that were done, the simplest, most cost-effective and environmentally the most acceptable way is connecting with big sources of natural gas in the wider region. The nearest big natural gas sources are in Russia, Iran and Turkmenistan. When it comes to natural gas and Turkmenistan, this country is in a strategic partnership with China. We're too late. When it comes to natural gas and Iran, a large investment and a lot of knowledge is necessary for exploitation, as the country has long been under sanctions. Who can offer it? The answer is simple: Gazprom or BP. So, Russians again! There is no sustainable energy concept for Balkan states without a Russian role. Everything else is questionable in terms of the economic interests of Balkan states.
