Madalina Sisu Vicari from University of Liege analyses Gazprom’s plan of bypassing Ukraine following its involvment in specific infrastructure projects in Europe.
Nord Stream II and Turkish Stream-dependent of a lot of variable
The announcement of the signing, on June 14, 2015, of a Memorandum of Understanding between Gazprom and E.ON, OMV and Shell to construct two additional lines of the Nord Stream pipeline made a lot of ink to flow and was widely analyzed and commented.
Some of the opinions expressed on this issue argue that Russia would intend to use the Nord Stream II to make pressure on Turkey in order to advance the Turkish Stream pipeline project. Other stances claim that Gazprom would go ahead with at least one branch of the Nord Stream II, in parallel with a limited version of the Turkish Stream as the latter would be addressed mainly to supply the Turkish market. Finally, other opinions suggest that Gazprom would not go ahead with any of the pipelines-neither the Nord Stream II, nor the Turkish Stream; both pipeline would remain only at the stage of intention as they had been announced solely for the purpose of creating various cleavages within the EU.
So far, the preliminary conclusion of this interpretations puzzle is that the scenarios involving the Turkish Stream and Nord Stream II hold a lot of dependent variables, among the most relevant are the following ones:
-the necessary and awaited signing of the inter-governmental agreement with Turkey for the building of the Turkish Stream;
-the EU’s regulations regarding the 3rd party access, which currently affect the Nord Stream I and would further apply to the Nord Stream II;
-Russia’s real commitment, despite the signature of an inter-governmental agreement with the Greek government, to build an extension of the Turkish Stream on Greece’s territory-the so-called Greek Stream;
-EU’s official intention to lessen its overdependence on Russia and to diversify its energy supplies and routes as it was declared in the “European Energy Security Strategy” (2014) and “Energy Union Package” (2015); and also EU’s aim to o ensure “the long-term energy supplies to and transit through Ukraine”, as stated in the recently –adopted EU Energy Diplomacy Action Plan.
-the Member States’ divergent interests regarding their gas cooperation with Russia.
However, among all the above mentioned dependent variables, there are two independent ones: the major independent variable is the growing accumulation of Gazprom’s gas storage capacities in Western and Central Europe, and the second one is represented by Russia’s high-level political actions aimed at influencing the European countries to acquiesce to its strategy of completely bypassing Ukraine.
Germany –the core of Gazprom’s gas storage capacities in Europe
Gazprom has been accumulating significant gas storage capacities in Western Europe, notably in Germany. The storage capacities in Germany are located in: Peissen, Etzel, Rehden and Jemgun.
In Peissen, situated in Saxony-Anhalt, Gazprom holds 50 % of the joint venture-set up with the German company Verbundnetz Gas AG-which developed the underground gas site “Katharina”, with a current storage capacity of 110 million cubic meters (m³). The two companies are working on the expansion of the site’s capacities, planned to reach 600 Mm³ in 2024. Starting this year, the Katharina site is linked to the JAGAL pipeline, operated by the GASCADE company, a German transmission system operator owned by BASF and Gazprom (49, 98% share). GASCADE’s partner pipelines are the NEL, OPAL and Nord Stream I pipelines. The JAGAL pipeline is linked to the Russian Yamal pipeline.
The Etzel cavern storage facility, situated also in Lower Saxony, is operated by a joint venture between Gazprom Germania, BP and Dong Energy, each holding 33, 3 % of the project share. Operational since last year, the Etzel gas storage facility is planned to reach nearly 1.2 billion m3 of gas by 2018. The Bunde-Etzel (BEP) pipeline, which has among its stakeholders Gazprom Germania, connects the Etzel storage facility to the German NETRA gas grid and the gas grids operate by Netherland’s Gasunie Transport Services B.V. (GTS).
Through its shareholding in the WINGAS company, Gazprom is also involved in the Rehden and Jemgum gas storage facilities. The Rehden storage facility, situated in Northern Germany, is the largest underground gas storage in Western Europe and has a capacity of 4.2 billion m3 of gas. It is connected to the NEL pipeline, and further to the Rehden-Hamburg and MIDAL pipelines; the Rehden-Hamburg and MIDAL pipelines are operated by GASCADE, a company in which, as it was abovementioned, Gazprom is shareholder.
The Jemgum cavern gas storage, located in the Northwest of Lower Saxony, is operational since 2013 and it is planned to reach 1 billion m3 of gas by 2018. It is connected to the gas transport system operated by GASCADE and the Gasunie Transport Services B.V.(GTS).
It is worth mentioning that Gazprom failed to take control over the Rehden and Jemgum gas storage facilities, an operation which should have happened through a multibillion dollar asset swap agreement with BASF. Though approved by the European Commission in December 2013, amid the Ukraine crisis and the subsequent political tensions, the deal was mutually abandoned.
Gazprom is also involved in the underground gas storage facility of Heidach, situated in Austria, near the border with Germany. With a capacity of 2.6 billion m3, the site is the second largest gas storage facility of Central Europe. The project is a two-stage joint venture between WINGAS, Austrian Rohöl-Aufsuchungs AG (RAG) and Gazprom export. The Russian gas stored in Heidach is supplied to Western, Central and Eastern European markets via the Central European Gas Hub (Baumgarten).
In Central Europe, Gazprom planned with the Czech MNG Group the construction of an underground facility in Damborice, Czech Republic. The site would be commissioned in 2016 and will have a capacity of 450 million m3 of gas. The project would store the gas supplied by the Nord Stream pipeline. The Czech government had previously granted an exemption regarding the third party access to this storage facility, which the European Commission considered illegal. In March 2015, the European Court of Justice referred the issue back to the General Court for a new ruling which is yet to be done.
More, Gazprom is currently actively seeking to acquire gas storage facilities in Hungary.
Another major gas storage project in which Gazprom is involved-though not through the shareholding- is Bergermeer, in Netherlands. Operational since April 1st, 2015, the storage facility has a capacity of 4.1 billion m3 and is the largest gas storage in Europe with third-party access rights. In exchange of delivering the “cushion gas”, Gazprom received storage capacity and an interest in the technical operatorship. Gaprom contracted 1.9 billion m3 at Bergermeer.
Nord Stream II-backed by gas storage accumulation and dependent on political actions
Gazprom’s aggressive strategy of acquiring these gas storage facilities should be analyzed in conjunction with the aim of keeping and further enhancing its European market share and, subsequently, with that of diverting the Ukrainian gas transit. Taking into account the large accumulation of the gas storage facilities in Germany/Austria/Netherlands and to a lesser extent, in the Czech Republic, it seems that the Russian gas is planned to flow to Europe mainly through the Nord Stream pipeline. Therefore, the assumption that Gazprom would go ahead with at least one supplementary line of the Nord Stream II should be seriously taken into consideration, as it could be supported by the evidence of the gas storage accumulation. The question remains: would Gazprom also build the second additional line to the Nord Stream II? The answer largely depends on the dependent variables mentioned above but also on the second independent variable, namely Russia’s capacity at influencing the European countries-a very difficult task in the current circumstances.
However, the political lobbying has been happening -either officially or behind the close doors- even that sometimes it passes rather unnoticed, as the high-level meeting held on July 8, 2015 between the Gazprom’s CEO, Alexei Miller and the German Vice-Chancellor, Sigmar Gabriel. According to the press release, “the meeting addressed the reliability of Russian gas supplies to Europe and the progress with the Nord Stream II project” and “the parties (…) highlighted the importance of creating new direct routes for Russian gas supplies to Europe”. Would these “direct routes” completely and/or largely divert the Ukrainian transit? It remains an open question.
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