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Research Report

Developing a Western Energy Strategy for the Black Sea Region and Beyond

Ariel Cohen
Copyright Date: Nov. 1, 2015
Published by: Atlantic Council
Pages: 20
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Table of Contents

  1. (pp. 2-2)

    The United States and NATO need to recognize that Black Sea energy security directly affects the ability of the region’s countries to withstand the pressure that the Russian Federation applies to them through price gouging and the disruption of gas supplies.

    The US State Department’s Bureau of Energy Resources, ably headed by Special Envoy Amos Hochstein, should take the lead in developing and implementing a coherent US policy that will ensure that the region is secure for energy transportation, exploration, and production, so that no one power is allowed to dominate the energy chess board.¹ However, the State Department cannot...

  2. (pp. 2-4)

    Russia’s natural gas leverage over countries in the Black Sea basin and in Central, Southeastern, and Eastern Europe has become a recognized challenge for European energy security. Countries that acquire most of their supply from the Russian Federation have become the most vulnerable. In 2006 and 2009, Bulgaria, Croatia, Greece, Slovakia, Ukraine, and other countries experienced abrupt interruptions of Russian gas supply during a cold winter. The Kremlin uses energy not just as a commodity to earn cash, but also as a means of increasing political interdependence—occasionally at the highest levels, as in the case of Gerhard Schröder, the...

  3. (pp. 4-4)

    The Black Sea region is pivotal in terms of addressing the challenge of gas supply diversification for Europe. The principal solution to this problem is geographic diversification of gas supply. Only a strongly competitive environment will force Gazprom to begin acting like a corporate entity and not a government agency.

    Unsurprisingly, Russia would prefer to maintain its energy dominance, to the detriment of European interests in energy security and the diversification of gas sources. This becomes evident in Moscow’s negative responses to the adoption by the European Union (EU) of the Third Energy Package, which creates a barrier against any...

  4. (pp. 4-5)

    Moscow initially rejected the Third Energy Package’s provisions instead of accommodating its principal customers in the EU. The war in Ukraine, along with Western sanctions, made the South Stream project politically untenable. Russian President Vladimir Putin cancelled the South Stream in December 2014.12 Putin replaced South Stream with Turkish Stream, initially envisaging four pipelines capable of delivering gas across the Black Sea straight to Turkey. According to a study published by the Oxford Institute for Energy Studies, “Of the 63 billion cubic meters per year (bcm/y) of capacity, 14 bcm/y would replace the volume currently delivered to Turkey via Ukraine...

  5. (pp. 5-6)

    The TANAP/TAP project was announced in November 2011, at the Third Black Sea Energy and Economic Forum in Istanbul, as an alternative to the failed Nabucco pipeline project.22 TANAP is a new 48-56-inch standalone pipeline under construction across Turkey, and is intended to carry Azeri natural gas from the Shah Deniz II field. The estimated reserves of Shah Deniz II alone are 991 bcm. TANAP’s projected capacity is 30 bcm/y, and the field itself has reserves for at least a 30-year supply. The Shah Deniz II consortium consists of the following companies:

    The number of shareholders in the TANAP pipeline...

  6. (pp. 6-9)

    Greece-Bulgaria Interconnector. Although only three countries will be directly involved in the TAP project, the number of countries that could benefit from its implementation is likely to rise in the future. For instance, in early 2014, Turkey and Bulgaria agreed to build a 114-kilometer pipeline connecting the two countries’ natural gas distribution networks, which would allow for the supply of additional volumes from Shah Deniz to Europe. Such a linkage would improve western Black Sea littoral energy security, benefitting Bulgaria.

    This interconnector initiative envisages building a Greece-Bulgaria interconnector (IGB), which would receive natural gas from TAP. The expectation is that...

  7. (pp. 10-11)

    Several countries that currently rely on Russian supplies, or serve as major transit corridors for Russian and Caspian gas, actually have ample hydrocarbon reserves. They can become independent—or nearly independent—as far as their natural gas supply is concerned.

    For example, Georgia has emerged as a potentially important hydrocarbon source for Europe. On October 8, 2015, Frontera Resources announced its discovery of massive resources of gas in eastern Georgia, where it is already producing oil and gas. The company estimates natural gas resources to be 3.8 trillion cubic meters (tcm) of gas in place in its South Kakheti Gas...

  8. (pp. 11-11)

    The Black Sea basin is a transit area for energy flows to Central and Eastern Europe—not only from east to west, but also from south to north. The Turkey-Iraq Gas Pipeline would allow Turkey and Europe access to Iraq’s natural gas reserves. While Ankara and the Kurdish Regional Government (KRG) signed a memorandum of understanding a number of years ago, feasibility studies for the project have not yet started.

    As of August 2015, Kurdistan has not exported any natural gas. Local authorities prioritized oil-focused projects due to higher rates of return on investment. In addition, significant legal constraints exist...

  9. (pp. 12-12)

    The Eastern Mediterranean is a strategic region capable of significantly reducing Europe’s dependence on Russian gas. Located less than one thousand miles from the Black Sea, it can become an important supplier to the Balkans, South-Central Europe, and beyond, including the heart of Europe. It would also make Cyprus an important energy hub, for the Eastern Mediterranean and all of Southern Europe.

    The recent discovery by Eni of the supergiant gas field at the Zohr Prospect, in the waters off Egypt (1,450 meters deep) shines a spotlight on the Eastern Mediterranean. Overnight, Egypt emerged as potentially the leading LNG supplier...

  10. (pp. 13-13)

    Given the recent shift in relations between Iran and the EU, it is reasonable to assume that Iran’s natural gas deposits, which are approximately 34 trillion cubic meters and the second largest in the world, could also contribute to European energy security. However, only 160 billion cubic meters of gas are produced annually, due to technological and financial constraints caused by domestic mismanagement, a lack of expertise, and the Western sanctions that now appear to be lifted. Only a small amount of Iran’s annual gas production is currently being exported.

    The Iranian energy industry will require massive investments to meet...

  11. (pp. 13-14)

    Countries around the Black Sea boast considerable conventional-energy potential, including the capacity for generating nuclear power. For example, Ukraine has four active power plants with 14-gigawatt total installed capacity. The ill-fated Chernobyl reactor remains closed, and three other projects are unfinished (including one in Crimea). With large-scale industrial consumers of energy located in the occupied eastern regions of Ukraine, there are no current plans for expanding the existing facilities or building new ones.

    Romania has one active power plant, with 1.4-gigawatt capacity. Future projects include a two-reactor power plant in Transylvania with 2.4-gigawatt capacity. These plans are long term and...

  12. (pp. 14-14)

    A safe and peaceful Black Sea region is vital for European energy security, and for the economic development of US and European markets in this strategically important region that abuts Russia, Iran, Turkey, the Middle East, and Europe. Energy policy in the Black Sea region is part of a broader economic and security policy paradigm that needs to be developed and implemented, with US support, by all littoral Black Sea states, and by the members of the EU.

    US energy security priorities should include boosting the US military presence along the western littoral of the Black Sea, with special emphasis...