The new gas routes
South Stream has been set aside, Turkish Stream scaled back, and Nabucco effectively ended. New discoveries in the eastern Mediterranean have led to a supply system in flux

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Nabucco and South Stream were at the beginning. Two competing projects supported by historic rivals, the United States and Russia, both intended to supply energy to southern Europe. The gas pipeline designed by Gazprom, the Russian gas giant, would have enabled Moscow to bypass Ukraine and transport up to 63 billion cubic meters (bcm) of gas per year to the Old Continent, at an estimated construction cost of €19-25 billion. The 2,380-Km route would have had to cross the Black Sea to then follow 2 directions: one to the north, via Bulgaria, Serbia, Hungary and Slovenia to reach Tarvisio, in Friuli-Venezia Giulia; the second to the south via Bulgaria, Greece and the Balkans to reach, via the Ionian Sea, Otranto, the easternmost point of Italy.

South Stream and Turkish Stream: frozen projects

South Stream remains only on paper – formally - 2 to Bulgaria’s refusal to allow the pipeline to pass through its territory. Moreover, the European Commission had threatened to impose sanctions against Sofia for alleged irregularities in the project. Having abandoned South Stream due to the prohibitions imposed by the EC executive, Moscow attempted, in December 2014, to launch Turkish Stream: a new pipeline of the same capacity - 63 bcm, 14 of which were destined for the Turkish market, the rest to Europe - to link the Russian shore of the Black Sea to Greece, via Turkey. However, the shooting down of a Russian Sukhoi 24 bomber by the Turkish Air Force on the Syrian border caused relations between Moscow and Ankara to break down significantly, and all cooperative projects between the 2 countries have suffered a setback. Among these was Turkish Stream.

Nabucco: gas from Azerbaijan to Austria

Nabucco, a natural gas pipeline supported by the US and the European Union, would have linked the Turkish hub of Erzurum, the arrival point of pipelines from Azerbaijan and Iran, to the Baumgarten platform in Austria, where the gas would have been stored and distributed to the rest of central Europe. The pipeline, at least 3,300 Km long and with an annual capacity of 31 bcm, would have passed through Turkey, Bulgaria, Romania and Hungary. The project was then reduced to a 10-23 bcm capacity pipeline, dubbed Nabucco West which, from the Turkish-Bulgarian border, would have reached Austria after a 1,329-Km route. However, the consortium managing the Shah Deniz II gas field in Azerbaijan chose the Trans-Atlantic Gas Pipeline (TAP) to transport its natural gas to the European markets, effectively marking the end of Nabucco West.

TAP: a gas pipeline sought by Europe

The TAP project provides for an 870-Km long gas pipeline with a capacity of 10 bcm per year, which may be increased to up to 20 billion, which will pass through Greece, Albania and Italy. Along with the Trans Anatolian Gas Pipeline (TANAP), which crosses from Eastern to Western Turkey, and the South Caucasus Pipeline (SCP), connecting Azerbaijan, Georgia and Turkey, the TAP is one of the infrastructures of the so-called Southern Gas Corridor, sought by the European Commission to promote infrastructure projects aimed at increasing the diversification of sources and the security of energy supply, thanks to the transport of new gas from the Caspian Sea.

ITGI Poseidon: a proposal arrives from Russia

Russia’s latest response to the TAP is ITGI Poseidon, a gas pipeline expected to connect Italy to Greece that could follow part of the old southern route of the South Stream pipeline. The project, which is still in its very early stages, has already seen the signing of a memorandum of understanding between Russia’s Gazprom, Italy’s Edison and Greece’s Depa. The pipeline provides for a 200-Km stretch off the coast of Greece and Puglia, to Otranto, therefore placing itself in direct competition with the Trans Adriatic Gas Pipeline. It is not yet clear whether Russia intends to connect itself to the Greece-Italy interconnector from Turkey or Bulgaria. Moscow has, however, dusted off a failed project from the Shah Deniz consortium, which currently has many advantages. Both Rome and Athens, in fact, have already obtained authorizations required for the landing of the gas pipeline and most of the onshore stretch. Meanwhile, Greece and Bulgaria have already agreed to build the Greece-Bulgaria interconnection, which includes, among its partners, Edison, Depa and Bulgaria’s BEH. Ironically, Moscow now seems to want to strongly launch a project that was originally designed to alleviate Europe’s energy dependence on Russian gas.

How the supply prospects are changing

The new hydrocarbon discoveries on the seabed of the eastern Mediterranean could, however, radically change the situation of supplies to Europe. The Leviathan supergiant natural gas field (450-600 bcm) off the coast of Israel, the supergiant Zohr gas field (850 bcm) off the coast of Egypt, and the large quantities of gas found in the Cypriot gas field of Aphrodite (200-300 bcm) could potentially meet the energy needs of the Old Continent. The Levant Basin may well establish itself as a valid alternative to the traditional east-west axis that links Europe to gas from Russia via the North Stream gas pipeline, and from central Asia via the Southern Gas Corridor, also downsizing Turkey’s role as a strategic transit hub. Israel, Egypt, Cyprus and Lebanon could also enter into direct competition with Iran, which, after the lifting of the economic sanctions, aims to become one of Europe’s main suppliers. In other words, the eastern Mediterranean is set to become a huge hub of relatively stable, low-cost gas, located a few nautical miles from the coasts of Europe.

A new network of gas pipelines or a system of liquefaction plants?

There are 2 ways of channeling this enormous amount of gas, amounting to approximately 1,500 bcm, according to the latest estimates, to continental Europe: a new network of gas pipelines or a system of liquefaction plants that would supply oil tankers. On January 28, 2016, Greek Prime Minister Alexis Tsipras, Israeli Prime Minister Benjamin Netanyahu and the President of the Republic of Cyprus, Nicos Anastasiades, have not ruled out the possibility of constructing a gas pipeline known as the EastMed, which is expected to resupply the European market. The idea of constructing an underwater pipeline in the Eastern Mediterranean linking the Middle Eastern coasts to Greece and Italy, via the island of Crete, may sound appealing, but would have a steep cost and, with the price of oil floating at around $30 a barrel, appears optimistic. The construction of natural gas liquefaction plants is much more feasible and Israel, Cyprus and Greece have already agreed to the construction of joint infrastructure for transporting gas from the Aphrodite gas field to the Greek peninsula, where LNG terminals would be built. The leaders of Egypt, Cyprus and Greece also signed a joint statement in Athens on December 9, 2015, with the aim of using hydrocarbons as a facilitator of peace "through the adherence of countries in the region to the established principles of international law."

See the OMC 2015 Special