The Ukraine crisis has laid bare both the EU’s lack of a coherent energy policy and the unsavoury politics of Europe’s dependence on Russian natural gas. My travels through Moldova and Ukraine last spring, as well as past work in Poland, Russia, and Azerbaijan, confirmed for me that these would have been interesting times in shaping the future of natural gas markets in Europe even if the last ten months’ dramatic events in Ukraine had not occurred. Given all that has happened – Russia’s occupation of Crimea, ongoing strife in eastern Ukraine, and the crash of flight MH17 – more fundamental shifts in Europe’s energy landscape are possible, including the widespread embrace of domestic sources of untapped unconventional hydrocarbons, including shale gas, but such a shift appears unlikely.
Europe’s changing energy landscape
In 2013 Russian President Vladimir Putin decided to move forward with the construction of a South Stream pipeline under the Black Sea in spite of a competing project to move gas from Azerbaijan’s Shah Deniz field to European markets via Turkey and a newly constructed Trans-Adriatic Pipeline (TAP) also moving forward. This bold – some might say foolhardy – move raised questions in many observers’ minds of where all of this gas would be burned and, more importantly, at what price it could be sold.
Figure 1: Proposed route of the South Stream pipeline
NOTE: IMAGE CREATED BY SAN JOSE/PATROL110 (CC-BY-SA-3.0)
Meanwhile, the completion of the second parallel line of the Nord Stream pipeline linking Russia and Germany under the Baltic Sea further locked in not just Germany, but also the Netherlands and several other EU member states into deliveries of Russian gas – and why not? Russia had proven a reliable supplier to non-Warsaw Pact countries since the depths of the Cold War. The Soviet Union had been reliable for much the same reason Russia continued the streak: it needed the cash. Yet, and quite by design, Nord Stream and South Stream were designed to bypass other states that had depended on Russian energy for even longer, notably Belarus and Ukraine, while the new Azerbaijan gas transit links opted for a cheaper alternative via the Adriatic to Italy over the EU’s favoured Southern Corridor pipeline, Nabucco, which would have passed through Bulgaria, Romania, and Hungary (all heavily dependent on Gazprom gas) en route to Austria.
Figure 2: Existing gas pipelines from Russia to Europe
NOTE: IMAGE CREATED BY DR A JUDGE (CC-BY-SA-3.0)
As my colleague Tim Boersma and I have argued, even the dramatic Russian invasion of Crimea last spring and events in eastern Ukraine did little to change the underlying reality of Europe’s dependence on Russian gas. In short, the EU and its member states, who carry the primary responsibility for developing and implementing energy policies, simply do not have the appetite for the economic and political upheavals a coordinated embargo of Russian energy would cause. Nor is it in anyone’s interest to have Russia – a nuclear power with serious imperial baggage and the largest country in the world – unable to sell its hydrocarbons, an important fact that is often ignored amid retributive blustering. The shooting down of MH17 in eastern Ukraine, an act that killed 200 Dutch nationals, has caused the Netherlands to reassess its cosy relations with the Kremlin, but whether the country is willing to take any serious steps that jeopardise the health of its economy remains to be seen.
Enter shale gas
It is little surprise, given the albatross around Europe’s neck of continued dependence on Russia, that yet untapped domestic sources of gas have been touted by some strategists, including the European Council itself, as a way to increase energy security. Because energy policy is still a core competency of the member states, not the EU, there is a wide range of approaches to shale gas among states.
The United Kingdom comes closest to commercial-scale production of shale gas using hydraulic fracturing, but as Nick Riley, former head of Unconventional Gas at the British Geological Society, recently pointed out, there has not been a well fracked for gas in the UK since 2011, largely owing to political opposition and a slow rollout of government regulations on well integrity and chemical use. The current UK government, adamantly pro-fracking though it may be, is realising that in spite of attempts to bribe local governments with generous cash payouts on a per-well basis if they too embrace fracking, resistance in local jurisdictions is formidable.