Pipeline geopolitics and energy security of Serbia

4. June 2013. / News Serbia Energy

From constant pursuit of man to tame nature, to use its resources and influence on them by winning and directing them to the optimal locations for their consumption, result pipelines. In its original form, they are usually open, above-ground canals for the flow of water, made so that this precious resource transports hundreds of miles away. In the history were famous the Roman canals for water supply. The first gas pipeline from the bamboo tubes were made at the beginning of our era in China. With the progress of science, the development of the steel industry and the expansion in the use of water steam appeared the first pipe designed to transport gas under high pressure. This discovery, by itself, imposed finding of pipeline to transport gas over long distances and its improvement both in technical and security sense. This development creates opportunities for all countries, rich in energy resources, to place their energy to the markets of countries which are economically developed, rich, but also to the markets with great needs, primarily for oil and natural gas. On one hand, the exporters’ countries rapidly strengthen economically, while the other importing countries are trying to create a safe energy environment for economy and its citizens. Sword of addiction is always above the heads of the importers, and exporters primarily depend on the opportunity to place their energy into many different markets. Objectively, in the most favorable position are the states encompassed by the transport fuels run.

Gas as a factor of energy security

The needs for different types of energy have changed along with the changes in society and science development. For long time coal has been a vital fuel, engines of economic development after the devastation of World War II. The importance of this energy shows the beginning of European integration with community, which is named according to him. The coal was followed by the phase of oil. The culmination experienced in the seventies of last century with oil crisis and the formation of the Organization of the Petroleum Exporting countries (OPEC), and until today remains the most important source of energy for which wage wars and happen unforeseeable crises. However, in the last decade it has become clear that the known oil deposits will be exhausted over the next two to three decades. Due to this reason there has been an expansion of the development of alternative energy sources in order to avert energy thirst that is imminent.  Alternative energy sources that are at the beginning have electricity production for the final aim, without which humanity is not able to function today. However, these sources of energy are unable to provide for a present a sufficient amount of energy needed for a positive energy balance. Natural gas is imposed to consumers as the only remaining realistic alternative. This statement especially refers to our region which lacks in oil and gas, and coal reserves are mainly unavailable (Kosovo and Metohija) or limited (Vreoci, Kostolac etc.). Serbian economy is heavily dependent on energy imports. Natural gas, as mixture of gaseous hydrocarbons with domination of methane in its composition, unstoppable records high growth rates of application in the economy and households. Its relatively low cost, ecological validity, a wide range of uses, huge reserves and relatively simple exploitation are the factors that contribute that the “blue fuel” is  justifiably called the fuel of the future and the key factor of energy security for 21 century.

Gas in the economy

Natural gas becomes the key energy source both for the economy and individual consumers in households. Its range application is wide – used in the industry, domestic consumption, heating, for electricity production, for the propulsion of motor cars, also as a raw material in the production. “Blue fuel” has a clear technical and economic advantages compared to conventional fuels. The fact that individual consumers can use gas to satisfy 80 percent of energy needs tells about its relevance. This fact becomes more important when it is known that natural gas has not firm residues during combustion and pollute the environment only to a negligible extent. The necessity for the use of natural gas is perhaps best illustrated by the example of gradual realignment of the car industry towards the use of this fuel.

The geopolitical importance of the pipeline and Serbia

The gas pipeline “Nord Stream”, which is in the construction

For centuries we say that we have built house in the middle of the road. The fact is that our country is in the heart of a region of vital importance to the geopolitical players in today’s international relations. Also the fact is that Serbia, through its turbulent history, experienced disasters due to its ungrateful position. It seems today that, at least in energetic sense, the time has come that Serbia with full capacity use its central position in the Balkans. Pipelines witch delivered natural gas to western customers from sites in western Siberia, stretch mainly through Belarus and Ukraine. In addition to geographic conveniences, gas pipelines through these countries currently do not have alternative because of the infrastructure from the Soviet period, which was built by 1973. for the first deliveries of natural gas to western european markets. About the significance of these pipelines tells enough that the EU delivers about 80 percent of its gas over the ukrainian territory, and about 20 percent over the Belarussian. Crucial role in providing energy to Europe have transit countries. Transit countries are responsible for the operation of the gas infrastructure on its territory and exclusion of any kind of risk to the pipeline. Therefore, of crucial importance are friendly and partnership relations in the construction of the pipeline – producers, consumers and transit countries, based on clear market and security principles. Yugoslavia did not know how to use properly its central position in the Balkans and thereby was missed a great historical chance for which today does not pass any pipeline through Serbia.

“The secret weapon Gasprom”

Russian gas exporters came in the unenviable position after the collapse of the USSR. The official Minsk and Kiev, especially in the decade behind us, proved as unreliable partner. Despite the huge fees that Ukraine is collected from the flow of gas through its territory, gas supplies to Ukraine were suspended after unpaid debts to “Gasprom”. However, Ukraine violated the agreement with “Gasprom” and has suspended gas supplies to EU countries and began to use gas intended for them. The adverse position of these important pipelines contribute from  unstable political situation in Belarus. This country changes its foreign policy very often, depending on the current interests of the official Minsk, oscillates between the interests of Brussels and Moscow, which in the most of cases are incompatible and this prevents a reliable support in the delivery of energy to the EU market. The value of building new pipelines measures tens of billions of dollars, but it is obvious that neither the EU nor Russia have little choice in the matter.

As the only alternative to the existing trunk routes is the construction of new in cooperation with western oil −gas companies. The russian state leadership is aware of the position of its country, the state without competition to its natural gas reserves in the world and therefore has a clear strategy for the development of the gas sector. As an alternative to the Belarus-Ukraine’s transit corridors, besides the less important pipelines, appear two large and essential for the energy security of Europe. The first is a technological marvel, the gas pipeline “Nord Stream”, which has been partially put into the operation. This pipeline is interesting because it extends through the sea bottom, and thereby passes the territory of potential transit countries, which is an extraordinary geopolitical move. “Nord Stream” is crucial for the EU because it supplies the biggest consumer of gas in the community – Germany. The other, the most important main direction for us, “South Stream”, will begin to be built in our country probably in December this year.

The needs and perspectives of Serbia

Production of natural gas in Serbia is under the control of NIS, and the exploitation takes place at about 60 wells, of which the most important are those in Mokrin, Novo Miloševo, Banatski Dvor etc. According to the forecasts of “Srbijagas”, natural gas consumption in Serbia will increase from about 4.5 billion cubic meters in 2010. to about 6 billion cubic meters in the 2015th year or 7 billion in 2020th year. However, according to the energy account from 2008, even 91 percent of the gas is provided from imports, while only 9 percent comes from domestic production, which makes us one of the most dependent countries on imported natural gas. Concerning the energy future of Serbia, which is not promising at the moment, it is necessary to provide new energy flows. The Energy Development Strategy of Serbia by 2020th year, natural gas is defined as the energy source of the 21st century and environmentally acceptable fuel. However, the production and consumption of natural gas in Serbia are modest. The dominant role of coal in electricity production, undeveloped ecological awareness and insignificant level of gasification, best reflect the current state policy in this field. In the next few years, in front of Serbia will be opened two options to improve its power position – gas pipelines “Nabucco” and “South Stream”.

The European energy strategy and Serbia

The EU, as well as any serious organization, thinks strategically and works to provide secure flow of energy to its customers in the future. European thirst for energy can be supplied, in the most efficient way− from the east, by the largest of EU energy partner – Russia. In the EU, the exploitation of natural gas is in decline, while in Russia grows instantly and will culminate over next years when are expected deliveries of hundreds of billions of cubic meters of gas to western consumers. According to the International Energy Agency (IEA) the energy consumption in the EU to the 2030th will increase each year by seven percent. Especially will increase the gas consumption which will require the import increase for four times. On the other hand, of strategic importance for Russia is to place its energy just on the European market because of its easy access and because of the huge volume of energy consumption in European countries. From a geographical point of view, Europe is needed reliable transit corridors in order that gas reaches consumers. Strategically important transit route for the EU, especially for very well developed industrial north of Italy, and also for our country, is “South Stream” and there I see our historic opportunity.

“South Stream” vs. “Nabucco

Routes of future pipelines  “Nabucco” and “South Stream”

“Gasprom”, which is the majority owner of NIS, is the company that owns the world’s largest reserves of natural gas. In early 2010, the calculated reserves of natural gas available to “Gasprom” amounted to 33.6 billion cubic meters. “Gasprom” provides most of the European gas needs, mostly through Ukrainian and Belarusian territory. Due to the uncertainty of these directions, “Gasprom” is actively seeking for alternatives. One of the key alternative which will soon start is the construction of the “South Stream”. In collaboration with the Italian company ENI, the construction of this pipeline is expected to begin next month and completion is planned for the end of 2015. year. This pipeline, essential to supply the southern and central Europe with gas, will run from Russian territory, across the bottom of the Black Sea via Bulgaria, where the pipeline splits into two branches. The southern arm will extend through the territory of Greece and the Adriatic Sea to southern Italy. Northern branch of the pipeline, particularly important for us, will run through Serbia to Hungary and Austria, and the smaller arm will be separated in Hungary to Slovenia and northern Italy. From Serbia one branch will be dedicated to gas supplies to Bosnia and Herzegovina with increased capacity concerning the current 400 million cubic meters per year.

According to the informations from agreement of the Government of Serbia and the Russian Federation from the 2008th year, the price of gas pipeline “South Stream” will amount to 15.5 billion euros, including 10 billion for the marine area and 5.5 billion for the land part. The contract has also secured capacity increase of underground gas storage in Banatski Dvor and Gospođinci concerning current one billion cubic meters of gas. When I am talking about the cost of construction, it is clear that Serbia would not have had any chance to self-finance this project for their own needs, which sufficiently speaks about its importance. “South Stream” can bring enormous economic and geopolitical benefits to Serbia in the long term. The construction of this pipeline brings to us investments of 1.5 billion euros and also 4 billion euros of profit in the state budget of the transit of gas over the next 20 years, which amount about 200 million euros per year. Serbia would become an important transit center by passing this pipeline. Its role will be particularly important in gas supply of some countries of the former Yugoslavia, which reinforces our shaken position in the region. The above mentioned data speak enough of the need to provide all the preconditions that Russian gas flow over our territory.

The only alternative to the “South Stream”, that is more and more debated, is the project of gas pipeline “Nabucco”, which is often the subject of public debate in recent years. The pipeline, which is necessary if the EU wants to diversify its sources of supply and reduce dependence on Russia, of  planned length of 3,300 kilometers, would stretch from Azerbaijan via Turkey, Bulgaria, Romania to Austria. This pipeline provides connection of the EU with suppliers – central asian countries, including the key role of energy-rich Azerbaijan. As a key defects of “Nabucco” gas pipeline are cited insufficiently checked gas reserves that would filled the pipeline in the long run, and therefore its future is unclear.” Political problems cause additional difficulties to the project “Nabucco – the refusal of Turkey and most western european countries to allow Iranian involvement in the project. The importance of Iran as a partner in this project becomes more important when it is known that Iran is among the leading countries in the world for its gas reserves. Recently, the consultations of partners in project have started directed at improving relations between European partners on the one side and Iran on the other. Besides the large defects, we are witnesses that some countries, which put military-security interests ahead of energy’s, see “Nabucco” as the last straw and the way to avoid the intrusion of russian energy jaw. Strategy of Serbia must be opposite, the result of good strategic planning and the balance between the economic interests in the form of large inflows into the budget of transit fees and energy fees in the form of securing Serbia’s energy needs in the long term. All these information must be kept on the mind when a serious energy strategy of such one geopolitically important country as Serbia is made.

Energy diplomacy is now the top priority of leading industrial countries and the world’s largest exporters of energy. Energy strategy and energy prices can cause an international crisis of incalculable consequences that we had a chance to see during the past decades while energy was an important factor of international pressure on recalcitrant countries. However, the fact is that energy is an important factor in today’s international relations and unavoidable topic for discussion at any international conference. It was necessary a little political will and openness for dialogue of our state leaders and russian partners to include Serbia in such an important project. We are on the threshold of achieving historical chance that this time we will not miss. I think the signing of the agreement about energy cooperation with Russia was a great move of our government leadership.

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