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EU Faces Risks as Bloc Builds Pipelines
Energy

EU Faces Risks as Bloc Builds Pipelines

European Union countries are at risk of stranding natural gas investments as they build pipelines between nations amid declining demand, according to an energy trading industry group.
As Bloomberg reported Tuesday, the push for new routes and more infrastructure to bolster security of supply has led to “significant” investment, resulting in historic pipeline links being used less, Doug Wood, the chairman of the gas committee for the European Federation of Energy Traders in Amsterdam, said in an interview. Low utilization of gas assets may deter future investment, said Wood, who took his post on Jan. 1.
“One of the challenges facing the gas industry will be what happens to those stranded assets,” Wood, a former BP Plc executive, said by phone on Jan. 9. “How will they be funded? Who will pay for them?”
EU leaders want to boost security of energy supplies as a conflict in Ukraine threatens natural gas flows from Russia for the third winter since 2006. The bloc’s energy union includes accelerating cross-border gas and power links, removing market barriers and diversifying sources. Russia provides about 30 percent of Europe’s gas, half of which flows through Ukraine.
Europe’s gas consumption probably fell 9 percent in 2014, a fourth year of declines, according to Eurogas, an industry lobby group in Brussels. The bloc’s gas network grew to 2.2 million kilometers (1.4 million miles) in 2013 from 2 million kilometers in 2010, Eurogas data showed. The EU gained a member nation in the period.

  Nord Stream
Russia delivered 50 percent more gas to Europe via the Nord Stream pipeline under the Baltic Seadirectly to Germany in 2014 from the previous year, while cutting transit to Europe through Ukraine by 40 percent, according to OAO Gazprom and pipeline operator UkrTransGaz.
The reduced Ukraine flows means pipelines managed by Slovakia’s Eustream are being used less, according to Wood. The grid operator transported 58.5 billion cubic meters (2.1 trillion cubic feet) of gas in 2013, down from 74 billion in 2011, the year Nord Stream opened, the Bratislava-based company’s annual report showed. Eustream’s revenue fell 11 percent in 2013 to 697 million euros ($822 million) from 2012.
“The poster child for pipeline capacity has always been Eustream,” Wood said. “There has been significant reduced flows of Russian gas through the Slovakian Eustream even before the current Ukraine crisis and the question is, what happens to the pipeline revenue? They can’t expect Slovakian domestic consumers to pay for a huge international transit line.”

 

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