Pipeline Politics: Importance of the Southern Gas Corridor for the European Energy Security

The European Union (EU) is the largest market for natural gas exports. The EU imports more than 50% of its total natural gas consumption. EU’s energy mix is diverse, but natural gas maintains an important role – 25% of the EU’s total energy mix. Natural gas is vitally important due to its frequent use in residential sector (36.9 %). The EU as the largest importer of natural gas- brings 40% of its total supplies from a single supplier, Russian state-owned company Gazprom. After the 2006 and 2009 natural gas disputes between Russia and Ukraine on the natural gas exports to the EU, the European Commission advanced its natural gas diversification agenda. This agenda has led to the accelerated development of the natural gas pipelines from the Caspian Sea region to the European continent. A natural gas mega-project, the Southern Gas Corridor (SGC), which was earlier (in 2008) introduced by the EU Commission, gained new pace. The SGC will bring around 2% of EU’s natural gas supplies from the Caspian Sea to the European market in 2020 and has a potential to become an important player in the European natural gas market. This thesis analyzes the trends in the European natural gas market, with a particular emphasis on pipelines, and the impact of these trends on the Southern Gas Corridor. The conclusion of the paper is a policy memo, which argues for the increased natural gas imports from the Southern Gas Corridor due to the three key reasons. First, EU will need additional gas supplies as domestic gas production depletes. Second, Eastern EU members states need diversification from single large supplier. Third, East European member states lag behind the EU’s ambitious climate agenda, additional natural gas can help these states as a bridge fuel. The memo addresses the High Commissioner of the European Union to advance EU Commission’s support to expand the Southern Gas Corridor.