The recent period of time is fraught with diverse surmises concerning the new gas pipeline routes. Each of these proposed routes is connected with its own history and issues which may lead to surprising twists. From the geographical point of view, the routes are oriented towards the north and south of Europe, i.e. the territory which the new pipelines will lead through. It is justified by the growing gas consumption in Europe, energy security of the countries as well as the diversification of the export and import routes and sources.

Owing to financial demands, the decision on routes is a long-term process in the course of which all positive and negative factors are analysed, namely the prediction about the gas consumption of consumers, the volume estimates of new deposits as well as their capacity, the technical aspects of gas pipelines, political links with transit countries and, last but not least, geopolitical factors. It is the political factors that are the most interesting issue as for gas pipeline construction, moreover, European geopolitical axes copy the proposed routes.

The Nord Stream project, which is supposed to link the Russian Federation (RF) directly with Germany, has been discussed in the media for a long time. Both sides try to label the project as a European one in spite of the fact that it is advantageous just for the two countries mentioned and has a strong political background. It has been vigorously opposed by Poland and the Baltic states, i.e. countries which the pipeline bypasses and interferes thus with their energy security. The route, however, is included also in the EU paramount projects like Nabucco.

It is also disadvantageous for the Slovak Republic (SR), because the gas, which has been currently flowing through the transit system of the SR, would flow in the pipes of the Baltic gas pipeline as well. It is the importance of the route running through Slovakia with as much gas volume transport as possible that is the most noticeable contribution to the energy security of the SR. The project will be entered also by the Dutch company Gasunie which will obtain 9 per cent at the expense of the companies E.ON and BASF, Gazprom will maintain its 51 per cent share. For Gazprom the entry of Gasunie will secure the share in the planned gas pipeline BBL connecting the United Kingdom with the Netherlands.

However, there are problems with the staking out of the Baltic gas pipeline, since it is supposed to run through sovereign economic territories of Finland or Estonia as well as economic territorial waters of Sweden and Denmark. The countries in question aren’t satisfied with this proposal and mainly Finland and Estonia regularly shift the responsibility for the decision between each other. The Finnish seabed is more jagged and difficult for building than the Estonian one and that’s why in spring 2007, the Finnish side suggested to lead the route more towards south. In September 2007, however, the Foreign Affairs Ministry of Estonia refused the demands of the consortium for the exploration of the seabed in its economic zone for the second time. (1) Despite partial delay the parties involved haven’t rescheduled the finishing deadline. According to the plans the finishing of the first route is planned for 2010 and the second one for 2012.

In October, 2007, these problems breathed new life into the Belorussian idea of the construction of the second pipe of the Jamal gas pipeline which was terminated three years ago exactly due to the Russian preference to a submarine route. (2) On the one hand Jamal II would be cheaper, but on the other hand it crosses countries which the RF wants to bypass because of various reasons. From the Slovak point of view there is no difference between both of the routes, since they are supposed to transport the same gas. Anyway, the feasibility of the building of the second pipe is small and it has been also rejected by the Russian side. (3)

Another questionable route is the Nabucco gas pipeline. It’s one of the strategic EU projects. It is to supply Europe with the Caspian and, in the future, also the Iranian gas and should bypass the territory of the RF. Probably, Russia has already reconciled itself with the project, although it struggles to hinder it in diverse ways, like separate negotiations at first with Hungary and afterwards with Austria which have been under way since 2006. The Russian strategy cleverly brought at odds both countries. The subject matter of the talks was the offers regarding the establishment of distribution centres, at first in one country and afterwards in the other one, on the condition that they preferred the lengthening of the Blue Stream gas pipeline.

After the Austrian side signed contracts with the Russian side in May 2007, Hungary expressed in return its full support of the Nabucco project in September 2007 and introduced simultaneously through the Economy Minister János Kóka an intention that the project was supposed to be open also for other suppliers – a direct hint at the Russian gas. On one level sufficient supplies for the maximum capacity of the gas pipeline would be ensured (the connection of Blue Stream, which is below its capacity, with Nabucco) and the route would bypass Russian territory and enable the partial diversification of sources. Thus, Russia would be entangled in the European project and forced to diversify export routes which it was interested in. On another level Gazprom will probably sign a contract with the Austrian OMV. In accordance with this contract it will obtain fifty per cent of the planned storage tanks in Baumgarten. Nabucco is supposed to end exactly at this point. That’s why Baumgarten has the ambition to become the largest European distribution centre. Nowadays, there are already 2 billion m³ of gas traded per annum. The amount of the traded gas will grow along with the increasing transit via Baumgarten. Also Slovakia is currently connected with Baumgarten, anyway, its capacity is low. It should step up in the future, but the Norwegian gas, that is traded here, is more expensive than the Russian one at present.
If OMV and Gazprom sign the contract, the Russian colossus will exert influence on the distribution activities in the Central Europe. Despite the fact that the Russian gas wouldn’t possess the majority in this place, it would have some say in distribution. That could be the costs at which the country would agree with the construction of Nabucco and potential participation in the project even in exchange for a minority share. Russia would in this way employ free capacities of Blue Stream, participate in joint European project, gain the access to information, meet partially the requirements of the EU for diversification and open the door to an important distribution centre in the Central Europe for itself.

The plan to lengthen the Blue Stream gas pipeline as far as the mentioned Baumgarten has stood for the Russian alternative to Nabucco for a long time. Although this project corresponds to Russian interests, it is at the same time in contrast with the EU plans as for gas supplies.

The South Stream project, the result of the cooperation between the Italian company ENI and Gazprom, has been entering the consciousness as well. It is supposed to lead underneath the Black Sea from Russia to Bulgaria, whereas one pipe leads to Italy and the second one to Austria. Austria was offered the entry into the consortium in August 2007.

First plans appeared in November 2006 on the occasion of the signature of a strategic contract between both companies. In June 2007, a memorandum on understanding, which commenced the conduction of a realisation study, was signed and in November 2007, an agreement on the establishment of a joint enterprise, which would have built and administered the gas pipeline, was signed. It is supposed to start in the Russian territory in Beregovaia, i.e. at the very same place like Blue Stream. From this place, a 900 km long pipeline will run underneath the sea to Bulgaria. Two pipes are planned at the end, namely in southern Italy and (or) in Austria. Both pipes are justifiable: Italy is the third largest gas market within the EU and ENI is simultaneously the biggest subject independently buying Russian gas. The Austrian pipe is likely to end in Baumgarten where it would strengthen the position of the Russian gas that would thus enter the distribution centre with great potential for the future. Since the question of pipe outfall still remains unanswered, the RF has still scope for negotiations. The financial demands are a huge disadvantage of the gas pipeline. They are estimated at approximately 10 billion dollars, thus also Nord Stream would be overrun. In order to carry out both known pipes, the second one would have to copy the Nabucco route from Bulgaria to Austria. The advantage of the project is the bypass of Turkey the growing strength of which, as for energy bearers, disconcerts European countries as well as Russia. Its conduction might impinge upon the amount of the gas transported through Slovakia. This would be the case of any route transporting the Russian gas which would bypass our territory.

South Stream is in competition with Nabucco as for the gas source as well. At the beginning, Nabucco counts exclusively on the Azerbaijani gas, however, in order to utilise the route at full capacity, it needs also sources from Turkmenistan and later on from Iran. On 23 November, 2007, following the meeting on the enlargement of gas pipelines leading from Turkmenistan around the Caspian Sea to Russia, talks among the Russian Prime Minister Viktor Zubkov, the Head of Gazprom Alexey Miller and the Turkmen President Gurbanguly Berdimukhamedov were held.

In the case of Gazprom’s participation in the Nabucco gas pipeline and its pledge to supply via Blue Stream, a situation would arise in which the Russian gas is transported to Europe through two similar routes. Since the RF intends to meet the demand for gas also in the Middle East, Blue Stream would be an advantageous route. South Stream is in competition with Nabucco from the consumers’ point of view as well, as it is not certain whether Europe will be capable of absorbing such amounts of gas. In this sense Nabucco could get into troubles due to the financial covering of the project.

In the end of 2007, a new gas pipeline transporting the Caspian raw material, which connects Turkey and Greece, was opened. Later on, it will be lengthened to Italy. It’s the first gas pipeline which supplies the Caspian gas outside the Russian territory. Nevertheless, its capacity of 9 billion m³ is insufficient, therefore we cannot talk about an alternative route.

Russia may calculate on miscellaneous projects despite the vast amount of costs linked with them. Lastly, the costs of these routes will be included in gas prices for end consumers. Nowadays, there are negotiations about long-term contracts under way between SPP and Gazexport, because current contracts will expire by the end of 2008. In 2007, no agreement was reached and any one will be reached unless it is sure which routes are built. The decision on route, although it has been dragging on for a long time, is expected to be made in the course of next months. It is unlikely to be reached prior to the elections in the RF. Since Vladimir Putin has found a candidate in the Gazprom’s top post, namely Dimitryi Medvedev, it is not to be expected that the plans will change in a fundamental way. However, he can demonstrate his power and determination by an official decision made after his election win.

A piece of information appeared in the media according to which the RF plans to increase the gas prices for European consumers from the current price 260 dollars per 1,000 m³ to 354 dollars. As the EU is dependent on Russian supplies which cover a quarter of its gas demand in average (4), it will be forced to discuss such abrupt increase and accede to Russian proposals. By means of growing gas prices it will be conceivable in the future to cover the costs for projects behind the construction of which there is usually political motivation. Russia also needs financial means for the opening of new sites in the hard conditions around the North Polar Circle.

The RF doesn’t approve of the liberalisation of power engineering in the EU, which will result in further gas prices growth according to it.  From the Russian point of view the best alternative are vertically integrated companies which are the best ones as far as the handling of the investments in infrastructure is concerned. On one hand the RF, as an exporter, is glad about the price growth, but on the other hand it is also interested in direct gas supplies to consumers. From this perspective, high prices amount to a bottleneck. Gazprom has been already authorised to supply gas to end consumers in Italy and France as well as the Czech Republic and Austria.

There are several options for Slovakia how to diversify the sources of earth gas. All of them are mentioned but not processed in the draft of the Energy Strategy of the Slovak Republic issued by the Economy Ministry in September 2007, because the definition of concrete steps is missing. At present, there is a connection between the Slovak gas distribution network and the distribution centre in Baumgarten the capacity of which, however, is insufficient, but there are plans for its enlargement. By means of this connection, Slovakia has the possibility to import, for instance, the Norwegian gas. Nonetheless, the limiting factor is its higher price in comparison with the Russian gas. In Baumgarten, there are three companies registered which are authorised to deal in the centre, i.e. to buy gas as well. One of them is Nafta Gbely which is among the 46 registered members. (5) It is in the SR’s interest that Baumgarten becomes an important centre that several suppliers will provide with gas which could be then bought by companies that will establish themselves in the Slovak gas market. That’s why the SR is interested in the Nabucco gas pipeline and has to use the whole of its means in order to support the project and integrate the country into it.

The second option of diversification is the project on the LNG terminal in Croatia called Adria LNG. It’s expected to come into operation in 2011. Again, the gas transport to Baumgarten seems to be the most feasible solution. It will draw attention to the construction of sufficient transport capacities to Slovakia.

Similar LNG project is in the pipeline in Poland, but its shape is less concrete meanwhile. All planned Russian project serve for the diversification of routes. However, these enfeeble the position of the SR as a significant transit country and are therefore disadvantageous.

Today, all routes in question are open to dispute. Just one thing is certain, namely that they will lead through the north and south of Europe. According to the analyst Karl Hirman the Nord Stream and South Stream systems could be interlinked by means of which the routes would form a kind of circle and thus cover the EU countries’ consumption more promptly. (6) This is bad news for Slovakia, because all routes proposed meanwhile by the Russian side will have a negative impact on the transit through its territory. The Energy Strategy of the Slovak Republic counts right on high transit as the guarantee of the energy security of the state. Also the projects on the Caspian and in the future also Iranian gas don’t apply to Slovakia. Gazprom was aware of this situation already in the course of the privatisation of SPP and that’s why it didn’t draw a claim to its share. According to the SPP Transport representatives the decrease of the transit caused by Nord Stream could cease the increased gas supplies for Italy and other countries like Germany and France. (7) This theory, however, is based on the latest information about new routes.

The fact remains that nowadays, more draft routes are published than the EU is able to absorb and than the Russian Federation is capable of filling. Investments in infrastructure must go hand in hand with investments in deposits and their opening. There’s a correlation between the production capacity and the transit capacity and as for such costly projects, the pipelines mustn’t remain half-empty.

(1) Nord Stream: „Status of the Nord Stream pipeline route in the Baltic Sea”, October 2007,
http://www.nord=stream.com/uploads/media/Nord_Stream_Route
_Status_ENGLISH.pdf, page. 7;

(2) Forbes: „Belarus to invite Russia to build 2nd branch of Yamal gas pipeline”, 26th October 2007, http://www.forbes.com/markets/feeds/afx/2007/10/26/afx4266297.html

(3) RIA Novosti: „Russia drops second leg of gas pipeline via Belarus”, 1st November 2007, http://en.rian.ru/russia/20071101/86223448.html

(4) Reuters: “ANALYSIS-Russian gas pipeline more likely than EU’s Nabucco”, 5th October 2007, http://uk.reuters.com/article/oilRpt/idUKL0518719320071005

(5) Central European Gas Hub, https://http://www.gashub.at/downloads/CEGH_memberlist.pdf

(6) Hirman, K.: Zmení sa Nord Stream na Jamal-Európa?, Trend, 30th October 2007, http://blogy.etrend.sk/116453/karel-hirman/zmeni-sa-north-stream-na
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