Contents

• Introduction: Change Is Afoot
• Context, Background, and Different Points of Views
• The U.S. Perspective
• Europe's Energy Dependence
• European Response: Toward a European Energy Union?
• Supply Diversification—Small Steps Away from Russia
• Russia's Role
• Russia, Ukraine, and Europe's Search for Alternatives
• Southern Corridor: Issues and Background
• Discussions on a Trans-Caspian Pipeline
• Potential Sources of Alternative Supplies
• The Caspian Region and Central Asia: The Focus of U.S. Policy
• Azerbaijan: The EU's Best Hope for New Natural Gas Supplies?
• Kazakhstan: Natural Gas Is Second to Oil
• Turkmenistan: Top Regional Natural Gas Producer
• Uzbekistan: A Sleeping Natural Gas Giant?
• North Africa: Opportunities Amid Uncertainty
• Algeria: Security Concerns Threaten Resource Development
• Egypt: New Natural Gas Discovery Bodes Well
• Libya: Untapped Potential amid Ongoing Unrest
• Liquefied Natural Gas Imports
• U.S. LNG Exports: The Gas Is to Start Flowing
• More Distant Alternatives
• Eastern Mediterranean: A Recent Development
• The Arctic Region and Players
• Potential Development of Alternative Sources in Europe
• Prospects for Diversification

Summary

As a major energy consumerconsuming region, Europe faces a number of challenges in addressing its future energy needs. Among these challenges areFor member states of the European Union (EU), challenges include rapidly rising global demand and competition for energy resources from countries such as China and IndiaIndia, tensions with Russia, persistent instability in the Middle East, a fragmented internal Europeanefforts to integrate the EU's internal energy market, and a growing need to shift fuels in keeping with Europeanthe EU's climate change policy goals. As a result, energy supply security has become a key concern for European governments and the European Union (EU).

A key element of the EU's energy supply strategy has been to shift to a greater use of natural gas, even though in recent years natural gas use has declined. Europe as a whole is a major importer of natural gas. Russia remains one of Europe's most important natural gas suppliers, regaining the top spot as Europe's biggest natural gas supplier in 2014. Europe's natural gas consumption is projected to grow while its own domesticthe EU. European energy security is also of significant interest to the United States. While energy policy in the EU has long been a strongly guarded competence of national governments, the EU's role in energy policy has expanded over the last few decades. An important element of the EU's energy supply strategy has been to shift to a greater use of natural gas and renewables and to move away from nuclear and coal. Russia is the most important of the EU's natural gas suppliers, holding the top spot since 2014. The EU's natural gas consumption is projected to grow as EU member states' natural gas production continues to decline. If trends continue as projected, Europe's dependence on Russia as a supplier is likely to grow. And, while it could be in Europe's interest to exploreAlthough some countries in the EU are exploring alternative sources for itstheir natural gas needs, it is uncertain whether Europethe EU as a whole can, or is willing to, replace a significant level of imports from Russia. Some European countriesEU member states that feel vulnerable to potential Russian energy supply manipulation may work harder to achieve diversification than others.

Russia has not been idle when it comes to protecting its share of the European natural gas market. Moscow, including the state-controlled company Gazprom,are working hard to achieve supply diversification and energy sector integration. Meanwhile, Russia has sought to protect its share of the EU natural gas market. It has attempted to stymie European-backed alternatives to pipelines it controls by proposing competing pipeline projects and attempting to increase its influence with European companies by offering them stakes in those and other projects. It has attempted to dissuade potential suppliers (especially those in Central Asia) from participating in European-supported plans. Moscow has also raised environmental concerns in an apparent effort to hinder other alternatives to its supplies, such as unconventional natural gas, in parts of Europe.

Successive U.S. Administrations and Congresses have viewed European energy security as a U.S. national interest. Promoting diversification of Europe's natural gas supplies, especially in recent years through the development of a southern corridor of gas from the Caspian region as an alternative to Russian natural gas, has been a focal point of U.S. energy policy in Europe and Eurasia. The George W. Bush Administration viewed the issue in geopolitical terms and sharply criticized Russia for using energy supplies as a political tool to influence other countries. The Obama Administration has also called for diversification. Nevertheless, although supplying natural gas to Europe from the Caspian Region and Central Asia has been a goal of multiple U.S. Administrations and the EU, it is far from being achieved in volumes significant enough to counter Russian exports.

This report focuses on potential approaches that Europe might employ to diversify its sources of natural gas supply, Russia's role in Europe's natural gas policies, and key factors that could hinder efforts to develop alternative suppliers of natural gas. The report assesses the potential suppliers of natural gas to Europe and the short- to medium-term obstacles to those suppliers becoming credible, long-term providers. The report looks at North Africa, potentially the most realistic supply alternative in the near term, but notes that the region faces political, economic, and security instability and problems in the internal structure of the natural gas industry. Central Asia, which may have the greatest amounts of natural gas of any of the alternatives to Russia, would need to construct lengthy pipelines through multiple countries to move its natural gas to Europe.

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Introduction: Change Is Afoot

The 28 member-state European Union (EU) has been a major natural gas consumer and importer for decades. As Europe's natural gas production has declined in recent years, its vulnerability to imported natural gas has increased. This has left it more dependent as a whole on its main supplier, Russia, which has shown an inclination to use its resources for political ends. Natural gas, unlike oil, which is a global commodity, is a regional commodity with regional buyers and sellers exerting more influence.

Over the past decade, some European officials have become increasingly concerned about the potential for cutoffs or curtailments of Russian natural gas supplies to Europe. At least until recently, most Russian natural gas exports to Europe flowed through Ukraine and Belarus. Fragile and sometimes hostile relations between Kyiv, Minsk, and Moscow have in the past resulted in interruptions in the flow of natural gas to parts of Europe, as happened in 2006 and 2009. Some countries in Eastern Europe, which are in some cases almost exclusively reliant on Russian gas imports, have been particularly susceptible to these fluctuations. Ongoing Russian aggression in Ukraine has not resulted in a cutoff of natural gas supplies to Europe, but has nevertheless revived questions about Russian reliability.

In response to past supply cutoffs and the potential for future energy supply interruptions, European leaders, sometimes with the support of the United States, have sought to increase their energy security by exploring supply diversification options. A key EU response in this regard has been the so-called Southern strategy or Southern Corridor to transport natural gas from the Caspian region and Central Asia. Although the long-time centerpiece of this strategy, the proposed Nabucco natural gas pipeline, is no longer considered a commercially viable project, it has been replaced by the planned smaller-scale Trans-Anatolian natural gas pipeline (TANAP), which would connect to the Trans Adriatic Pipeline (TAP), which goes from the Turkish border through Greece and Albania, and ends in Italy. A second aspect of Europe's energy security policies involves Europe's own fragmented internal energy market. In 2011, European heads of state pledged to complete the integration and liberalization of the internal European energy market by 2014; ensure all European member states are connected to a Europe-wide energy supply grid by 2015; boost energy efficiency throughout Europe; and better coordinate external energy policies. These goals were reinforced in early 2015, with the adoption of a proposal for a new EU "Energy Union" (discussed below). European leaders hope that further market liberalization and interconnection of electric grids and pipelines will, among other things, allow member states to share and trade energy more flexibly than at present, mitigating the impact of supply interruptions and overdependence on a single supplier.

Although European countries have generally supported the goal of supply diversification, some governments have continued to enhance energy ties with Russia, including by seeking to develop new supply routes that bypass countries such as Ukraine. At various times, U.S. policymakers and critics of Russian energy policy have argued that such actions could undermine development of a unified European diversification strategy. A key enhancement of European-Russian energy ties was the construction of the Nord Stream pipeline, which directly connects Russia and Germany, Russia's largest importer. Russia has also announced the Turkish Stream pipeline, across the Black Sea, connecting Russia to Turkey at its border with Europe. The stated goal of Turkish Stream is to supply natural gas to Europe, not Turkey. While these pipeline projects bypass transit states such as Ukraine and Belarus, they also bypass EU member states like Poland and Lithuania that are more critical of Russian policies. The Russian-backed projects are also widely seen as rivals to other pipelines supported by the EU.

The opening of Nord Stream in 2012 and the proposal for Turkish Stream highlight challenges Europe faces in diversifying its natural gas supplies: Russia has demonstrated a willingness to go to great lengths to maintain its hold on European market share of natural gas. However, while some European countries, Germany included, maintain that projects such as Nord Stream enhance European energy security by providing alternate routes for Russian supplies, a number of EU member states, including Poland and Lithuania, opposed Nord Stream and have questioned Russia's reliability as an energy supplier. Critics tend to argue, for example, that projects like Nord Stream could give Moscow additional political and economic leverage in its dealings with countries that have been bypassed by the pipeline. Gazprom and a consortium of European companies, including E.ON of Germany, Shell, OMV of Austria, BASF/Wintershall of Germany, and Engie of France, have proposed an expansion of Nord Stream.

Despite its dependence on Russian natural gas, some analysts argue that Europe is well positioned geographically to benefit from recent changes in global natural gas development. Since the advent of shale gas in the United States, the world appears to be potentially awash in natural gas. A 2011 study commissioned by the U.S. Energy Information Administration (EIA) showed that technically recoverable shale gas resources worldwide may exceed current global natural gas reserves.¹ Other key developments and possible alternatives to Russian natural gas are outlined below:

• North Africa's large gas supplies could pose a credible partial alternative to Russian natural gas supplies. However, political upheaval has heightened uncertainty about the viability of needed investments and the reliability of supplies. Both Libya and Egypt have large natural gas reserves, but production and exports have been hampered by domestic policies and unrest, and while Egypt has just made a new large natural gas discovery, it began importing LNG in 2015 to meet domestic needs.² Algeria, the largest exporter of natural gas in North Africa and the third-largest supplier to Europe behind Russia and Norway, may also hold large volumes of undeveloped shale gas in addition to substantial conventional reserves. A terrorist attack and ensuing hostage crisis at a natural gas facility in Algeria in January 2013 highlighted security concerns that could present a key obstacle to further development of these resources, however.
• The Caspian region may hold the greatest potential for new natural gas supplies for Europe, but currently supplies in Central Asia must transit Russia to arrive in the European market. The delays in expanding and fully developing southern corridor natural gas pipelines to Europe, including trans-Caspian links, have caused Central Asian countries to look east rather than west to bypass Russia and open new markets.³
• Liquefied natural gas (LNG) imports pose an additional alternative to Russian natural gas. In 2014, LNG comprised almost 12% of the EU's natural gas imports and 11% of its consumption. The EU has LNG import capacity to meet its peak winter demand for natural gas, but during most of the year the facilities are underutilized. Nevertheless, some countries are considering building additional LNG import terminals to diversify their sources of natural gas, e.g., Lithuania, which opened its LNG import terminal at the end of 2014. In addition to LNG import terminals, the EU could benefit from strategically located natural gas storage facilities in order to manage import capacity during non-peak periods, as well as more pipeline interconnections to move natural gas where it is needed. EU officials have identified both improvements as priorities and they are being pursued, but not without some difficulty.
• The prospect of significant U.S. LNG exports may pose an opportunity for the United States to play a bigger role in European energy security and global natural gas markets.⁴ The United States is to begin exporting liquefied natural gas (LNG) from the lower-48 states at the end of 2015. The Sabine Pass Liquefaction project, which is located in Cameron Parish, LA, and owned by Houston-based Cheniere Energy, is scheduled to begin operations in December 2015. Contracts for initial production have been signed for capacity at the terminal with BG Group (based in the United Kingdom but now owned by Royal Dutch Shell), Gas Natural Fenoso (Spain), KOGAS (South Korea), and GAIL (India), with future capacity contracted with Total (France) and Centrica (United Kingdom). Although contracts have been signed with European companies, there is a likelihood that most of those exports will head to Asia, which tends to pay the highest prices for LNG. Additionally, U.S. LNG contracts do not include an oil-indexed formula, which could pressure other countries, including Russia, to follow suit. Russian companies, including state-controlled natural gas giant Gazprom, have adamantly defended oil-indexed natural gas prices.

Context, Background, and Different Points of Views

The U.S. Perspective

The primary focus of U.S. energy policy in Europe has been on establishing a southern corridor route for Caspian, Central Asian, and Middle Eastern natural gas supplies to be shipped by pipeline to Europe. Other efforts have been focused on encouraging EU market reforms.

The George W. Bush Administration sharply criticized Russia for using energy supplies as a means to gain political influence over other countries and urged European countries to diversify supply sources.⁵ The Obama Administration has also called for diversification and opposed the use of energy as a political weapon.⁶

The progress of the TANAP project along with the selection of TAP has improved the chances of Caspian natural gas flowing to Europe in significant quantities. Both TAP and Nabucco West were designed to be significantly smaller than the previously proposed Nabucco project, long a centerpiece of U.S. and European energy policy in the region. Despite political support from the United States and the European Union, Nabucco was not deemed to be commercially viable. U.S. officials have indicated that they "support any pipeline through the Southern Corridor that provides gas to the most vulnerable countries in Europe and that includes concrete, written guarantees that the pipeline will be expanded as more gas becomes available."⁷ The three projects mentioned above are all viewed as scalable as supply and demand changes. Despite the Obama Administration's stated support of the Southern Corridor, officials reject the view that Russia and the United States are competing for influence over Caspian and Central Asian energy supplies.

Although U.S. and EU officials have welcomed TAP as an alternative to Russian natural gas, some analysts continue to express concern about Russian influence. Observers note, for example, that Russian companies have shown interest in Greece's natural gas sector and that Italy and Russia historically have close ties on energy issues. In June 2013, Greek officials reportedly were surprised to learn that Gazprom would not submit a bid to purchase Greece's state-owned natural gas supplier, DEPA. The proposed sale, potentially worth above €900 million ($1.17 billion), was a priority for then-Prime Minister Antonis Samaras, who had negotiated directly with Gazprom CEO Alexey Miller. Some speculate that Gazprom's unexpected decision not to go through with the deal could have been the result of opposition from the European Commission.⁸ Regardless of the outcome of negotiations with Russia, the TAP project, which former Prime Minister Samaras claimed will bring €1.5 billion (about $1.9 billion) in direct investment and at least 2,000 jobs to Greece over the next several years, remains a cornerstone of Greek economic development plans.⁹

The Arab Spring brought regime change and turmoil to two large natural gas producers, Libya and Egypt, with potentially expanded sources of natural gas to Europe. The development of these resources will depend upon stability and the policies of the evolving governments. Libya is far from being settled, while Egypt announced its first major natural gas discovery in years. North Africa already has significant natural gas infrastructure—LNG export terminals and pipelines—connecting it to Europe. However, it is too early to determine how the changes to the Middle East and North Africa (MENA) will affect natural gas production and exports. The U.S. government, along with the EU, has indicated its desire to expand trade and investment with the MENA region, which could help foster economic growth and provide support for successful democratic transitions. For example, in a speech delivered at the State Department on May 19, 2011, President Obama outlined a new plan for U.S. engagement with MENA that includes a "Trade and Investment Partnership Initiative."¹⁰ Some Members of Congress have also expressed interest in deeper trade and investment ties with Arab Spring countries.¹¹ Although U.S. trade and investment with the MENA region overall is relatively limited at present, this region may present growing commercial opportunities for U.S. businesses in areas such as energy, transportation, and infrastructure.¹² Aside from security, market competitiveness may limit the potential for such investments. In the past, international energy companies seeking to invest in North African markets have faced what they have considered non-competitive pricing offers from local governments.

Europe's Energy Dependence

Ongoing Russian aggression in Ukraine, including episodic cutoffs of natural gas supplies to Ukraine, has heightened attention on Europe's dependence on Russian energy resources. Many analysts assert that this dependence has been and will continue to be a key factor in constraining Europe's policy responses to Russia's actions. Some observers note, for example, that the EU has not imposed sanctions against Russia's natural gas companies.¹³ As the crisis in Ukraine continues, European leaders have renewed their focus on long-standing efforts to diversify energy supplies and to enhance pipeline and electricity interconnections within the EU.

Collectively, EU member states are the world's largest energy importer, importing about 53% of their energy needs—including approximately 88% of their oil and 66% of their natural gas. Given declining domestic fossil fuel production, Europe's dependence on energy imports is expected to increase over the foreseeable future.¹⁴ Russia is Europe's main energy supplier. In 2014, about 40% of the EU's natural gas imports and almost 30% of its oil imports came from Russia. Other key energy suppliers to the EU include non-EU member Norway (35% of natural gas imports and 12% of oil imports), Algeria (11% of natural gas imports), and Saudi Arabia (8% of oil imports).¹⁵ See Figure 1 for more detail on natural gas imports.

Europe's dependence on natural gas imports, especially from Russia, is a particular concern and a focal point of diversification efforts. Unlike oil imports, 90% of which arrive in Europe by sea, the vast majority of natural gas imports are transported via pipeline. This significantly limits European countries' flexibility to change suppliers or supply routes. In addition, EU member states may increasingly rely on natural gas, particularly to reach ambitious targets to reduce carbon dioxide and greenhouse gas emissions. Natural gas comprises about 23% of the EU's primary energy consumption, a number that is expected to grow to almost 30% by 2030. Gas imports from outside the EU currently account for almost 70% of gas consumed in the EU. Analysts note that policy decisions, such as a German decision to phase out use of its nuclear power plants by 2020 and possible prohibitions on shale gas development by some EU members, could mean a more rapid rise in Europe's dependence on natural gas imports.

The extent of individual EU member states' dependence on Russian energy resources varies greatly. (See Figure 2.) Seven member states depend on Russia for all of their gas imports; three of those rely on natural gas for at least a quarter of their total energy needs. Other states, such as Germany and Italy, receive almost 40% of their gas imports from Russia. At the same time, however, some EU members do not rely on Russian gas at all, and other EU member states are far less dependent on natural gas, in general.

Russian involvement in the European energy sector goes beyond its role as an energy supplier. Russian energy companies and their subsidiaries have significant ownership stakes in European energy infrastructure, including pipelines, distribution, and storage facilities. Given complicated ownership structures and subsidiary arrangements, the extent of Russian involvement is difficult to quantify, however most analysts agree that Russian efforts to increase investments in European energy infrastructure have been quite successful. According to a 2014 study commissioned by members of the European Parliament, state-controlled Russian energy company Gazprom controls large and even majority shares of energy trading, distribution, pipeline, and storage facilities in many Central and Eastern European countries, and has significant stakes in facilities in Western European countries, including Germany, Austria, and the UK.¹⁶

Figure 1. 2014 EU Natural Gas Imports

Source: Cedigaz Statistical Database, http://www.cedigaz.org. Notes: The percentages do not include trade from one EU country to another. Units are billion cubic meters (BCM).

European Response: Toward a European Energy Union?

In Europe, energy policy has traditionally been a strongly guarded competence of national governments, with individual EU member states making their own decisions on national energy mix, energy suppliers, and supply contracts. Accordingly, energy import levels and reliance on energy sources vary significantly by country.¹⁷ (See Table 1.) In a reflection of these national differences, the EU has generally exerted little if any influence over the energy policies of individual member states. However, in the face of rising concern about Europe's reliance on Russian energy and growing public pressure to address global climate change, over the past decade EU member states have begun to increase cooperation toward a unified EU energy policy.

In March 2015, EU member state governments endorsed key elements of a European Commission proposal for a so-called European Energy Union. The European Parliament followed suit in mid-June, voting in favor of most aspects of the Commission proposal. The proposed energy union focuses on five core dimensions:

• Energy security and solidarity;
• An integrated European energy market;
• Energy efficiency;
• "Decarbonizing" the economy; and
• Research, innovation, and competitiveness.

Some analysts are hopeful that the proposed energy union is another step toward bolstering European energy security through increased cooperation. Others remain skeptical, however. They point out that many of the policies proposed in the new energy strategy have been proposed and endorsed at various times over the past 15 years, but have never been fully implemented. A top European Commission priority is to fully implement existing EU energy legislation. Critics question whether member states will demonstrate the political will to realize past commitments, let alone forge new levels of cooperation.

Supply Diversification—Small Steps Away from Russia

The EU has been particularly challenged to reduce its dependence on Russian resources. Analysts agree that Europe has few if any alternatives to replace gas flows from Russia in the short-term. Over the medium- to long-term, Europe could accelerate ongoing efforts to further develop pipelines from the Caspian region that bypass Russia, as well as explore the possibility of additional energy sources in Europe such as in the eastern Mediterranean. European countries could seek to boost LNG imports from North Africa, the Persian Gulf, or even the United States. EU member states could also enhance efforts to develop new domestic energy sources, such as shale gas and renewable energy.

Many analysts believe that, regardless of the aforementioned efforts, Russia will continue to exercise significant influence over Europe's energy security. They note, for example, that several member states have pursued bilateral energy deals with Russia that will increase their dependence on Russia for years to come. Both Germany and Italy, the largest importers of Russian natural gas, have negotiated long-term deals with Russia to lock in future natural gas supplies. Further, bilateral deals with Russia have not been limited to the major energy consumers. Bulgaria, Romania, Hungary, Greece, and others have also entered into long-term energy agreements with Gazprom over the past several years. For Germany and several others, Russia's role as a dominant energy supplier has, at least until recently, increased the importance of fostering good relations with Moscow.

On the other hand, as Europe's relations with Russia continue to sour, European countries have also become more inclined to question Russia's reliability and have increasingly pressured one another to curb energy ties with Moscow. Mounting tensions were evident in European responses to Russia's abrupt announcement in December 2014 that it was canceling its proposed South Stream gas pipeline. Those EU members that had committed to the project were dismayed by the loss of a key anticipated supply source and by the lack of prior communication from Russia on the cancellation. Opponents of the project were encouraged that Moscow was apparently bowing to European pressure to reduce Gazprom's control over supply and distribution networks. Prior to the project's cancellation, EU officials had threatened to block construction of the pipeline unless Gazprom opened up at least half of the pipeline's capacity to other suppliers. South Stream would have run across the Black Sea through Bulgaria, Serbia, and Hungary to Austria.

Integrating Europe's Internal Energy Market

A key component of the EU's energy strategy has been to liberalize and better integrate the European energy market. The European Commission and a range of analysts have long contended that strong state control over national energy sectors has prevented development of a more competitive European energy market, leaving some member states more vulnerable to manipulation by dominant energy suppliers. Until recently, analysts questioned whether the EU would be willing to pressure Russia and Gazprom to adopt EU principles of competition. However, over the past several years, member states have begun to demonstrate a clearer commitment to implementing market regulations that would reduce Russian influence over the energy sector.

In late 2014 the European Commission formally charged Gazprom with violating EU antitrust law by manipulating energy prices and deliberately limiting supplies to some customers. Gazprom submitted its proposal to the EU for settling the claims against it in September 2015. Gazprom could face financial penalties of up to $9 billion and be forced to restructure its supply contracts, according to the EU case against the company. In addition, other EU energy directives could force Gazprom to sell some of its significant shares in European pipelines. The EU's so-called Third Energy Package requires energy producers to limit their stakes in distribution networks, or manage them separately. EU member states had previously committed to fully implementing the Energy Package, including the break-up of production and distribution cartels, by the end of 2014. However, that target date was not met, and some analysts still question how committed all EU member states are to continue to pressure their primary energy supplier.

Another key element of the EU's market liberalization efforts is enhancing the inter-connectedness of European gas pipelines and electricity grids. In recent years, the EU has prioritized developing pipeline and electric grid interconnections in order to allow European countries to share energy resources, particularly in the event of supply reductions that adversely affect some member states. Observers note, however, that while some progress has been made, efforts are far from complete, as evidenced by the difficulty in transporting Norwegian gas and LNG imports to Southern and Eastern Europe. In its proposed Energy Security strategy, the European Commission calls on member states to adopt a goal of linking up 15% of existing EU electricity capacity by 2030, in addition to meeting a previously adopted target of 10% by 2020.

Russia's Role¹⁸

The Russian natural gas industry is one of the most important in the global energy market. As of 2014, Russia had the largest natural gas reserves in the world, about 25% of the world's total according to data from research firm Cedigaz. The country was the leading exporter of natural gas, and placed second in production and consumption behind the United States. Russia was also a founding member, and currently holds the top position, in the Gas Exporting Countries Forum (GECF).

The Gas Exporting Countries Forum The Gas Exporting Countries Forum (GECF), also known as Gas-OPEC, is composed of some of the world's leading natural gas producers and exporters. It is not a cartel in the same sense as OPEC, in that it does not control marginal production in an effort to influence prices. There are structural differences in global natural gas and global oil that make this type of control difficult. Nevertheless, the GECF provides a venue for its members to discuss topics of interest such as production projects, exports, etc. Its members—which include Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Qatar, Russia, Trinidad and Tobago, the United Arab Emirates, and Venezuela—control 38% of world production and 40% of global trade.19 Kazakhstan, the Netherlands, and Norway have observer status at the GECF. Major natural gas producers that are not affiliated with the GECF include Australia, Azerbaijan, Canada, Indonesia, Malaysia, Oman, Turkmenistan, and the United States (the world's leading natural gas producer).

As noted, Russia is currently the dominant supplier of natural gas to Europe, accounting for about 27% of the EU's natural gas supplies in 2014 according to Eurogas, or 47% of pipeline imports (excluding LNG) according to Cedigaz data.²⁰ (See Figure 2.) This dependency does not go only in one direction, however. The EU is also the most important market for Russian natural gas exports (63% of the total), a calculation Moscow likely takes into account in its broader relationship with EU countries.

In addition to the EU, Russia exports significant volumes of gas via pipeline to the Commonwealth of Independent States (CIS),²¹ some of which Russia has accused of being unreliable counterparties.²² Russia has also been attacked as an allegedly "unreliable partner" in the gas trade by some of these same countries.²³ The remainder of Russian pipeline exports goes to Turkey and other non-EU countries in Europe. Russia's LNG goes exclusively to East Asia (mostly Japan).²⁴

Figure 2. EU Dependence on Russian Natural Gas, 2014

Source: CRS Graphics compiled this graphic. Notes: For primary energy, which is the base source of energy used to produce electricity and perform other work, Russian natural gas does not comprise greater than 50% for any EU country.

The revenues generated by this trade are vital to the ruling Russian elite. At present, all Russian natural gas exports are controlled by Gazprom, which has very close links with top Russian leaders. Current Gazprom CEO Alexey Miller served under Vladimir Putin in the Saint Petersburg city government in the 1990s.

The personal and political fortunes of Russia's leaders are closely tied to Gazprom. In 2012, President Putin estimated that half of total Russian government revenue came from oil and natural gas taxes. Other estimates put the figure higher. Russia's economic revival in the Putin era has been heavily dependent on the massive wealth generated by energy exports to Europe. Gazprom offers natural gas to the Russian domestic market at subsidized prices, which also bolsters the ruling elite politically. Although proposals to strip away subsidies have been floated in recent years, they appear to be going nowhere. The late 2014 drop in energy prices, coupled with Russia's economic woes and currency collapse, have only increased demands for state subsidies. Russia's sovereign wealth fund was tapped in December 2014 to provide a $700 million bailout for Gazprom's financial arm,²⁵ and as of March 2015 Gazprom had requested an additional $3.2 billion.²⁶

Despite the problems currently facing the gas industry in Russia, natural gas exports to Europe and Eurasia may have important psychological benefits for the Russian elite. They may be viewed as demonstrating the resurgence of Russian power after the collapse of the Soviet Union over 20 years ago. Russia's "National Security Strategy to 2020," released in 2009, stated that "the resource potential of Russia" is one of the factors that has "expanded the possibilities of the Russian Federation to strengthen its influence in the world arena."²⁷

In the long term, Russia hopes to reduce dependency on Europe by diversifying its customer base as well. By 2030, the Russian government plans to increase gas exports to Asian countries such as China, South Korea, and Japan until they make up 19%-20% of the total.

However, Russia has a considerable way to go to meet this objective. More than half of its 2014 exports are contracted with European companies through 2030 (see Figure 3). Russia opened its first LNG export facility in 2009 on its east coast, and already exports small amounts to Japan, South Korea, and Taiwan.

Long-standing Russian hopes of providing large amounts of pipeline gas to China appeared to take a step forward with an agreement for Russia to provide 37 BCM per year, over the course of 30 years.²⁸ In November 2014, the two sides signed a framework deal for a second pipeline that would supply an additional 31 BCM per year. The implementation of the deals may be affected by the sharp drop in oil prices on which the gas prices will be based, however.

Figure 3. Russian Contract Volumes for EU and Other European Countries 2010-2030

Source: Cedigaz, Long-Term Gas and LNG Supply Database, Pipelines in Europe, updated June 2014, http://www.cedigaz.org. Notes: Units = billion cubic meters (BCM)

Given this situation, most experts believe that, barring the failure of Russia to increase its own energy exploration and development, Russia will continue to remain Europe's primary energy supplier, including natural gas supplies, for many years and possibly decades. Additionally, Europe will remain the primary market for Russian energy exports. Therefore, the main goal of state-run Russian energy companies, such as Gazprom, has been to try to solidify their dominance of Europe's energy sector by pursuing long-term bilateral supply contracts with some European countries such as Germany, Italy, and Bulgaria, and by seeking to buy stakes in European energy distribution networks and storage facilities.

Russia, Ukraine, and Europe's Search for Alternatives

For the past decade, Europe's gas supplies have to some extent been held hostage to problems in relations between Russia and Ukraine. The election of a pro-Western government in Ukraine in 2005 led Moscow to take a harder line with Kyiv on many issues, including gas supply, debts, and pricing. Disputes on these issues led to brief cutoffs of gas supplies to Europe in 2006 and 2009, as Russia cut off supplies to Ukraine and Ukraine responded by taking gas from the pipelines that Russia had intended to go to Europe via Ukraine.

Russia and some Western European countries responded to these incidents by planning new pipeline projects to bypass Ukraine and Belarus (which plays a considerably smaller role in gas transit to Europe and has better relations with Moscow). One result of these efforts is the Nord Stream pipeline system, which transports natural gas directly from Russia to Germany under the Baltic Sea. It currently has a capacity of almost 57 BCM per year, as compared to the Ukrainian pipeline system's 110-130 BCM per year.

Before Nord Stream opened in 2011, as much as 80% of Europe's gas imports from Russia transited Ukraine. Currently, Ukraine's share of the gas transit is only about 50%. In June 2015, Gazprom reached agreement with Anglo-Dutch Shell, Germany's E.ON and BASF/Wintershall, France's Engie, and Austria's OMV to build a third and fourth pipeline as part of Nord Stream by 2020. If built, the pipelines would add 55 BCM a year in transit capacity to the system. The announcement was strongly criticized by Ukraine, Slovakia, and Poland, whose own gas transit infrastructure risks being bypassed by the deal.²⁹

South Stream was another pipeline project touted by Moscow to circumvent Ukraine. It was to run under the Black Sea to Bulgaria and then on to other European countries. Russia broke ground on South Stream in December 2012, but the project was scrapped by Moscow in late 2014.

Russia's current pipeline project to replace South Stream is Turkish Stream, which is intended to provide gas to Europe through Turkey and Greece.³⁰ In early 2015, Gazprom announced that all gas currently flowing through Ukraine would be diverted to Turkish Stream after its completion, currently scheduled for 2019.³¹ However, Turkish Stream's prospects are also unclear, due to complicated political and financial dynamics that similarly stymied South Stream.³² Russian military action in Syria and reported incursions into Turkish airspace as of early October 2015 could exacerbate these complications.³³

After a popular revolt against the regime of Viktor Yanukovych in Ukraine and the victory of pro-Western forces in February 2014, Russia invaded and annexed Ukraine's Crimean peninsula and seized parts of eastern Ukraine. Given the experience of 2006 and 2009, one might have expected another European gas crisis. However, this has not yet occurred. Russia cut off gas supplies to Ukraine in June 2014, due to pricing and payment disputes. Nonetheless, Ukraine has continued to allow Russian supplies to transit its territory. One reason for this may be Europe's diversification efforts. Another is Ukraine's desire to not alienate European countries whose help Kyiv needs to stabilize its economy and negotiate an end to Russia's aggression against Ukraine.

In October 2014, the EU brokered an agreement between Gazprom and Ukraine that permitted the resumption of supplies to Ukraine through March 2015. This deal was subsequently extended for three additional months. In July 2015, Russia cut off natural gas supplies to Ukraine again after the two sides failed to agree on prices. Ukrainian officials acknowledge that while Ukraine has sufficient gas reserves for now (in part due to imports from Slovakia), it will need Russian gas this fall and winter both for its own needs and to maintain uninterrupted supplies to Europe. With the EU's help, Russia and Ukraine agreed in September 2015 on a gas deal that will run through March 2016

The conflict between Russia and Ukraine has caused both sides to declare that they will end their dependence on the other party in the gas sector. However, this will be easier said than done, and in any case cannot be done quickly, perhaps setting the scene for years of additional uncertainty for Europe over its gas supplies from Russia. As noted above, Gazprom plans to end gas transit via Ukraine after 2019, but it is unclear whether this goal is realistic. Likewise Ukraine is seeking to achieve energy independence through increased domestic gas production, diversification, and conservation within 10 years.

Other Russian actions may be aimed at frustrating European efforts at diversification. These include trying to sign long-term contracts with Azerbaijan and Central Asian states to lock up supplies sought by the Europeans; lodging legal objections to the proposed Trans-Caspian Pipeline between Azerbaijan and Turkmenistan, which would be a key link in providing Caspian gas to Europe; and attempting to coordinate natural gas export policies with other leading producers such as Qatar and Iran, perhaps with hopes of eventually creating a "gas OPEC" out of the GECF.

Some observers have suggested that Russia attempted to influence Azerbaijan and the Shah Deniz consortium's selection at the end of June 2013 of the Trans-Adriatic Pipeline (TAP) over the competing Nabucco West pipeline, although Russia would likely have preferred neither project be built. Nabucco's planned route and terminus in Austria were partly similar to those of Russia's South Stream pipeline, so it was viewed as competing for the same markets (although the volumes of the Nabucco project would have been smaller than South Stream).

Southern Corridor: Issues and Background³⁴

Establishing a non-Russian and non-Iranian natural gas pipeline system to transport natural gas from the Caspian region and Central Asia to Europe is a stated priority for the EU, supported by the United States. Although the Trans-Anatolia Pipeline (TANAP), with a capacity of 16 BCM, and TAP, with a capacity of 10 BCM, are significant steps in achieving this goal, the initial volumes are not great enough to significantly alter Europe's dependence on Russian natural gas. As currently envisioned, an initial pipeline network would transport less than the capacity of the originally proposed Nabucco pipeline—but European policymakers hope that TANAP will be the first of a series of expansion projects.³⁵

In 2007, then-Prime Minister Kostas Karamanlis of Greece and then-Prime Minister (now President) Recep Tayyip Erdogan of Turkey inaugurated a natural gas pipeline connecting the two countries. Since some Azerbaijani natural gas reaches Greece, the pipeline represented the first Caspian region natural gas supplies to reach the EU.

Alternatives have also been raised that would bypass Turkey. An Azerbaijan-Georgia-Romania-Interconnection (AGRI) project envisions the construction of a natural gas pipeline from Azerbaijan to the Georgian port of Kalevi, where the natural gas would be liquefied, shipped across the Black Sea, and regasified at the Romanian port of Constanta. This is an unusual use of LNG, as the distance across the Black Sea is relatively short—the industry norm for economic LNG transport is 1,500 miles or more.

Although the AGRI project has lain dormant for years, regional tensions spurred its revival in late 2014, at a meeting of key stakeholders in Romania.³⁶ In its currently planned form, the project is expected to cost about $1.3 billion to $4.9 billion, and is expected to transport between 2 BCM and 8 BCM of LNG annually from Azerbaijan to the EU.³⁷

The Azerbaijan-Turkey relationship experienced deep tensions in the late 2000s over Turkey's increasingly friendly relations with Armenia—at one point, Azerbaijan's President Ilham Aliyev threatened to cut off Turkey's access to Azerbaijani gas flows.³⁸ However, since then there has been a rapprochement, with both nations supporting increased development of TANAP and the two major Shah Deniz gasfield projects currently in operation. TANAP's first stage, with a capacity of 16 BCM per year, is planned to be completed in 2018.

Discussions on a Trans-Caspian Pipeline

In 1999, Turkmenistan signed an accord with two U.S. construction firms to conduct a feasibility study on building a trans-Caspian gas pipeline (TCP) to Azerbaijan, but Turkmenistan failed to commit to the pipeline following objections from Iran and Russia. Since the 1990s, attempts to launch a trans-Caspian pipeline construction project have been stymied by maritime disputes and legal hurdles imposed by Russia and Iran. Such blockades have proven difficult to overcome, but in the wake of recent summits, participating officials have been quoted as stating that these disputes are "more than 80 percent" resolved.³⁹

In mid-2015, leaders in Turkmenistan, Azerbaijan, and Turkey announced a trilateral mechanism on energy issues, which would appear to open the doors to potential practical discussion of a TCP.⁴⁰ The United States and EU have for several years supported the idea of such a project.

Figure 4. Select European Natural Gas Infrastructure

Source: Compiled by the Library of Congress Cartography Section.

Potential Sources of Alternative Supplies⁴¹

Two regions—Central Asia and North Africa—hold great potential to produce more natural gas than they currently do, and given the proximity of both to Europe (see Figure 4) offer possible alternatives to Russian supplies. As noted above, Central Asia has been a focus of U.S. and European efforts to provide Europe an alternative to Russia for natural gas through the southern corridor. North Africa already has multiple pipelines to Europe and LNG export terminals. The main issue for this region is whether the MENA nations, with existing reserves and infrastructure, can increase production and delivery of additional supplies to Europe.

There has been tremendous growth in LNG liquefaction over the last few years, mainly in Qatar, and more capacity is projected to be added by industry. Even the United States has multiple proposed LNG liquefaction projects at various stages of regulatory approval. The addition of more liquefaction capacity could provide the EU with other alternative suppliers even though their ability to use LNG is currently constrained by a lack of infrastructure.

The Caspian Region and Central Asia: The Focus of U.S. Policy⁴²

The Caspian region (see Figure 5) has emerged as a significant source of natural gas for world markets. The proven natural gas reserves of Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan are estimated at approximately 14,700 BCM, among the largest in the world (see Figure 6). The International Energy Agency (IEA) estimates that the Caspian region's proven and recoverable natural gas reserves are about 7% of the world's reserves, but also stresses that further exploration could result in an upward revision of estimated reserves. Nonetheless, the Central Asian states remain geographically isolated from world markets. Natural gas pipelines must be built long distances and must traverse several countries, increasing political and economic risks. Those pipelines which head westward must traverse Russia, Iran, or the Caspian Sea, where the littoral states continue to argue over the Caspian Sea's legal status.

Figure 5. The Caspian Region

Source: Compiled by the Library of Congress Cartography Section.

East Asia represents an increasingly important export market for Central Asian natural gas. The 3-line Central Asia-China Pipeline runs through Turkmenistan, Kazakhstan, and Uzbekistan, and with the possible completion of a fourth line through Tajikistan, is expected to transport 85 BCM per year.⁴³ (See Figure 6.) A separate pipeline from Turkmenistan to China already exists.

Figure 6. Central Asian Natural Gas Exports 2000-2014

Source: Cedigaz Statistical Database, http://www.cedigaz.org. Notes: The decline between 2008 and 2009 is attributed to the financial crisis. Units = billion cubic meters (BCM).

Kazakhstan is in discussions with China to export natural gas as well. Turkmen natural gas fields could help meet both Pakistan's and India's growing energy needs and provide significant transit revenues for both Afghanistan and Pakistan.⁴⁴ If enough capacity is constructed to China and other parts of Asia, future supplies from Central Asia to Europe may be moot, which would benefit Russia.

Azerbaijan: The EU's Best Hope for New Natural Gas Supplies?⁴⁵

U.S. Administrations have stated that exports from Azerbaijan could boost energy security for European consumers that currently rely heavily on Russia. According to Richard Morningstar, who served as both U.S. Special Envoy for Eurasian Energy and U.S. Ambassador to Azerbaijan, Azerbaijani natural gas "is necessary to the development of the Southern Corridor."⁴⁶ As noted previously, Azerbaijan is to supply all the natural gas for the TANAP pipeline, as a producer and, if a TCP is built, a transit state. It is considered likely that the price of the natural gas will be predominantly linked to oil prices and may not give European consumers a discount compared to other sources. It is also important to note that Azerbaijan is to supply Turkey with an additional 6 BCM of natural gas to help Turkey meet its growing natural gas demand.

The natural gas to Europe is to come from phase 2 development of Azerbaijan's Shah Deniz field in the Caspian Sea. The consortium that owns the Shah Deniz field is led by BP as the operator, but also includes Statoil (Norway), SOCAR (Azerbaijan), LUKOIL (Russia), Total (France), NICO (Iran), and TPAO (Turkey). U.S. legislation imposing sanctions on Iran provides waivers for the Shah Deniz gas project, in which Iran's Naftiran Intertrade Company (NICO) holds a passive 10% share. NICO is to also have a 10% stake in the South Caucasus Pipeline expansion that is to connect to TANAP.⁴⁷

At the end of 2005, Azerbaijan began sending about 200 million cubic meters (MCM) of natural gas per year through a section of Soviet-era pipeline to the Iranian border at Astara. In January 2011, Azerbaijan signed a five-year accord with Iran to supply 1 BCM of natural gas through the pipeline in 2011, with possibly increasing amounts thereafter. This gas was to be used in northern Iran, and in exchange, Iran agreed to provide some gas to the Azerbaijani exclave of Naxçivan. However, in practice, pipeline exports may be less than the countries originally had agreed upon. According to data from research firm Cedigaz, Azerbaijan only exported 37 MCM to Iran in 2013 and 14 MCM in 2014.

Kazakhstan: Natural Gas Is Second to Oil⁴⁸

Most natural gas production in Kazakhstan has been associated with the development of oil fields, and a significant portion of extracted natural gas is reinjected into underground reservoirs in order to facilitate oil extraction. This leads to a relatively low percentage of Kazakhstan's gas being ultimately sold in the regional market. Natural gas is mostly produced in areas near the Caspian Sea coast, with 46% of Kazakhstan's reserves located in the single field of Karachaganak.⁴⁹ According to industry association Cedigaz, Kazakhstan exported about 12 BCM of natural gas in 2014, up slightly from 2013.

Kazakhstan has for many years expressed its intentions to increase natural gas exports to both Russia and China. In December 2007, Kazakhstan, Turkmenistan, and Russia signed an agreement to renovate a branch of the Central Asia-Center Pipeline supplying natural gas to Russia and to build a new Caspian Coastal Pipeline running through Kazakhstan along Turkmenistan's Caspian coast.⁵⁰ However, this pipeline segment has been long-delayed, and appears to have been shelved indefinitely.⁵¹

At the end of October 2008, China and Kazakhstan signed a framework agreement on constructing a natural gas pipeline from Beyneu, just east of the Caspian Sea, southeastward to Shymkent, where it will connect with the Central Asia-China Pipeline. The first segment of the Beyneu-Shymkent pipeline, running 702 miles from Bozoi to the Uzbek border near Tashkent, was completed in September 2013, and construction of the second phase of the pipeline was still underway as of late 2015. In August 2015, state monopoly KazTransGas agreed to a $2.5 billion loan from the Bank of China and China Development Bank to finish pipeline construction.⁵² This new link to the Central Asia-China Pipeline is projected to supply over 10 BCM from the Caspian coast to inland Kazakhstan and over 5.6 BCM to the Kazakh-Uzbek border for export to Central Asia and China.⁵³ Kazakhstan's government has also expressed strong interest in participating in the future TAPI pipeline from Turkmenistan to India.⁵⁴

Some observers have suggested that Kazakhstan's joint participation in region-wide energy sector projects is due in part to its gas sector's aging infrastructure and inefficient management practices.⁵⁵ According to Cedigaz, Kazakhstan's natural gas sector sees a much higher ratio of waste than its gas-producing neighbors.⁵⁶ In late 2014, due to concerns over halted production at the Kashagan oilfield and the impact of international sanctions on the Russian economy, Kazakhstan's government began to combine several ministries to promote greater coordination within its energy sector and maintain growth. As of August 2014, a new ministry had been formed from the previously existing Oil and Gas Ministry, the Industry and New Technologies Ministry, and the Environmental Protection Ministry.⁵⁷

Turkmenistan: Top Regional Natural Gas Producer⁵⁸

As shown in Table 2, Turkmenistan is considered to hold the largest proved reserves of natural gas in Central Asia. A significant quantity of Turkmenistan's gas production already flows to Europe via Russia. However, Turkmenistan's drive for alternative export routes has pitted it against other Caspian countries. In the wake of the Ukraine crisis and renewed sense of unease over its energy dependence on Russia, the EU also has an incentive to encourage alternate routes for Turkmen gas.

Since September 2011, the EU, Azerbaijan, and Turkmenistan have been engaged in talks on building a Trans-Caspian Pipeline to provide gas to Europe via Turkey. Plans have faltered in recent years; a 2016 meeting in Kazakhstan may provide the regional consensus needed to move the project forward. In the past, Russia and Iran have strongly opposed the building of trans-Caspian pipelines, claiming that their opposition stems from concern over environmental impacts.⁵⁹

Although negotiations over Caspian access rights have stretched on since the end of the Soviet Union, recent signs suggest that the five coastal countries' long-standing disagreements may finally be nearing resolution. At a September 2014 summit in Astrakhan, Russia, all five coastal countries agreed not to allow foreign military forces access to the Caspian.⁶⁰ In March 2015 in Baku, Azerbaijan, they reached agreement on surface rights in the Caspian.⁶¹ Azerbaijan's deputy foreign minister Khalaf Khalafov said after the meeting that a final agreement was "more than 80 percent" complete, and predicted that all outstanding issues would likely be resolved at the 2016 Caspian Summit in Astana, Kazakhstan.⁶²

Russia was at one point a major importer of Turkmenistan's gas. However, several factors have led to a decrease in Russian gas imports: the global recession's effect on EU demand, a major 2009 pipeline explosion, and an argument over pricing in 2010.⁶³ The 2009 explosion in particular led to displeasure on both sides, as Turkmenistan blamed the explosion on Gazprom's alleged mismanagement and sought to attract media attention to the issue in the hopes of getting Russia to foot the bill for repairs.⁶⁴

The rise of Chinese demand has also been a key factor in diverting Turkmen hydrocarbons from Russia, and the vast bulk of gas now flows to China via the Central Asia-China Pipeline. Turkmenistan has played a critical role in helping China to meet rapidly increasing energy demand while minimizing greenhouse gas emissions. Some analysts have suggested Turkmenistan is moving towards a "one-country policy" in its energy sector, raising the possibility of Chinese monopsony over local gas output.⁶⁵

Between 1997 and 2010, Turkmenistan and Iran opened two cross-border pipelines, increasing Turkmenistan's export capacity to the point that for a brief period during 2009, Iran was its main gas customer. However, it appears that this long-running bilateral trade relationship may be about to end. In August 2014, the Oil Minister of Iran declared that his country no longer had any market-driven need for Turkmen gas, and was importing it mainly due to political concerns.⁶⁶

Turkmen President Berdimuhamedov has also revived his predecessor's proposal to build a natural gas pipeline through Afghanistan to Pakistan and India (TAPI). The project is still being development and has not begun construction.

Uzbekistan: A Sleeping Natural Gas Giant?⁶⁷

Uzbekistan mostly uses its natural gas production domestically and is self-sufficient. It has, however, used its network of Soviet-era pipelines to export some natural gas to some of its former Soviet neighbors (Russia, Kazakhstan, and Kyrgyzstan in 2013).⁶⁸ Uzbekistan appears to have sufficient gas reserves to become a potential supplier of some gas to Europe if its infrastructure is developed with western exports in mind.

Although Uzbekistan has welcomed foreign direct investment in its energy sector in recent years, firms have expressed increasing wariness about the country's political situation. In 2013, British-Canadian company Tethys Petroleum's in-country director was arrested and imprisoned, and the firm itself faces charges of corruption and theft. Since 2011, Tethys and two other major multinational energy firms have chosen to cease operations in Uzbekistan.⁶⁹

Russian firms Gazprom and Lukoil have historically been the major foreign investors in Uzbek natural gas development and production, but the state-owned China National Petroleum Corporation (CNPC) plays an increasingly important role as well. In 2007, Uzbekistan and China signed an agreement on building a 326-mile section of the Central Asia-China Pipeline, which came into operation in mid-2008.⁷⁰ In June 2012, Uzbekistan agreed to supply China with 10 BCM of natural gas per year through the pipeline.⁷¹ Uzbekistan's National Information Agency reported in September 2012 that shipments had begun, but they were well below the target amount throughout 2013. According to industry group Cedigaz, Uzbek exports to China reached only a little over 400 MCM for the entire year.⁷²

In an effort to expand beyond existing gas fields, a consortium composed of Uzbekneftegaz, Lukoil, the Korea National Oil Corporation, and CNPC is exploring for natural gas in the Aral Sea region.⁷³

North Africa: Opportunities Amid Uncertainty

To date, U.S. energy strategy towards Europe has not focused on North Africa as a counterbalance to Russian natural gas supplies. The Arab Spring may have created an opportunity, albeit with major challenges, to increase exports from the region. Taken as a whole, the two existing suppliers to Europe in the region—Algeria and Libya—already have natural gas infrastructure to Europe by both pipeline and LNG (see Table 3) and hold tremendous natural gas resources and reserves that could be further developed. Egypt, a historic natural gas supplier to Europe, did not export any natural gas in 2014 because of its internal issues. Algerian and Libyan natural gas exports accounted for about 34% of what Russia supplied to the EU in 2014, most of which came from Algeria. Difficult business environments and domestic demand, prompted by subsidies for natural gas consumption, have limited development of each country's natural gas resources. Burgeoning security concerns linked to instability and terrorism emanating from northern Mali, and conflict across Libya, may constrain new and existing exploitation of energy resources in the region.

Algeria: Security Concerns Threaten Resource Development⁷⁴

The four-day hostage crisis that began when terrorists seized a natural gas compound with foreign (including U.S.) workers in southeastern Algeria on January 16, 2013, highlights security concerns in North Africa's largest hydrocarbon producer. The ramifications of the incident are unclear, particularly how it will impact on Algeria's energy sector and foreign participation.

According to a study by the U.S. Energy Information Administration (EIA), Algeria may hold shale gas resources much greater than its conventional reserves, which are substantial. In March 2013, Algeria passed a new set of amendments to its hydrocarbon law to address shale gas in the country. Depending upon the development of its unconventional natural gas resources and its conventional resources, Algeria could become a more significant natural gas producer and exporter. However, a difficult business environment may continue to limit its potential. Limited unrest linked to security force confrontations with anti-hydraulic fracturing activists has emerged in the wake of the Algerian government's December 2014 announcement that extraction using the new method would begin in some areas after pilot projects concluded.⁷⁵

A 2005 hydrocarbon law diminished the monopoly of the state energy company, Sonatrach, opening the sector for private and foreign investment. A 2006 law, however, required international companies to give Sonatrach a 51% stake in new oil, natural gas, and related transport projects. Additional foreign investment rules were enacted in the Complementary Finance Law (CFL) of 2009, which restricted imports and foreign investment. These measures require 51% Algerian ownership of new foreign investment. Further, the 2010 CFL, effective as of September 2010, requires foreign bidders who win construction contracts to invest in a joint venture with a local partner.⁷⁶ Such changes have prompted foreign investors, including U.S. and European businesses and governments, to appeal for greater stability of laws in Algeria, and may have contributed to a reported slowing of foreign investment in exploration and production.⁷⁷ Still, according to the State Department, "the 49/51 rule remains controversial but foreign investors have adapted."⁷⁸

Algerian natural gas production and exports had been declining since 2005, when it produced over 88 BCM and exported more than 65 BCM. In 2014, Algeria produced 83 BCM—its first increase in three years—and exported 41 BCM, with 30 BCM going to the EU. In 2005, Algeria's energy minister announced ambitious plans to increase production and export, with a goal of reaching 110 BCM of production and 100 BCM of exports by 2015. These targets are not on track to be achieved, and the country has changed its focus to preserving its resource base and not expanding production as quickly. Domestic consumption may outstrip exports within the next decade.

Nevertheless, Algeria continues to expand its connections to Europe. In 2011, a consortium led by Sonatrach opened the Medgaz natural gas pipeline. The new, submarine pipeline runs directly from Algeria's Beni Saf port to Spain's Perdigal Beach. The initial capacity of the line is approximately 8 BCM per year. Despite this new addition, Algerian exports to Spain do not have much impact on the rest of Europe, as the interconnection between Spain and France is limited. In addition to Medgaz, Algeria exports natural gas to Europe via the 12 BCM Maghreb-Europe pipeline to Spain and the 6.5 BCM Trans-Mediterranean pipeline to Italy. Algeria has also announced plans to expand its LNG export capacity.

Egypt: New Natural Gas Discovery Bodes Well⁷⁹

In August 2015, Italy's ENI announced that it had discovered a massive natural gas field (commonly referred to as a superfield or supergiant) off Egypt's coast, which may hold as much as 850 BCM of natural gas.⁸⁰ The discovery (named the Zohr Field) may mean that Egypt would have enough natural gas not only to cover domestic consumption for decades, but also allow it to resume and grow its exports. Egyptian natural gas exports of both pipeline gas and LNG were halted in 2015.

Since the resignation of former Egyptian President Hosni Mubarak in February 2011, Egypt's natural gas infrastructure in the Sinai Peninsula has been attacked many times by either disaffected Bedouin Arabs living in the Sinai or terrorist groups with camps in the peninsula. These attacks have disrupted gas shipments via two separate pipelines converging at El Arish to both Israel and Jordan. Egypt is no longer exporting natural gas to either country. The Egyptian authorities have struggled to protect infrastructure in the demilitarized Sinai Peninsula.

Before the discovery of the Zohr Field by ENI, Egypt's production had been in decline, while demand has grown, forcing Egypt to import natural gas. Until the ENI discovery, Egypt was projected to need to import increasing volumes of natural gas.

Libya: Untapped Potential amid Ongoing Unrest⁸¹

The September 11, 2012, terrorist attacks on U.S. facilities in Benghazi and ongoing unrest that has seen national energy infrastructure held hostage by armed groups underscore security and stability issues in the country. Nevertheless, Libya may have the greatest potential to increase natural gas exports to Europe when it stabilizes, which may not happen for a long time. The 2011 civil war and subsequent unrest have intermittently halted natural gas production at several key locations, but some production is ongoing and holds potential for consistent resumption and expansion if political conditions stabilize.

Libya has one natural gas pipeline to Europe, Greenstream, which was closed during the 2011 unrest, as well as an LNG export terminal. Italy received all of Libya's natural gas exports in 2014, while Libya provided approximately 12% of Italy's natural gas imports. Libya did not export any LNG in 2014.

Libya's natural gas production dropped almost 90% in 2011 and remains below capacity. Barring further production over time, domestic consumption, particularly for electric power generation, could reduce Libya's exports of natural gas, which have been stable over the past decade according to EIA.⁸²

Liquefied Natural Gas Imports

One of the most important developments for Europe has been the growing availability of natural gas in LNG. LNG represents almost 25% of European natural gas imports, up from 15% in 2010. Spain leads Europe in LNG imports, followed by the United Kingdom and France. However, the interconnection between Spain and France could be expanded to allow Europe to take advantage of Spain's excess import capacity for LNG or pipeline natural gas.

The principal suppliers of LNG to Europe include Algeria, Egypt, and Qatar. Qatar is the largest supplier of LNG to Europe, and also owns multiple LNG import terminals in Europe. Lithuania opened its LNG import facility at the end of 2014, which is considered a milestone for the country. Poland may start operations of its LNG import terminal at the end of 2015.

U.S. LNG Exports: The Gas Is to Start Flowing

The United States is to begin exporting liquefied natural gas (LNG) from the lower-48 states at the end of 2015. The Sabine Pass Liquefaction project, which is located in Cameron Parish, LA, and owned by Houston-based Cheniere Energy, is scheduled to begin operations in December 2015. Contracts for initial production have been signed for capacity at the terminal with BG Group (based in the United Kingdom but now owned by Royal Dutch Shell), Gas Natural Fenoso (Spain), KOGAS (South Korea), and GAIL (India), with future capacity contracted with Total (France) and Centrica (United Kingdom). Although contracts have been signed with European companies, there is a high likelihood that most of those exports will head to Asia, which tends to pay the highest prices for LNG.

As of August 2015, the Department of Energy (DOE) has granted final approval for the export of 103 BCM per year to countries with which the United States does not have a free trade agreement.⁸³ The non-FTA permit is important because South Korea is the only major importer of LNG that has an FTA with the United States. However, if the Transatlantic Trade and Investment Partnership and/or the Trans-Pacific Partnership negotiations conclude in an agreement, the signatory countries would likely be viewed as FTA countries for the purposes of U.S. natural gas exports. Contracts for the other projects that have received final DOE approval for the export of LNG to non-FTA countries include companies from France, Italy, Spain, and the United Kingdom in Europe and Australia, India, Indonesia, Japan, and South Korea in the Asia region. DOE has issued conditional approvals for 42 BCM and there are pending applications for 318 BCM to non-FTA countries.

Any volumes of LNG from the United States would benefit other markets by offering a new supplier to consuming countries. For parts of Europe, especially the Baltic region and Central Europe, where the United States enjoys strong and friendly relations, any decision to export U.S. LNG to that region would be welcomed as a potential offset to their dependence on Russian gas; however, most countries in those regions have not yet constructed LNG import terminals that would be needed. Lithuania opened the first LNG receiving facility in these regions in 2014, and Poland is scheduled to bring its LNG import terminal into operation later in 2015.

More Distant Alternatives

Eastern Mediterranean: A Recent Development

Natural gas discoveries in the eastern Mediterranean by Israel and Cyprus may open a new source of European natural gas. However, regulatory issues in the case of Israel and resource issues in the case of Cyprus may limit or curtail exports, particularly expensive LNG exports. The large natural gas discovery in Egypt by the Italian firm ENI may pose a more likely source of future supply to Europe as that country could resume exports more quickly than other countries could build more capacity. Additionally, other countries in the region, including Lebanon and Turkey, may begin exploration efforts that could increase the amount of natural gas produced in the region.⁸⁴

The Arctic Region and Players

Norway is not a member of the EU, but is the eighth-largest natural gas producer in the world and second-largest exporter of natural gas to the EU, behind Russia. The North Sea holds the majority of Norway's natural gas reserves, but there are also significant quantities in the Norwegian and Barents Seas. The U.S. Geological Survey has estimated that almost 25% of the globe's yet-to-be-discovered natural gas resources are located in the Arctic region and last year Norway and Russia reached agreement on Arctic energy exploration issues. Norway's Snohvit natural gas field along with Russia's field at Shtockman, in which Norway is an investor and development partner, promises to make the Barents Sea a new European energy region.

Potential Development of Alternative Sources in Europe

In addition to solidifying other sources of energy supply from other regions, experts point to several additional factors that could decrease European dependence on Russian resources. The development of previously difficult-to-develop "unconventional" natural gas deposits, including shale gas, in Europe and elsewhere could diversify supplies and keep prices down. EIA assessed the EU's technically recoverable shale gas resources at almost 14 trillion cubic meters, more than 35 years of supply at current consumption levels.⁸⁵ The growth of the spot market for natural gas and the development of liquefied natural gas infrastructure in Europe could also help diversify supplies as well as reduce dependence on Russian-controlled pipelines. Finally, developing alternative energy sources within Europe, in particular, hydropower, energy from the seas, biomass, wind power, solar energy, and geothermal energy, could all contribute to further diversification of Europe's energy supply, reducing overall natural gas demand.

Prospects for Diversification

There are alternatives to Russian natural gas for Europe to choose from, but it would be difficult, if not impractical, for Europe to consider replacing all Russian natural gas imports. Some EU countries and companies also appear reluctant to shift significantly from the status quo. Some of Europe's larger natural gas companies have major financial interests in maintaining Russian supplies and do not see a problem in depending so much on Russia. Russia not only holds the largest supplies of natural gas globally, but already has significant infrastructure connecting its resources to Europe, while some of the alternatives remain constrained. A major test for the EU in developing a more coherent energy policy could be how to balance these views with those of member states that are highly dependent on Russian energy and are concerned by the leverage Russia could exert on parts of Europe if no alternatives are found to alleviate at least some of that dependence.

Although supplying natural gas to Europe from the Caspian region and Central Asia has been a goal of multiple U.S. Administrations and the EU, it is far from being achieved in volumes significant to counter Russian exports. Some observers view the fact that the State Department has not appointed a new Special Envoy for Eurasian Energy since early 2012 as one indication of the Administration's waning interest in the Southern Corridor natural gas effort. In addition, given the interest in combating climate change both in Europe and in some quarters of the United States, some analysts believe that increasing the flow of Caspian natural gas to China, where pipelines already existsthese and other projects.

Successive U.S. Administrations and Congresses have viewed European energy security as a U.S. national interest. In recent years, promoting diversification of EU natural gas supplies has been a focal point of U.S. energy policy in Europe and Eurasia. The Trump Administration has opposed new Russian gas projects as tools to maintain EU dependence on Russia. At the end of 2019, Congress passed the FY2020 National Defense Authorization Act (P.L. 116-92), which included sanctions related to the construction of the Nord Stream 2 and TurkStream pipelines. The Further Consolidated Appropriations Act, 2020 (P.L. 116-94) includes the European Energy Security and Diversification Act of 2019, which seeks to promote the diversification of Central and East European energy sources and supply routes.

Although the United States and the EU have sought to promote the export of piped natural gas from the Caspian Region and liquefied natural gas (LNG) from the United States, this is not being achieved in volumes sufficient to counter Russian exports. Regions such as North Africa and the Eastern Mediterranean have potential as alternative suppliers but are constrained in their ability to increase exports.

Introduction

The 27-member European Union (EU) has been a major natural gas consumer and importer for decades.¹ As EU member states' natural gas production has declined, their dependence on natural gas imports has increased. This has left them more dependent on their main supplier, Russia, which many observers believe has long been willing to use its energy resources, especially natural gas, for political ends (see Figure 1 for key natural gas infrastructure in the EU and surrounding region).

For almost 15 years, the EU and several member states have advocated for increased European energy supply diversification in order to mitigate the potential for cutoffs or curtailments of Russian natural gas supplies to Europe. At present, most Russian natural gas exports to the EU arrive via pipelines that pass through Ukraine and Belarus. Russian disputes with Ukraine have at least twice resulted in significant interruptions in the flow of natural gas to some EU members (in 2006 and 2009). Some member states in Central and Eastern Europe rely entirely or almost entirely on Russian imports for their natural gas supplies and thus are especially vulnerable to such interruptions. Since 2014, Russian aggression in Ukraine has not resulted in a cutoff of natural gas supplies to EU members, but it has increased concerns about the reliability of Russia as a supplier.

To increase reliability, some EU member states have sought to strengthen their energy ties to Russia by developing new supply routes for Russian gas that they view to be less vulnerable to potential Russian cutoffs. Since 2012, an increasing share of Russian gas imports has transited directly from Russia to Germany (and on to other EU member states) via the Nord Stream pipeline, a joint venture between Russia and several European energy companies. The new Nord Stream 2 pipeline, if completed, will increase the amount of Russian natural gas that transits directly to the EU. Although several member states support Nord Stream 2, others in the EU oppose the new pipeline project, as does the United States.

At the same time, many in the EU have sought to diversify the sources of their natural gas imports. One such diversification effort involves the so-called Southern Gas Corridor to transport natural gas to the EU from Azerbaijan and, potentially, Central Asia via Turkey. The centerpiece of this strategy in the early 2000s, the proposed Nabucco natural gas pipeline, eventually was deemed not to be commercially viable and was replaced by a smaller-scale Trans-Anatolian natural gas pipeline (TANAP). TANAP connects to the Trans Adriatic Pipeline (TAP), scheduled to open in 2020, to bring natural gas into Italy and onward, via Greece and Albania.

In recent decades, EU officials have sought to build an integrated internal energy market and improve network connectivity as part of a broader agenda of facilitating cross-border gas trade, improving consumer prices, and mitigating the impact of interruptions and overdependence on a single supplier. In response to potential supply instability from Russia, the EU has strengthened its internal energy regulations, diversified its suppliers and fuel mix, and invested in energy infrastructure, including gas storage. In February 2019, the EU amended a 2009 directive on natural gas regulations in an attempt to clarify and strengthen them.

Energy policy also is a key component of the EU's broader climate change agenda, as the production and use of energy account for approximately 75% of the EU's greenhouse gas emissions.² Under the EU's 2015 "Energy Union" initiative, member states committed to energy efficiency and renewable energy targets by 2020 and 2030. Although some EU members are expected to miss their 2020 targets, the European Commission (the EU's executive) has proposed a broad climate policy blueprint, the "European Green Deal," which could set more ambitious energy targets by 2021.³ In this context, natural gas could play a critical, but potentially temporary, role in transitioning away from coal.

Despite its dependence on Russian natural gas, some analysts argue that the EU is well positioned geographically to benefit from recent changes in global natural gas development. Potential alternatives to Russian natural gas include increases in European production, new exports from the Eastern Mediterranean, which includes EU member Cyprus, imports from North Africa and the Caspian Sea region (Azerbaijan and Central Asia), and liquefied natural gas (LNG), including from the United States. U.S. LNG exports began in earnest in 2016 because of the rise in its natural gas production from shale formations, although imports of U.S. LNG to the EU have been limited thus far.

Nonetheless, challenges to developing alternative sources of natural gas for Europe persist. Some potential alternatives present complications, such as political and geopolitical obstacles, corruption, technical limitations, environmental concerns, and financial constraints. There also are certain limitations in the use, trade, and transport of natural gas. Unlike oil, which can be easily purchased on the spot market and transported via rail, truck, or ship, natural gas is relatively expensive in world markets, technologically challenging to transport, and not as easily traded. The natural gas market is becoming more global, especially with more LNG available, but additional changes need to happen for it to reach the same level as the oil market. The ease of trading oil has contributed to its greater insulation from geopolitical tensions and other challenges.

Figure 1. Select EU and Regional Energy Infrastructure

Source: Compiled by the CRS's Geospatial Information Systems.

U.S. Perspective and Related Issues

The Trump Administration's attention to EU natural gas has focused primarily on two issues: promoting the expansion of U.S. LNG exports to the EU, as part of a larger effort to diversify European energy imports, and opposing the Nord Stream 2 pipeline, which Russia is constructing to expand capacity to supply natural gas directly to Europe via Germany (bypassing Ukraine). The TurkStream pipeline, Russia's second natural gas pipeline to Turkey that opened in January 2020, also has attracted some U.S. policymaker attention. In addition, the United States has encouraged the EU to improve gas infrastructure connectivity, particularly in isolated markets. Finally, a long-standing focus of the United States' European energy policy has been to promote the so-called Southern Gas Corridor for non-Russian and non-Iranian natural gas to flow to Europe, in the near-term from Azerbaijan but potentially also from Central Asia and the Middle East.

Congressional Interest

Congress has long expressed interest in European energy security, especially with respect to natural gas and the Southern Gas Corridor. Legislation related to European energy has been introduced consistently since 2008.

In the 116^th Congress, the FY2020 National Defense Authorization Act (NDAA, P.L. 116-92) includes as Title LXXV the Protecting Europe's Energy Security Act of 2019 (PEESA), which established sanctions related to the construction of the Nord Stream 2 and TurkStream pipelines (see "Sanctions-Related Issues" below).⁴ The Further Consolidated Appropriations Act, 2020 (P.L. 116-94), includes the European Energy Security and Diversification Act of 2019 (Division P, Title XX), which seeks to promote the diversification of Central and East European energy sources and supply routes.

Other bills related to European energy security that have been introduced in the 116^th Congress include the Protect European Energy Security Act (H.R. 2023), the Energy Security Cooperation with Allied Partners in Europe Act of 2019 (S. 1830), S.Res. 27 and H.Res. 116 (expressing opposition to the Nord Stream 2 pipeline), and H.Res. 672 (expressing support for energy independence and infrastructure connectivity).

The Countering Russian Influence in Europe and Eurasia Act of 2017 (CRIEEA, P.L. 115-44, Title II), which was enacted during the 115^th Congress, states that it is U.S. policy to "continue to oppose the Nord Stream 2 pipeline given its detrimental impacts on the EU's energy security, gas market development of Central and Eastern Europe, and energy reforms in Ukraine." Also during the 115^th Congress, the House of Representatives agreed to H.Res. 1035, which called for the cancellation of Nord Stream 2 and the imposition of sanctions with respect to the project.

Sanctions-Related Issues⁵

Two legislative authorities provide for sanctions related to the development of Russian energy export pipelines; however, no designations have been made under these authorities as of January 2020.

CRIEEA, Section 232 (22 U.S.C. 9526), authorizes (but does not require) sanctions on individuals or entities that invest at least $1 million, or $5 million over 12 months, or engage in trade valued at an equivalent amount for the construction of Russian energy export pipelines. Section 232 was a response to the development of Nord Stream 2.

The Trump Administration has not used Section 232 to oppose the construction of Nord Stream 2. In October 2017, the Administration published guidance noting that Section 232 sanctions would not apply to projects for which contracts were signed prior to August 2, 2017, the date of CRIEEA's enactment.⁶ Gazprom signed agreements with five European companies to fund 50% of project costs, each up to €950 million (around $1.1 billion), in April 2017.⁷ Section 232 does not provide for sanctions on financing specifically, although it provides for sanctions on the provision of services and support.

A newer authority providing for sanctions related to the construction of Nord Stream 2 and other Russian energy export pipelines is the Protecting Europe's Energy Security Act of 2019 (PEESA). PEESA requires sanctions on foreign persons who the President determines have sold, leased, or provided subsea pipe-laying vessels for the construction of Nord Stream 2 and TurkStream, or any successor pipeline, since December 20, 2019 (the date of the NDAA's enactment). PEESA provides for a 30-day wind-down period; exceptions for repairs, maintenance, environmental remediation, and safety; and a national security waiver.

PEESA provides for the termination of sanctions if the President certifies to Congress "that appropriate safeguards have been put in place"

• to minimize Russia's ability to use the sanctioned pipeline project "as a tool of coercion and political leverage," and
• to ensure "that the project would not result in a decrease of more than 25 percent in the volume of Russian energy exports transiting through existing pipelines in other countries, particularly Ukraine, relative to the average monthly volume of Russian energy exports transiting through such pipelines in 2018."

As of February 2020, PEESA's impact on completion of the Nord Stream 2 pipeline is uncertain (TurkStream was inaugurated on January 8, 2020). About 100 miles of the approximately 760-mile pipeline reportedly remain to be constructed.⁸ On December 21, 2019, Allseas, the Swiss-Dutch company laying the pipeline, stated that it had "suspended its Nord Stream 2 pipelay activities [and would] proceed, consistent with the legislation's wind down provision."⁹ On December 27, 2019, the State Department said that "the United States' intention is to stop construction of Nord Stream 2" and that PEESA's sanctions would be imposed "unless related parties immediately demonstrate good faith efforts to wind-down."¹⁰ Russian officials have said that Russia should be able to finish construction of the pipeline. In January 2020, Russian President Vladimir Putin said that he expected the pipeline to be completed no later than the start of 2021.¹¹

Other U.S. and European sanctions that target Russian energy companies and projects could potentially have an impact on Russian natural gas development. In August 2018, Russia's Ministry of Natural Resources said that sanctions against Russian oil and gas companies complicate the development of new projects in Russia, especially offshore and those directed at resources that are hard to extract.¹²

Main Sources of EU Natural Gas

EU natural gas consumption has increased since 2014, after declining for several years. In 2018, natural gas made up about 23% of the EU's primary energy mix.¹³ Observers expect EU member states to rely increasingly on natural gas, as they strive to meet targets for reducing carbon dioxide and other greenhouse gas emissions.¹⁴ By 2035, some analysts estimate that natural gas may make up almost 30% of the EU's primary energy mix, depending upon market conditions, though it could decline in a "slow development scenario" where natural gas becomes less competitive.¹⁵

Most natural gas that EU member states consume comes from imports from countries outside the EU. In 2018, imports accounted for 80% of EU members' natural gas consumption.¹⁶ EU dependence on natural gas imports is expected to rise over time given declining fossil fuel production within the EU. Analysts note this decline has been propelled in part by policy decisions, such as Germany's decision to phase out use of nuclear energy (by 2022) and coal (by 2038) and some EU member state prohibitions on shale gas development.¹⁷

The main source of natural gas imports for EU members is Russia, which accounted for 46% (about 176 billion cubic meters, or BCM) of EU natural gas imports in 2018 (37% of total EU natural gas consumption) (see Figure 2).¹⁸ EU member states also import natural gas from non-EU members Norway (31%), Algeria (11%), Qatar (5%), and others.¹⁹

EU member states have limited flexibility to change natural gas suppliers or supply routes. Most natural gas imports are transported via pipeline, unlike oil imports (90% of which arrive by sea). In addition, typically natural gas is bought and sold via long-term contracts, whereas oil is sold mainly on the spot market or short-term basis.

Figure 2. EU Natural Gas Imports, 2018

Units = billion cubic meters (BCM)

Source: Cedigaz, a subscription service statistical database, http://www.cedigaz.org.

Notes: The total and percentages do not include trade from one EU country to another.

Natural Gas Production in the EU and Norway As shown in Figure 3, natural gas production within the EU is relatively low and has generally been in decline since at least 2008. From 2013 to 2018, EU natural gas production decreased by around 31%, while consumption increased by 4%. In 2013, the EU produced 35% of the natural gas it consumed; in 2018, it produced 23% (see Table 1 for 2018 data by country).

Figure 3. Select EU Gas Data

2008-2018

Source: Cedigaz, a subscription service statistical database, http://www.cedigaz.org.

Notes: Units = billion cubic meters (BCM). Net Imports = Gross Imports minus Gross Exports. Although Croatia joined the EU in 2013, its data is included for the entire time period for consistency purposes.

In 2018, two EU member states, the Netherlands and the United Kingdom (then an EU member), produced significant amounts of natural gas (more than 35 BCM a year). Production in both these countries, however, has declined in recent years. In 2018, nine EU member states produced between 1 to 10 BCM.²⁰ Six produced less than one BCM, and 11 produced none. Of the 23 EU member states that consumed more than 1 BCM of gas in 2018, Denmark, the Netherlands, and Romania produced sufficient (or nearly sufficient) natural gas to meet domestic consumption.

North Sea fields have long been a major source of natural gas for markets in the United Kingdom, the Netherlands, Germany, and Denmark, as well as for Norway. Norway has the largest proven North Sea oil and gas reserves, and is one of the world's leading gas exporters. Norway is not an EU member, but it has a close relationship with the bloc. Almost all of Norway's gas exports go to the EU, via both pipeline and LNG tanker (Norway produced 122 BCM of natural gas in 2018).²¹

In general, the North Sea is considered to be a mature basin, with natural gas production in decline.²² ConocoPhillips divested from the region in April 2019, selling its British North Sea oil and gas operations for nearly $2.7 billion to North Sea oil producer Chrysaor.²³ Other major energy companies, such as Chevron, Marathon, and EOG Resources, have left the area in the last two years, with some citing concerns about remaining supply.²⁴ Danish officials reportedly are considering rescinding an announced oil and gas exploration tender due to pressure from some parties in the current government coalition, which consider exploration to contradict the country's goal of more quickly phasing out fossil fuels.²⁵ Analysts note continuing declines in production in the United Kingdom and the Netherlands, and eventual decline in Norwegian production over the longer term.²⁶

Production in the Netherlands is expected to considerably decline with the Dutch government's recent decision to end production at Groningen gas field by 2022. Groningen is the largest onshore gas field in Europe and was once one of its primary suppliers. Production has dropped since 2013, when it produced almost 54 BCM of gas, due to widespread public concern that drilling activities have been triggering a series of earthquakes.²⁷ Some analysts have raised concern over the impact of halting production on the Dutch Title Transfer Facility, the largest traded gas hub in Europe and a benchmark price setter (see below, "Developments in EU Energy Policy"), as well as impacts on markets in Germany, France, and Belgium that import Groningen gas.

Table 1. EU Natural Gas Data, 2018

Units = billion cubic meters (BCM)

 

Natural Gas Consumption

Natural Gas Production

Natural Gas Imports

Austria

8.92

1.06

7.86

Belgium

19.21

0.00

19.21

Bulgaria

2.98

0.01

2.97

Croatia

3.00

1.00

2.00

Cyprus

0.00

0.00

0.00

Czech Republic

9.09

0.22

8.87

Denmark

2.99

4.10

-1.11

Estonia

0.43

0.00

0.43

Finland

2.89

0.00

2.89

France

46.37

0.07

46.30

Germany

94.45

5.90

88.55

Greece

4.68

0.01

4.67

Hungary

8.21

1.90

6.31

Ireland

6.37

3.37

3.00

Italy

71.84

5.46

66.38

Latvia

0.99

0.00

0.99

Lithuania

2.15

0.00

2.15

Luxembourg

0.73

0.00

0.73

Malta

0.50

0.00

0.50

Netherlands

39.52

36.50

3.02

Poland

17.05

3.70

13.35

Portugal

6.64

0.00

6.64

Romania

12.41

10.12

2.29

Slovakia

3.81

0.10

3.71

Slovenia

0.37

0.00

0.37

Spain

32.15

0.09

32.06

Sweden

1.18

0.00

1.18

United Kingdom

75.45

37.44

38.01

TOTAL

474.29

111.05

363.24

Source: Cedigaz, a subscription service statistical database, http://www.cedigaz.org.

Notes: Production data represent marketed natural gas, not gross natural gas production, which includes gases other than methane. Several countries (especially Belgium, Denmark, the Netherlands, and Romania) re-export natural gas imports or export their own production to EU members. Denmark exports more than it imports, which is why its import figure is negative. In this table, imports include natural gas received from other EU countries. Imports equal Consumption less Production. Natural Gas Imports from Russia

Russia has the largest natural gas reserves in the world, with about 20% of total global reserves.²⁸ It is the leading exporter of natural gas and, in 2018, was the second-largest producer and consumer after the United States. Russia is a founding member of the Gas Exporting Countries Forum (GECF), a cartel-like organization of natural gas producing countries.²⁹

The EU is Russia's largest natural gas trading partner. In 2018, more than 70% of Russia's natural gas exports went to EU member states (about 176 BCM).³⁰ Twenty-three% of Russia's total natural gas exports went to Germany (57 BCM). The next largest importer of Russian gas, volumetrically, was Italy (22 BCM).³¹

The dependence of EU member states on Russian natural gas varies. Of the 21 EU member states that import natural gas from Russia, 16 relied on Russia for more than half their total natural gas imports in 2018 (see Figure 4). Among these, eight (Austria, Bulgaria, Estonia, Finland, Hungary, Latvia, Slovakia, and Slovenia) were entirely or almost entirely dependent on Russia for natural gas imports (Romania's imports also come only from Russia, but it produces large volumes domestically). Seven EU member states imported no gas from Russia, whether due to low consumption, high production, availability of supplies from North Africa, Norway, or LNG, and/or lack of infrastructure. Two countries, Cyprus and Iceland, did not use any natural gas in 2018.

The reliance of EU member states on Russian natural gas imports depends not only on the share of Russian gas in their total natural gas imports but also on the share of natural gas in their total primary energy mix. Among those EU members that import gas from Russia, five (Austria, Belgium, Hungary, Latvia, and Slovakia) rely on Russian gas for 20% to 35% of their primary energy. Five countries (Bulgaria, Czech Republic, Germany, Italy, and Lithuania) rely on Russian gas for 10% to 20% of their primary energy. Eleven EU member states rely on Russian gas for less than 10% of their primary energy consumption.

Figure 4. EU Energy Consumption of Russian Natural Gas, 2018 Source: BP Statistical Review of World Energy—all data, 1965-2018, https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html, and Cedigaz, a subscription service statistical database, http://www.cedigaz.org.

Notes: Primary energy is defined as commercially traded fuels, including modern renewables used to generate electricity. Belgium, Denmark, France, Germany, Hungary, Italy, the Netherlands, and Romania import more natural gas than they consume and export the remainder to other EU countries. Although Romania's imports came only from Russia, the country also produces large volumes domestically.

Russia's Reliability as a Supplier: European Debate

Since at least 2006, the EU and its members have weighed the implications of their heavy reliance on Russian natural gas imports. The main impetus for their concern were two temporary reductions in Russian natural gas supplies via Ukraine in 2006 and 2009. After Ukraine's 2005 Orange Revolution, which led to the rise of a Western-leaning government, Russia clashed with Ukraine on several issues, including natural gas supply volumes, prices, and debt repayment. After gas contract negotiations failed, Russia twice briefly reduced and, in 2009, cut gas exports via Ukraine, leading to temporary dips in supplies to some European countries during the winter.³² As a result, the EU and member states began to more seriously assess the need to diversify their energy sources away from Russia.

Views regarding the EU's dependence on Russian natural gas vary. The European Commission and some member states believe that Russia's willingness to use gas export volumes and prices as tools in its foreign policy means that EU members need more alternatives to Russian gas to diminish the impact of gas reductions and cutoffs or unexpected price increases. Some states, such as Poland (see text box "Poland: Proactive on Natural Gas Diversification," below), have taken more proactive measures than others to reduce their dependence on Russian gas. The EU's 2017 Security of Supply regulation introduced measures aimed at preventing supply crises and safeguarding supply; these include an EU-wide disruption simulation, a requirement that member states cooperate in regional groupings to develop joint Preventive Action Plans and Emergency Plans, and application of the EU's "solidarity principle" to facilitate gas-sharing during crises.³³

Other EU member states believe that dependence on Russian natural gas does not pose a major security risk and thus accept growth in Russian natural gas imports. Governments in Germany and Italy at times have expressed that Russia (like the Soviet Union before it) can remain a reliable supplier of natural gas at relatively less expensive prices, despite adversarial relations between Russia and the West. From the perspective of some officials, risks to EU energy security lie more with gas transit routes; projects that bypass Ukraine, such as Nord Stream 2, can provide a check against supply disruption.

Russian involvement in the European energy sector goes beyond its role as an energy supplier. Russian energy companies and their subsidiaries have significant ownership stakes in European energy infrastructure, including pipelines, distribution, and storage facilities.³⁴ According to some reports, Russian-backed groups are suspected of spreading propaganda regarding environmental concerns about unconventional natural gas production in Europe and the United States.³⁵

Poland: Proactive on Natural Gas Diversification³⁶

Poland has sought to diversify its energy sources, especially natural gas sources. Polish officials say they are doing so to reduce dependence on Russian natural gas and that they hope to lead in the EU by example. Poland currently is under contract to import 10.24 BCM per year of gas from Russia. The Polish Oil and Gas Company (PGNiG), a state-owned oil and gas company, says that it will not sign another long-term gas deal with Russia after the current contract expires in 2022.

Actions taken by Poland fall into two categories: supply diversification, with regard to fuel type and supplier, and infrastructure diversification and security, including gas storage and LNG terminal construction. PGNiG has signed multiple long-term contracts with U.S. and other LNG suppliers (Cheniere, Centrica, Venture Global LNG, and Port Arthur LNG) in an effort to replace volumes they now import from Russia. Poland's first LNG terminal, located in Świnoujście on the Baltic Sea, was completed in 2016. The Świnoujście LNG terminal received its first shipment of U.S. LNG in June 2017; it also processed imports from Qatar and Norway in 2017. In December 2018, the owner and operator of Świnoujście, Polskie LNG, tendered a contract to expand the terminal's annual regasification capacity by 50% by 2021 (the terminal currently utilizes its total capacity of 5 BCM). PGNiG plans to increase LNG purchases after the expansion.

The tender also includes construction of a third LNG storage tank at Świnoujście. Natural gas storage can enable Poland to stabilize domestic gas prices and protect itself against shutoffs, and the Polish Government has advocated for new and expanded underground storage facilities. Poland has 3.2 BCM of underground storage capacity (see Table 2) and plans to add another 2.5 BCM by 2021.

Poland also has sought to create a more integrated regional energy market. Poland has developed the ability to reverse the flow of natural gas in the Polish section of the Yamal pipeline, which runs from Russia to Germany via Belarus and Poland, to import natural gas from the West in the case of a gas cutoff before 2022 when the Russian contract expires. In addition, Poland has been discussing natural gas pipeline interconnections with the Czech Republic, Slovakia, and Hungary to connect LNG terminals in Poland and possibly Croatia by 2022, thereby creating a North-South Gas Corridor. Poland also is working to integrate with neighboring markets, such as Lithuania, which has its own LNG import terminal at the port of Klaipėda.

Finally, Baltic Pipe, a joint project of Energinet (Denmark) and GAZ-SYSTEM (Poland), aims to connect an existing Norway-Germany gas pipeline, Europipe II, to new pipelines and compressor stations in Denmark and Poland. Via Baltic Pipe, Poland is to receive 7 BCM of natural gas annually from Norway starting in 2022.

Russian Natural Gas Routes to the EU

Russia currently exports natural gas directly to Finland and the Baltic states, as well as via Nord Stream to Germany and, from there, to other EU members. To access the larger integrated EU market, Russia also transits gas via Ukraine and Belarus to Poland, and via Ukraine to Slovakia, Hungary, and Romania, where gas then flows onward. Excluding the export of gas supplies to Finland and the Baltic states, the International Energy Agency has calculated Russia's natural gas transit capacity to EU points of entry at 233.5 BCM per year.³⁷

Nord Stream and Nord Stream 2

The Nord Stream pipeline, in operation since 2011, transits Russian natural gas directly to Germany via the Baltic Sea. Nord Stream has a total capacity of 55 BCM per year. In 2018, it ran at 107% of stated capacity.³⁸ Nord Stream is a joint venture between Russia's largest state-owned energy company Gazprom and four European companies. Gazprom has a 51% stake; the four European companies – Engie (France), Wintershall (Germany), E.ON (Germany), and Gasunie (Netherlands)—own the rest.

Nord Stream 2, currently under construction, is a second Baltic Sea pipeline project that runs parallel to Nord Stream. Nord Stream 2 also is to have a capacity of 55 BCM per year, doubling the system's capacity. Prior to the introduction of U.S. sanctions related to the construction of Nord Stream 2 in December 2019, the pipeline was scheduled for completion in early 2020. The pipeline currently is scheduled for completion by the end of 2020 or early 2021 (see "Sanctions-Related Issues" above).

Unlike Nord Stream, Nord Stream 2 is owned entirely by Gazprom. Half the cost is being financed by five European companies: Engie, OMV (Austria), Shell (Netherlands/UK), Uniper (Germany), and Wintershall.

Supporters of Nord Stream 2, including the German and Austrian governments, argue that the pipeline will enhance EU energy security by increasing the capacity of a direct and secure supply route at a time of rising European demand for gas.³⁹ German officials and others have said that once the gas reaches Germany it could be transported throughout Europe.

Opponents of the pipeline—including, among others, some EU officials, Poland, the Baltic states, Ukraine, the Trump Administration, and many Members of Congress—argue that it will give Russia greater political and economic leverage over Germany and others that are dependent on Russian gas, leave some countries more vulnerable to supply cutoffs or price manipulation by Russia, and increase Ukraine's vulnerability to Russian aggression (see text box below).

TurkStream

TurkStream is a new natural gas pipeline from Russia to Turkey for which operations officially began in January 2020.⁴¹ Along with Nord Stream 2, TurkStream could strengthen Russia's foothold in the European energy market, especially southern Europe. Many analysts view TurkStream as a counter to the U.S.-backed Southern Gas Corridor project for transporting natural gas to Europe from Azerbaijan, and potentially Central Asia (see "Azerbaijan and the Southern Gas Corridor" below). Opponents of the TurkStream project, including the Trump Administration and some Members of Congress, have expressed concern that the project could also further erode Ukraine's transit role for natural gas.

The TurkStream project is to consist of two parallel pipelines with a total capacity of 31.5 BCM per year (15.75 BCM each). The pipelines enter the water in Anapa, Russia, and make landfall in Kiyikoy, close to Turkey's border with Bulgaria. The first pipeline supplies natural gas to Turkey. The second pipeline, for which onshore construction continues, is to transport Russian natural gas from the Turkish landing point to southeastern and central European markets via Bulgaria, Serbia, and Hungary. The European extension (also referred to as "TurkStream 2") comprises new and existing infrastructure.

Natural Gas Contracts Dependence on Russian natural gas among EU member states that rely on Russian imports is unlikely to be overcome in the near future. Many states have long-term contracts to import Russian gas that specify particular durations, annual volumes, and additional terms (see Figure 5). For example, Germany's five gas contracts with Gazprom all terminate between 2031 and 2035. As expiration dates approach, contracting parties must either renew the contract or find other counterparts. Depending upon market conditions, the importer or exporter may have a negotiating advantage. For example, contracts promulgated by U.S. LNG export companies have been instrumental in making natural gas a more tradeable commodity like oil. This has given consuming countries leverage in dealing with traditional suppliers. For instance, after Lithuania installed an LNG import terminal, giving it an alternative to Russian pipeline imports, Russia gave Lithuania a more favorable price in its contract renegotiation. Figure 5 shows where Russia, primarily through the state energy company Gazprom, will face shortfalls in its export contracts in the coming years.

Figure 5. Russian Contract Volumes for EU Countries and Turkey

2015-2035

Source: Cedigaz, Pipeline Supply Contracts Database, updated October 2018, http://www.cedigaz.org.

Notes: Units = billion cubic meters (BCM).

Natural Gas Storage In many markets, including the EU (see Table 2), natural gas is pumped into storage for times during the year when production and imports are insufficient to meet demand. Gas is injected into storage facilities during non-peak times of the year, usually in the spring and summer. The peak for natural gas use tends to be in the winter when it is used for heating. In some cases, there is a second, smaller, peak in the summer for electricity generation, especially in locations where temperatures are high.

In 2018, EU members held about 22% of their consumption in storage, a greater percentage than in the United States, according to industry data. Despite having a large amount of storage capacity, some EU members could benefit from having additional or new storage facilities. Expanding storage has been an EU priority since Russia's 2009 gas cutoff. Within the EU, Germany and Italy hold most storage facilities and volumes.

Table 2. EU Underground Gas Storage Capacity, 2018

Units = billion cubic meters (BCM)

 

Number of Facilities

Working Gas

Austria

11

8.1

Belgium

1

0.7

Bulgaria

1

0.6

Croatia

2

0.6

Czech Republic

21

3.8

Denmark

3

0.9

France

23

11.7

Germany

86

24.0

Hungary

5

6.1

Italy

25

18.4

Latvia

2

2.3

Netherlands

13

12.4

Poland

16

3.2

Portugal

2

0.2

Romania

10

3.1

Slovakia

4

3.6

Spain

8

2.7

Sweden

1

0.01>

United Kingdom

15

1.5

TOTAL

249

103.9

Developments in EU Energy Policy

Energy policy in the EU has traditionally been a strongly guarded competence of national governments, with member states making their own decisions on national energy mix. In the last few decades, however, the EU's role has expanded in some energy policy areas, due in part to concerns about energy security and consumer protection, as well as public pressure to address climate change. As outlined in EU treaties, the aims and general scope of the bloc's energy policy include ensuring a functioning energy market and supply security, promoting energy efficiency and new and renewable energies, and facilitating network interconnectivity. At the same time, energy policy remains a shared competence between the EU and member states; national governments have the right to make decisions about energy mix and the general structure of energy supply.⁴²

Liberalization and Integration Historically, European natural gas production and delivery were dominated by large, state-owned monopolies, and gas markets across the bloc's member states were relatively weakly integrated.⁴³ Over the last few decades, the energy sector has gradually been exposed to greater competition, and the EU's regulatory role has expanded in some areas as the bloc seeks to build an integrated, barrier-free internal energy market, promote energy security and efficiency, and aid consumers.⁴⁴

In 2009, the EU adopted the "Third Energy Package" in an effort to further liberalize and increase competition in the energy sector.⁴⁵ A key element of the 2009 regulations was to separate ownership and control of gas supply and production activities, on the one hand, and delivery, on the other (also known as "unbundling"), in order to prevent individual companies from dominating gas markets. Network transmission system operators (TSOs) in the EU, which operate the infrastructure through which gas is transported, demonstrate compliance with this requirement by obtaining unbundling certification from national energy regulators.⁴⁶ The unbundling measure aims to prevent conflicts of interest that, according to EU policymakers, could lead to unfair competition, leverage, and higher prices for consumers.⁴⁷

The Third Energy Package also introduced the third party access principle, which requires TSOs to grant suppliers non-discriminatory access to networks. Other measures expanded independent regulatory oversight at the national and European levels and introduced mechanisms to harmonize network codes in support of cross-border gas flows. At the same time, national authorities regulate the conditions of network access and may determine the specific unbundling model for TSOs. Regulators also may exempt new gas infrastructure from some of the Third Energy Package requirements under certain conditions (for instance, the Trans Adriatic Pipeline, discussed below, received an exemption from the third party access provision for its initial 10 BCM capacity annually for a 25-year period).⁴⁸

Concerns about Russia's reliability and dominance as an energy supplier are considered to have prompted some of these rules.⁴⁹ Russia's ultimately unsuccessful challenge of the Third Energy Package before the World Trade Organization claimed that the rules unfairly discriminated against Gazprom by design and through selective exemption of non-Russian projects from some requirements.⁵⁰ Pressure from the European Commission is considered to have contributed to Russia's decision to cancel Gazprom's controversial South Stream project in 2014. The commission asserted that intergovernmental agreements signed between Russia and selected EU transit countries did not comply with some EU rules.⁵¹

In early 2019, during intra-EU debates over Nord Stream 2 (see "Nord Stream and Nord Stream 2"), the EU amended the Third Energy Package's gas directive to extend its application to pipelines in EU territorial waters. Proponents hoped that the amendment would require Gazprom to adhere to EU unbundling regulations. In November 2019, however, the German parliament ruled that the restrictions would not apply to Nord Stream 2, as the pipeline was already under construction at the time they were agreed.⁵²

Analysts consider EU natural gas market liberalization and integration to have been generally successful, albeit an ongoing process. The extent of market liberalization, integration, and rule implementation varies somewhat across member states. Liberalization and price convergence, for example, are most advanced in northwestern Europe and generally less complete in Southeastern and Southern Europe.⁵³ A growing number of EU member states have established natural gas trading hubs, including the Dutch Title Transfer Facility (TTF), which in recent years has surpassed the UK's National Balancing Point (NBP) to become Europe's largest hub and benchmark price setter.⁵⁴

The European Commission, as guardian of EU treaties, is tasked with monitoring member state implementation and enforcement of EU laws and regulations. In practice, implementation and enforcement may vary across member states due to different constellations of legal institutions and political interests.⁵⁵ When the EU identifies potential problems, the response typically involves multiple stages of assessment and dialogue between Brussels and the member state in question, and the entire infringement process may be months or years-long in practice.⁵⁶ The European Commission has used infringement proceedings to seek member state compliance with energy rule implementation on several occasions.⁵⁷ For example, in 2013 the European Commission referred Bulgaria, Estonia, and the United Kingdom to the European Court of Justice (ECJ, the EU's top court) for failing to meet a 2011 deadline to incorporate measures in the Third Energy Package into their domestic frameworks. In 2018 and 2019, the European Commission referred Germany, Hungary, and Belgium to the ECJ for incorrectly or incompletely transposing rules.⁵⁸

EU Support for Energy Projects

As of early 2020, the European Commission estimates that at least €70 billion (about $78 billion) would be required to upgrade aging gas infrastructure in the EU and develop new infrastructure to improve connectivity.⁶⁴ Projects that comply with the EU's energy goals may be eligible for funding through several programs under the EU's long-term budget (multiannual financial framework, or MFF), as well as other EU-linked financing sources.⁶⁵ In some cases, funding decisions are guided by the EU's periodic list of Projects of Common Interest, which are "key cross-border infrastructure projects that link the energy systems of EU countries" and are intended to bring the bloc closer to its energy and climate goals.⁶⁶

The following programs and institutions may support some natural gas projects, although the list is not necessarily inclusive of all available EU-linked financing:

• In the 2014-2020 MFF, €2 billion ($2.22 billion) in European Regional Development Funds (ERDF) has been allocated for large-scale electricity and gas infrastructure projects. For example, about half of the €300.5 million ($334.3 million) investment in Poland's Pogórska Wola-Tworzeń gas pipeline, expected to be completed in 2020, is co-financed by ERDF. The pipeline is part of the proposed North-South Gas Corridor between Świnoujście LNG terminal in Poland and a planned terminal in Croatia. ERDF also co-financed several other Corridor segments, as well as Świnoujście terminal and a planned upgrade.⁶⁷
• The Connecting Europe Facility (CEF), an instrument that supports European energy infrastructure, among other areas of investment, made available €5.4 billion ($6 billion) for energy projects under the 2014-2020 MFF. This includes projects that are considered to be of strategic importance but not commercially viable. About €1.3 billion ($1.45 billion) is currently contributed to works projects in natural gas. A planned LNG terminal in Krk, Croatia, was approved for up to €101.4 million ($112.8 million) financing from CEF (just under half of the projected cost).⁶⁸
• The EU's European Investment Bank (EIB) has provided an estimated €9 billion for natural gas pipelines and distribution network projects since 2013. EIB recently announced, however, that it intends to phase out fossil fuel projects at the end of 2021, which "potentially deals a blow to billions of dollars of [traditional] gas projects in the pipeline."⁶⁹ It is the first major multilateral lender to phase out natural gas project financing due to climate change concerns.

Natural Gas in the Balkans⁷⁰

Russia is a major gas supplier to most countries in the Balkan region and is the near-exclusive foreign supplier to Bulgaria, Serbia, and North Macedonia. Current production in the Balkans is relatively low, with the exception of Romania, although several countries in the region are considered potential producers amid offshore exploration in the Adriatic and Black Seas.⁷¹

Gazprom's planned extension of TurkStream could further regional dependence and serve Russia's purported ambitions of undercutting Ukraine as a transit country (to date, most Russian gas has been transported to the Balkan region via Ukraine and Hungary, or Ukraine and the north-south Trans-Balkan Pipeline).⁷² In addition, Russian firms have invested in refineries, storage facilities, and other energy assets in the Balkans. More generally, observers consider the energy sector a potential conduit of Russian leverage in some countries.⁷³

The EU supports several proposed projects to connect Balkan gas infrastructure to the Trans Adriatic Pipeline (see below) in hopes of undercutting regional reliance on Russian gas. These projects—some of which have received EU funds—include the Greece-Bulgaria interconnector (up to 3 BCM per year) and the Bulgaria-Serbia interconnector (proposed 1-1.8 BCM per year), as well as the Ionian Adriatic Pipeline (proposed up to 5 BCM per year).⁷⁴ Other regional initiatives include a proposed transit corridor for Black Sea gas and planned LNG terminals in Croatia and Greece. These and other proposals have been included as EU Projects of Common Interest or as priority projects under the Three Seas Initiative, a U.S.- and EU-backed regional forum aimed at improving interconnectivity in the region between the Adriatic, Baltic, and Black Seas. Some countries in the region import U.S. LNG.

Gas markets in the Balkans are generally less liberalized and integrated than in other parts of Europe.⁷⁵ Analysts attribute delays in opening up the region's gas markets in part to "a lack of political will and continued political intervention."⁷⁶ European officials have noted that energy rules, even if successfully transposed into legislation, are not always implemented in practice.⁷⁷ For example, Serbia was recently found to be in "serious and persistent breach" of the Energy Community treaty for failing to unbundle state-owned Srbijagas. In December 2018, the European Commission fined Bulgaria's state-owned Bulgarian Energy Holding and two subsidiaries €77 million (about $85 million) for violating EU competition rules; the subsidiaries were accused of denying rival suppliers access to natural gas infrastructure.⁷⁸

From the "European Energy Union" to the "European Green Deal"

Amid growing environmental activism and public pressure to address climate change, EU energy and environmental policy have become increasingly intertwined.⁷⁹ Energy use and production account for 75% of emissions in the EU.⁸⁰ The European Commission envisions natural gas playing a key, albeit perhaps transitional, role in moving away from coal—and thus in the bloc's long-term goal of becoming carbon neutral by 2050.⁸¹

In 2015, member state governments and the European Parliament endorsed key elements of the European Energy Union, a flagship initiative of the 2014-2019 European Commission under then-President Jean-Claude Juncker. The Energy Union outlined five core dimensions aimed at advancing energy and climate goals: energy security and solidarity; an integrated European energy market; energy efficiency; "decarbonizing" the economy; and research, innovation, and competitiveness.

Various binding and nonbinding measures were adopted under the banner of the Energy Union. These include the 2017 Security of Supply regulation, which introduced measures aimed at preventing supply crises and safeguarding supply (see "Russia's Reliability as a Supplier: European Debate" above). A regulation adopted in 2018 required member states to submit an "integrated national energy and climate plan" by the end of 2019 (and every ten years subsequently) to outline long-term national strategies to meet climate goals and other EU energy objectives.⁸²

The Energy Union also endorsed more ambitious carbon targets to further the EU's longer-term agenda to address climate change, principally its goal of a carbon-neutral Europe by 2050. A binding "2020 package" (enacted in 2009) set targets of a 20% cut in greenhouse gas emissions relative to 1990 levels, 20% of energy from renewables, and a 20% improvement in energy efficiency. The 2030 targets were revised upwards in 2018, to 40%, 32%, and 32.5%, respectively.⁸³

European Commission President Ursula von der Leyen, who assumed office in December 2019, has pledged to make the "European Green Deal" proposal a hallmark of her 2019-2024 Commission. The European Green Deal is multifaceted. Among other proposals, it envisions increasing the bloc's 2030 targets and codifying in EU law the goal of a climate neutral economy.⁸⁴ Some analysts believe that some of the new Commission's proposals could face resistance from some countries, such as Poland, that currently rely heavily on coal.⁸⁵

Alternatives to Russian Natural Gas Imports Analysts generally agree that EU members have few, if any, alternatives for substantially replacing gas flows from Russia in the short term, especially as natural gas production in the EU is in decline. Over the longer term, EU members could enhance efforts to develop new domestic energy sources, such as shale gas and renewable energy, or increase the use of nuclear energy and enhance efficiency. They also could seek to boost LNG imports from Africa, the Persian Gulf, and the United States. EU members could accelerate efforts to extend and expand pipeline systems that route natural gas to Europe from Azerbaijan and possibly Central Asia. Finally, they could explore the possibility of additional energy sources in the eastern Mediterranean. Expanding EU Production

As the role of natural gas in the EU's primary energy mix grows, one way to achieve greater energy security would be to produce more natural gas within the EU. Although EU member states do not have the energy resources of the United States or Russia, some of them have access to undeveloped and underdeveloped natural gas resources. However, environmental policies and safety concerns hinder greater production.

Opportunities for Shale?

The development of previously difficult-to-develop "unconventional" natural gas deposits, including shale gas, could increase domestic production. The U.S. Energy Information Administration has assessed the EU's technically recoverable shale gas resources at almost 14 trillion cubic meters, more than 35 years of supply at current consumption levels.⁸⁶ Multiple member states contain shale gas resources.

However, energy companies seeking to advance shale gas development in the EU have faced considerable public and political opposition to hydraulic fracturing (often referred to as fracking), a method of extracting natural gas and oil from tight formations such as shale. In some countries, such as the Netherlands and Germany, opposition is rooted in long-standing environmental concerns. In other countries—such as Bulgaria and Romania, which currently receive most of their gas imports from Russia—observers assert that Russia may have provided financing and other support to protest groups in hopes of deterring local shale gas development.⁸⁷

Some governments have passed laws or other measures to restrict fracking. Germany, France, Bulgaria, and Ireland have banned fracking, and the Netherlands enacted a memorandum in 2013 banning the practice until 2020. Other EU member states do not have laws preventing fracking, but the consensus within the EU is that this method of extraction is not viable due to its overwhelming political unpopularity. As a result, international energy companies have halted their exploration and development of shale gas in the EU.⁸⁸

North Sea Future

Although North Sea gas production has passed its peak, some analysts contend that production may continue longer than current estimates suggest.⁸⁹ In January 2019, the French company TOTAL and China National Offshore Oil Corporation (CNOOC) announced they had discovered approximately 1,400 BCM of natural gas off the coast of Scotland (part of the United Kingdom, then an EU member). This is the largest gas discovery in the North Sea since 2008. Although the discovery sites are not far from existing infrastructure, further analysis is needed for a reliable timeline for developing and transporting the gas to markets.⁹⁰ Some Scottish environmental groups have expressed opposition to developing the field.

North Africa: Diminished but Consistent Suppliers The main natural gas producers and exporters in North Africa are Algeria, Egypt, and Libya.⁹¹ In 2018, Algeria was the largest producer and exporter in the region, a position it has held for more than a decade (see Table 3). Each of these states has LNG export infrastructure, and Libya and Algeria also can access EU markets by pipeline. Historical relationships, proximity, price, and import capacity dictate where and at what volumes North African countries can export to the EU. At the same time, multiple factors, including production disruptions, growing domestic consumption, and government intervention, hinder these countries from becoming larger natural gas suppliers to the EU, despite having the resources to increase production and exports. Ongoing security concerns and a difficult business environment have slowed foreign investment and natural gas exploration, especially in Libya. Table 3. North African Natural Gas Data, 2018

Units = billion cubic meters (BCM)

 

Reserves

Production

Exports to EU

Algeria

4,300

92.3

42.2

Egypt

2,100

58.6

0.8

Libya

1,400

9.8

4.3

TOTAL

7,800

160.7

47.3

Qatar and Other Liquefied Natural Gas Exporters One of the most important developments in energy for the EU has been the growing availability of LNG. LNG imports represent 14% of EU natural gas imports (see Figure 2), a proportion that has remained steady since 2010. Qatar, the EU's fourth largest natural gas supplier, provides the majority of the EU's total LNG imports.⁹² Qatar has been exporting LNG to the EU since 1997, when its first shipments were delivered to Spain. The construction of new LNG terminals in the EU has allowed for increased imports. In 2018, Qatar exported about 19.5 BCM to Belgium, France, Greece, Italy, the Netherlands, Poland, Portugal, Spain, and the United Kingdom.⁹³ In the last three years, Qatar has signed new LNG contracts with France, the Netherlands, Poland, and the United Kingdom.

The EU imports smaller amounts of LNG from multiple countries in Sub-Saharan Africa, the Caribbean, and South America. These countries—Angola, Brazil, Dominican Republic, Equatorial Guiana, Nigeria, Peru, and Trinidad and Tobago—mainly export to Western European countries with established LNG infrastructure. Combined, these small LNG imports by the EU are up from 4.5 BCM to 7.9 BCM, a 76% increase, from 2014 to 2018.

Rising U.S. LNG

Large-scale U.S. LNG exports from the lower 48 states began in 2016. Since then, exports have increased almost six times and have gone to 35 countries. In the EU, U.S. cargoes have been received by Belgium, Bulgaria (via Greece), France, Greece, Italy, Lithuania, Malta, Netherlands, Poland, Portugal, Spain, and the United Kingdom. Turkey also has received a significant amount of U.S. LNG exports.

As of February 2020, the United States has six operating facilities, including a small export terminal in Alaska, with a total capacity of 76 BCM. An additional 83 BCM is currently under construction. If all these projects become operational, the United States will have the most LNG export capacity in the world, surpassing Australia and Qatar. The United States also has many other projects that have been approved but have not begun construction.

Some European officials have voiced suspicion that U.S. opposition to the Nord Stream 2 pipeline is rooted primarily in a desire to increase U.S. LNG exports to Europe. Usually, LNG, including U.S. LNG, is more expensive than gas from Russia and cannot replace all of Russia's imports. The CRIEEA legislation, in a section that addresses Ukrainian energy security (P.L. 115-44, Section 257), states "that the United States Government should prioritize the export of United States energy resources in order to create American jobs, help United States allies and partners, and strengthen United States foreign policy."

EU LNG Importers As shown in Table 4, the EU has had more than enough LNG import capacity to meet its annual needs, but import terminals operate at near full capacity during the winter.⁹⁴ Additional LNG import terminals in certain locations may help countries diversify suppliers and enhance overall EU energy security, particularly if infrastructure interconnectivity is improved. In 2018, Spain led the EU in LNG imports, followed by France, Italy, and the United Kingdom.⁹⁵ As seen in Table 4, Spain has the most LNG import terminals and the largest capacity. However, it only utilizes 22% of its 67 BCM capacity, less than the EU average. Spain has invested significantly in its LNG infrastructure, and increased utilization may benefit Spanish and EU markets. However, infrastructure to transit imports into Spain to other countries is lacking. Table 4. EU LNG Import Capacity, 2018

Units = billion cubic meters (BCM)

 

Number of Facilities

LNG Capacity

LNG Imports

Imports as a Percentage of Capacity

Belgium

1

9.00

2.91

32%

Finland

1

0.10

0.07

11%

France

4

35.00

12.59

36%

Greece

1

5.00

0.94

21%

Italy

3

15.00

8.23

55%

Lithuania

1

4.00

0.91

23%

Malta

1

0.70

0.50

83%

Netherlands

1

12.00

3.20

27%

Poland

1

5.00

2.58

52%

Portugal

1

8.00

3.84

48%

Spain

6

67.00

14.68

22%

Sweden

2

1.00

0.33

20%

United Kingdom

3

48.00

6.74

14%

TOTAL

27

212.9

57.52

27%

Source: Cedigaz, a subscription service statistical database, http://www.cedigaz.org, and Gas Infrastructure Europe, https://www.gie.eu/index.php/gie-publications/maps-data/lng-map. Azerbaijan and the Southern Gas Corridor

A stated priority for the EU, supported by the United States, continues to be the development of a natural gas pipeline system from the Caspian Sea region that does not pass through Russia or Iran or rely on Russian or Iranian natural gas. The so-called Southern Gas Corridor has evolved to include three connecting pipelines with an annual capacity of 16 BCM.⁹⁶ These pipelines are the South Caucasus Pipeline (SCP) running from Azerbaijan to Turkey via Georgia;⁹⁷ the Trans-Anatolian Pipeline (TANAP) through Turkey; and the Trans Adriatic Pipeline (TAP), under construction from Turkey to Italy, via Greece and Albania.⁹⁸

Turkey has contracted for 6 BCM from TANAP, and 10 BCM is to continue on to Italy. The first delivery of Azerbaijani gas through TANAP to Turkey was in June 2018. After a new Italian government came to power in 2018, it announced its intention to review, and potentially block or delay, the Italian segment of TAP, but it ultimately allowed the project to proceed.⁹⁹ TAP is scheduled to come online in the second half of 2020.

Although construction of the TANAP/TAP pipeline network further diversifies imports of natural gas for EU member states, the initial export volume of 10 BCM from Azerbaijan to Italy is not expected to significantly alter EU dependence on Russian natural gas. Although TAP's capacity may be increased to more than 20 BCM, Azerbaijani gas supplies are limited. In 2018, Azerbaijan produced 17.8 BCM of marketed gas. A second phase of gas production in Azerbaijan's Shah Deniz field is expected to add up to 16 BCM per year.¹⁰⁰ Azerbaijan's domestic consumption has been stable at between 8 and 11 BCM a year in the last decade.¹⁰¹

Azerbaijan's Shah Deniz field is operated by BP, which owns the largest share (28.8%) of the joint venture that developed the field, which was discovered in 1999. The other members of the Shah Deniz joint venture are Azerbaijan's state energy company SOCAR (16.7%), the Turkish Petroleum Corporation (BOTAŞ) (19%), Petronas from Malaysia (15.5%), Lukoil from Russia (10%), and NaftIran Intertrade Company from Iran (NICO, 10%).¹⁰²

In its present form, the Southern Gas Corridor is a more modest project than its proponents originally desired. The EU's flagship natural gas initiative was once the proposed Nabucco natural gas pipeline, which was to transport over 30 BCM of Caspian (and potentially Middle Eastern) natural gas per year to the EU via Turkey. However, the Nabucco project was beset by lengthy delays and questions about its economic viability. A key concern was whether Azerbaijan's production capacity alone was sufficient to justify the pipeline. Frustrated by the slow progress of Nabucco, Azerbaijan and Turkey united in 2011 to announce the launch of TANAP, which is jointly owned by SOCAR, BOTAŞ, and BP.

Central Asia and the Caspian Sea In Central Asia, Kazakhstan, Uzbekistan, and Turkmenistan produce and collectively export large volumes of natural gas (see Table 5 and Figure 6). Many in the United States and the EU have long viewed Central Asian exports as a potential means for EU member states to reduce dependence on Russian gas. However, geography, Russian pressure, and domestic policies have prevented much Central Asian gas trade with EU member states.¹⁰³ Russia does not allow natural gas to freely move across its pipeline network. Russia has used Central Asian natural gas to meet contract obligations as needed but otherwise its Central Asian neighbors have limited access to the Russian pipeline network.

The majority of Central Asian gas production is consumed domestically.¹⁰⁴ As is frequently the case in gas-rich countries, countries in the region often use natural gas inefficiently. For example, Turkmenistan consumes 46.2% of its 80.5 BCM production, an extremely high volume of gas per capita, especially given Turkmenistan's relatively low level of industrialization.

Some experts believe that completion of the TANAP/TAP infrastructure will improve the prospects for the construction of a Trans-Caspian pipeline under the Caspian Sea that could feed Central Asian natural gas into the TANAP/TAP pipeline network. At present, the majority of gas exports from Kazakhstan go to Russia, and most of Turkmenistan and Uzbekistan's gas exports go to China. All three countries export gas to China via the Central Asia-China gas pipeline, which originates in Turkmenistan and crosses Uzbekistan and Kazakhstan.

In August 2018, the five Caspian littoral states—Azerbaijan, Iran, Kazakhstan, Russia, and Turkmenistan—met at the Fifth Caspian Summit and signed the Convention on the Legal Status of the Caspian Sea, a document aimed at regulating legal issues pertaining to the Caspian. The convention stipulates that sovereign waters stretch 15 nautical miles from each border, with exclusive fishing rights extending a further 10 nautical miles. The agreement also bars Caspian nations from allowing any foreign military presence on the sea.

Table 5. Central Asian Natural Gas Data, 2018

Units = billion cubic meters (BCM)

 

Reserves

Production

Exports to EU

Kazakhstan

1,000

24.5

0

Turkmenistan

19,500

61.5

0

Uzbekistan

1,200

56.6

0

TOTAL

21,700

142.6

0

For the success of this project, this convention is a long-awaited and necessary step towards the construction of a Trans-Caspian pipeline and, as such, represents an important milestone. However, the convention leaves the key question of delimiting national sectors in the hydrocarbon-rich subsoil seabed unresolved. Its near-term impact on the energy sector, thus, will likely be limited.¹⁰⁵

Figure 6. Central Asian Natural Gas Exports

2004-2018

Source: Cedigaz, a subscription service statistical database, http://www.cedigaz.org.

Notes: The decline between 2008 and 2009 is attributed to the financial crisis. Units = billion cubic meters (BCM).

Eastern Mediterranean and the Arctic: On the Horizon¹⁰⁶

Over the past decade, large gas discoveries in the Eastern Mediterranean off the shores of Egypt, Israel, and Cyprus have raised the possibility of additional sources for EU natural gas supplies in the future. The U.S. Geological Survey (USGS) has estimated regional resources to be between 3.5 trillion and 6.3 trillion cubic meters (and 1.7 billion barrels of oil).¹⁰⁷ In 2012, an Eastern Mediterranean gas pipeline was proposed to bring gas from Cyprus and Israel to the EU via Greece. In January 2020, the governments of Cyprus, Greece, and Israel signed an agreement to build the pipeline, which is endorsed by the United States.¹⁰⁸ Italy and France also are included in the agreement as the company Edison, an Italian-based French energy company, is part of the project. Another option for eastern Mediterranean natural gas would be to export it via Egypt's existing LNG infrastructure, which has been underutilized in recent years due to Egypt's high domestic gas consumption.

In January 2019, Egypt, Israel, Cyprus, Greece, Italy, Jordan, and the Palestinian Authority established the East Mediterranean Gas Forum (EMGF) in an effort to coordinate energy policies and establish a regional gas market.¹⁰⁹ Turkey, Lebanon, and Syria were not included in the EMGF, and there are tensions between Turkey and its neighbors over Eastern Mediterranean energy resources. Speaking at a military ceremony in Istanbul in November 2018, Turkish President Recep Tayyip Erdogan said that his country would not allow gas extraction plans in the Eastern Mediterranean to materialize if they excluded Turkey and its allies in the Turkish Republic of Northern Cyprus, a political entity recognized only by Turkey.¹¹⁰

In the Arctic, the USGS estimated in 2008 that the seven Arctic basins hold total oil and natural gas resources of 412 billion barrels of oil equivalent, with 78% of those resources expected to be natural gas and natural gas liquids (NGL).¹¹¹ These resources do not easily translate into production. The USGS officially has stated that Arctic resources are too expensive to develop at current prices. Many of the fields were discovered in the 1970s and 1980s and remain undeveloped. Harsh weather, supply chain difficulties, and long lead times can bankrupt a project, regardless of political and environmental challenges.¹¹² Russia has had some success in extracting natural gas in the Western Siberian Basin, which is mainly underground, not offshore. However, U.S. and European sanctions restricting foreign involvement in development of Arctic projects may also impact Russia's ability to exploit natural gas resources in the region.

Conclusion: Prospects for Diversification

Although there are alternatives to Russian natural gas for EU member states, it would be difficult, if not impractical, for EU members to consider replacing all Russian natural gas imports in the near to medium term. Russia not only holds the largest supplies of natural gas globally but also has significant infrastructure connecting its resources to Europe; some of the alternatives remain constrained. Some EU member states and companies also appear reluctant to shift significantly away from the status quo. Some of Europe's larger natural gas companies have major financial interests in maintaining Russian supplies and do not see a problem in depending so much on Russia. A major test for the EU in developing a more coherent energy policy could be how to balance these views with those of member states that are highly dependent on Russian energy and are concerned by the leverage Russia could exert on parts of Europe if no alternatives are found to alleviate at least some of that dependence.

Supporting flows of natural gas supplies to Europe from the Caspian region and Central Asia has been a goal of multiple U.S. Administrations and the EU, but this is not being achieved in volumes sufficient to counter Russian exports. In addition, given the interest in combating climate change in Europe and in some quarters in the United States, some analysts believe that increasing the flow of Caspian natural gas to China, where pipelines already exist, could have greater benefits. In this view, Chinese natural gas imports could help reduce carbon dioxide and other greenhouse gas emissions by, for instance, limiting the use of coal in China's electric power sector. Other regions, such as North Africa and the Eastern Mediterranean, have potential to increase exports to the EU, but are still constrained in their ability to do so. The evolving global LNG trade may provide some energy security, but import volumes would need to increase to curb Russian influence.

Author Contact Information

Acknowledgments

Alexis Arieff, Maria Blackwood, Calvin DeSouza, Derek Mix, and Amber Wilhelm contributed to this report. A special thanks goes to Beryl Taylor, a research assistant at CRS, who helped structure this report and provided research and analysis. She also drafted parts of the report and edited others.

Footnotes

1.

The United Kingdom withdrew from the EU ("Brexit") on January 31, 2020, after 47 years of membership. EU-level data in this report includes the United Kingdom through 2019.

2.

European Commission, The European Green Deal: Clean Energy, December 2019, at https://ec.europa.eu/commission/presscorner/detail/en/fs_19_6723.

3.

Ibid.

4.

For additional information on Nord Stream 2 and TurkStream, see CRS In Focus IF11138, Russia's Nord Stream 2 Pipeline: Will Sanctions Stop It?, by Paul Belkin, Michael Ratner, and Cory Welt, and CRS In Focus IF11177, TurkStream: Russia's Newest Gas Pipeline to Europe, by Sarah E. Garding et al.

5.

This section is based on material from CRS Report R45415, U.S. Sanctions on Russia, coordinated by Cory Welt.

6. U.S. Department of State, "CAATSA/CRIEEA Section 232 Public Guidance," October 31, 2017, at https://www.state.gov/caatsa-crieea-section-232-public-guidance/. 7.

Nord Stream 2, "Nord Stream 2 AG and European Energy Companies Sign Financing Agreements," press release, April 24, 2017.

8.

Brian Scheid and Anastasia Dmitrieva, "US Gives Companies 30 Days to Avoid Nord Stream 2 Sanctions," S&P Global, December 27, 2019.

9. Allseas, "Allseas Suspends Nord Stream 2 Pipelay Activities," press release, December 21, 2019, at https://allseas.com/news/allseas-suspends-nord-stream-2-pipelay-activities/. 10. U.S. Department of State, "Fact Sheet on U.S. Opposition to Nord Stream 2," December 27, 2019, at https://www.state.gov/fact-sheet-on-u-s-opposition-to-nord-stream-2/. 11.

Vladimir Soldatkin and Andreas Rinke, "Putin: Nord Stream 2 Pipeline Will Be Finished by Year-End or Q1 2021," Reuters, January 11, 2020.

12.

Nastassia Astrasheuskaya, "Russian Natural Resources Ministry Admits Sanctions Are Biting on Natural Gas Projects," S&P Global, August 17, 2018.

13, could have greater benefits. In this view, Chinese natural gas imports could help reduce carbon dioxide and other greenhouse gas emissions by, for instance, limiting the use of coal in China's electric power sector.

In North Africa, the ongoing turmoil in Libya and the evolving government in Egypt are key factors for natural gas development. Both countries have large natural gas resources, but historical political constraints have limited the development of these resources. The United States and Europe are in a position to aid both countries in reforming their regulatory regimes governing natural gas development as well as establishing oversight by non-governmental organizations and their respective parliaments. And U.S. and European energy companies seem eager to help further develop energy infrastructure and production in both countries. Redirecting U.S. and European efforts from Central Asia to MENA as an alternative to Russian natural gas supplies could improve the chances of more natural gas reaching Europe in the short run.

Meanwhile, new discoveries in the eastern Mediterranean pose a potential new source of European natural gas. However, neither Israel nor Cyprus has any experience in developing large scale natural gas projects. Both countries could benefit from the U.S. and European experience in developing their resources, both on a federal and state level.

Footnotes

BP Statistical Review of World Energy 2019; Adam Vaughan, "Discovery of Biggest UK Gasfield in a Decade Raises Industry Hopes," Guardian, January 29, 2019; Norwegian Petroleum Directorate, "Oil and Gas," available at https://www.norskpetroleum.no/en/production-and-exports/exports-of-oil-and-gas/. Cedigaz, at http://www.cedigaz.org. U.S. Energy Information Administration (EIA), World Shale Gas Resources: An Initial Assessment of 14 Regions Outside the United States, Washington, DC, April 2011, p. 4, http://www.eia.gov/analysis/studies/worldshalegas/. C.J. Schenk, M.A. Kirschbaum, and R.R. Charpentier, et al., Assessment of Undiscovered Oil and Gas Resources of the Levant Basin Province, Eastern Mediterranean, U.S. Geological Survey, March 12, 2010, at https://pubs.usgs.gov/fs/2010/3014/. Philip Budzik, "Arctic Oil and Natural Gas Potential," EIA,October 19, 2009, at https://www.eia.gov/analysis/studies/archive/2009/arctic/index.html#atrco.

1.	U.S. Energy Information Administration, World Shale Gas Resources: An Initial Assessment of 14 Regions Outside the United States, Washington, DC, April 5, 2011, p. 4, http://www.eia.gov/analysis/studies/worldshalegas/.
2.	Ehab Farouk, "Egypt to Begin LNG Imports as Floating Terminal Arrives," Reuters, April 2, 2015.
3.	The southern corridor refers to the area south of the Black Sea and into southern Europe.
4.	For additional information see CRS Report R42074, U.S. Natural Gas Exports: New Opportunities, Uncertain Outcomes, by [author name scrubbed] et al.
5.	The White House, Vice President's Remarks at the Vilnius Conference, May 4, 2006, http://www.whitehouse.gov.
6.	Matthew Lee, "Kerry: Energy Should Not Be Used as a Weapon," Associated Press, April 2, 2014, http://www.pbs.org/newshour/rundown/kerry-energy-used-weapon/.
7.	Remarks by Ambassador Richard Morningstar, Special Envoy for Eurasia Energy at the Economist's Investment Energy Summit, Athens, Greece, March 28, 2012. http://www.state.gov/s/eee/rmk/187662.htm.
8.	See, for example, Helena Smith, "Greek Gas Supplier Selloff Fails to Draw Gazprom Bid," The Guardian, June 10, 2013, online edition.
9.	"PM Hails Choice of TAP As 'Putting Greece on Pipeline Map,'" ekathimerini.com, June 28, 2013, online edition.
10.	Office of the Press Secretary, "Remarks by the President on the Middle East and North Africa," The White House, State Department, Washington, DC, May 19, 2011.
11.	See, for example, Carnegie Endowment for International Peace, "Lieberman Delivers Remarks on Democratic Transition in Egypt," July 22, 2011, http://carnegieendowment.org/files/Lieberman_Prepared_Remarks.pdf; John McCain, Lindsey Graham, Mark Kirk, and Marco Rubio, "The Promise of a Pro-American Libya," Wall Street Journal, October 7, 2011. On November 18, 2011, Representative Dreier introduced a resolution, co-sponsored by Representative Meeks, that calls for the United States to initiate FTA negotiations with Egypt.
12.	For additional information, see CRS Report R42153, U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues for Congress, coordinated by [author name scrubbed].
13.	European Union, Consolidated List of Persons, Groups and Entities Subject to EU Financial Sanctions, August 10, 2015, http://eeas.europa.eu/cfsp/sanctions/consol-list/index_en.htm.
14.	Between 1995 and 2012, natural gas production in the EU decreased by 30%, oil production by 56%, and production of solid fuels such as coal by 40%. European Commission Memo, Questions and Answers on Security of Energy Supply in the EU, May 28, 2014.
15.	Data in this paragraph from: European Commission, https://ec.europa.eu/energy/en/statistics/eu-crude-oil-imports and Cedigaz Statistical Database, http://www.cedigaz.org.
16.	See Deutsches Institut für Wirtschaftsforschung, European Natural Gas Infrastructure: The Role of Gazprom in European Natural Gas Supplies, Spring 2014.
17.	For example, while some member states, such as France, rely greatly on nuclear energy, others, such as Germany, have committed to phasing out nuclear energy. France has also prohibited hydraulic fracturing for shale gas production, while Poland has aggressively tried to develop its shale gas resources.
18.	For additional information on Russia see CRS Report RL33407, Russian Political, Economic, and Security Issues and U.S. Interests, coordinated by [author name scrubbed] and [author name scrubbed].
19.	Data compiled by CRS from Cedigaz dataset published September 2014.
20.	Primary energy comprises commercially-traded fuels, including modern renewables used to generate electricity. Oil makes up about 38%; coal, 13%; nuclear, 11%; and renewables (including hydroelectric), 14%. BP Statistical Review of World Energy 2019, p. 9.
14.	EU Commission, "2020 Climate & Energy Package," at https://ec.europa.eu/clima/policies/strategies/2020_en.
15.	Eurogas, Long-Term Outlook for Gas to 2035, October 2013, p. 3, at https://eurogas.org/website/wp-content/uploads/2018/03/Eurogas_Brochure_Long-Term_Outlook_for_gas_to_2035.pdf.
16.	Based on data from Cedigaz, a subscription service statistical database, http://www.cedigaz.org.
17.	Markus Wacket, "Germany to Phase Out Coal by 2038 in Move Away from Fossil Fuels," Reuters, January 25, 2019.
18.	Gas imports from Russia peaked in 2008 at 226 BCM. Since 2008, imports have not risen above 200 BCM. BP Statistical Review of World Energy 2019.
19.	BP Statistical Review of World Energy 2019.
20.	In descending order, these include Romania, Germany, Italy, Denmark, Hungary, Poland, Ireland, Croatia, and Austria.
21.
22.	Frederic Simon, "Gas Market Liberalization: An Unsung EU Success Story?," Euractiv, May 14, 2018.
23.	Shadia Nasralla and Ron Bousso, "Chrysaor Completes Acquisition of Conoco's UK North Sea Assets," Reuters, September 30, 2019.
24.	David Sheppard and Nathalie, "Chrysaor Strikes $2.7bn Deal for ConocoPhillips' North Sea Assets," Financial Times, April 18, 2019.
25.	"Denmark Weighs Ending North Sea Oil and Gas Hunt," Reuters, October 11, 2019.
26.	The Norwegian Petroleum Directorate forecasts increasing gas production from 2020 to 2023. An estimated two-thirds of Norway's undiscovered resources are believed to be in the Barents Sea. Frederic Simon, "'Huge Progress' in EU Gas Markets but Supply Still an Issue," Euractiv, May 15, 2018; Marshall Hall, "Gas Production from the UK Continental Shelf," Oxford Institute for Energy Studies, July 2019; Norwegian Petroleum Directorate, "The Shelf in 2018," January 10, 2019, at https://www.npd.no/en/facts/news/general-news/2019/The-Shelf-in-2018/#2.1.
27.	Bart H. Meijer, "Netherlands to Halt Groningen Gas Production by 2022," Reuters, September 10, 2019.
28.	The countries with the next four largest natural gas reserves are Iran (16% of the total), Qatar (12%), Turkmenistan (10%), and the United States (6%). BP Statistical Review of World Energy 2019. The term reserve has a specific industry definition which accounts for prices, infrastructure to move gas to markets, and technology. The amount of reserves may change based on changes to any of these factors. For example, if prices rise from one year to the next the amount of reserves would also increase, all else equal. Also, if a pipeline is built and the natural gas can reach a market, then those resources are now counted as a reserve, where they may not have been prior to the pipeline.
29.	For more, see CRS In Focus IF10939, Gas Exporting Countries Forum (GECF): Cartel Lite?, by Michael Ratner.
30.	BP Statistical Review of World Energy 2019.
31.	Eurogas Statistical Report 2014, Eurogas, December 2014, http://www.eurogas.org/uploads/media/Eurogas_Statistical_Report_2014.pdf.
21.	The Commonwealth of Independent States (CIS) includes Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, and Uzbekistan with Turkmenistan and Ukraine having unofficial status. Georgia withdrew from the CIS in 2009.
22.	"Cold Self-Interest," Economist, October 31, 2014, http://www.economist.com/blogs/easternapproaches/2014/10/ukraine-russia-gas-deal.
23.	"Turkmenistan Blasts Russia as "Unreliable" Gas Partner," Chris Rickleton, Eurasianet, February 17, 2015, http://www.eurasianet.org/node/72121.
24.	Sergey Paltsev, "Russian Natural Gas Export Potential Up to 2050," MIT Center for Energy and Environmental Policy Research, July 2011.
25.	James Marson, "Russia Adds Gazprombank to Its Bank Bailouts," Wall Street Journal, December 31, 2014, http://www.wsj.com/articles/russia-adds-gazprombank-to-its-bank-bailouts-1420050602.
26.	Andrew Kramer, "Russia's Well for Corporate Bailouts Appears to Be Running Dry," New York Times, March 9, 2015, http://www.nytimes.com/2015/03/10/business/dealbook/in-russia-the-well-for-corporate-bailouts-might-run-dry.html.
27.	The text of the National Security Strategy can be found at the website of the Russian National Security Council at http://www.scrf.gov.ru/documents/99.html.
28.	Nadezhda Sladkova, Vitaly Sokolov, and Dawn Lee, "Russia, China Sign Strategic Gas Supply Deal," Oil Daily, May 22, 2014, online.
29.	Denis Pinchuk, "Gazprom Mothballs Extension of Nord Stream Pipeline," Reuters, January 28, 2015, http://www.reuters.com/article/2015/01/28/russia-gazprom-nordstream-idUSL6N0V71HO20150128.
30.	"A Twist in the Pipeline," Economist, April 14, 2015, http://www.economist.com/news/europe/21647939-hungary-and-greece-are-joining-turkey-new-route-russian-gas-twist-pipeline.
31.	Elena Holodny, "Russia Just Made a Bold Move to Keep Its Gas Leverage on Europe," Business Insider, January 15, 2015, http://www.businessinsider.com/russia-turkey-black-sea-pipeline-2015-1; "Speculation Rife over Russia's Turkish Stream Loan to Greece," EurActiv, April 20, 2015, http://www.euractiv.com/sections/energy/speculation-rife-over-russias-turkish-stream-loan-greece-313910.
32.	See, e.g., Barin Kayaoglu, "Turkey Treads Carefully on New Gas Pipeline with Russia," Al-Monitor Turkey Pulse, August 12, 2015.
33.	Daren Butler, "Turkey's Erdogan Warns Russia on Nuclear Project, Natural Gas: Papers," Reuters, October 8, 2015.
34.	Since the mid-1990s, the United States had advocated building pipelines from the Caspian region to the west along diverse routes in addition to existing routes through Russia, and which avoided Iran. See below, and CRS Report 97-569, Azerbaijan's Oil and Gas, May 27, 1997, by [author name scrubbed] (out of print; available from the author of this report). The term "Southern Gas Corridor" was mentioned in Commission of the European Communities, Communication from the Commission to the European Parliament, The Council, The European Economic and Social Committee, and the Committee of the Regions, Second Strategic Energy Review: An EU Energy Security and Solidarity Action Plan, Com(2008) 781 Final, November 13, 2008.
35.	Qishloq Ovozi, "The European Union, the Southern Corridor, and Turkmen Gas," Radio Free Europe/Radio Liberty, April 23, 2015, http://www.rferl.org/content/energy-pipelines-turkmenistan-former-soviet-europe/26974648.html.
36.	"Azerbaijan to Revive LNG Export Project to EU," Natural Gas Europe, December 9, 2014, http://www.naturalgaseurope.com/azerbaijan-revive-lng-export-project-eu.
37.	Original cost estimate is €1.2 to €4.5 billion, and original flow estimate is 2 to 8 BCM.
38.	Emrullah Uslu, "Ankara-Yerevan Rapprochement Strains Turkey's Relations With Azerbaijan," Jamestown Foundation, April 9, 2009, http://www.jamestown.org/programs/edm/single/?tx_ttnews%5Btt_news%5D=34835&cHash=be5de68ed6#.VUANvCFVhHw.
39.	"Caspian Sea's Economic Issues Resolved, Agreement Nears," Turkish Weekly, March 6, 2015, http://www.turkishweekly.net/news/181196/caspian-sea-39-s-economic-issues-resolved-agreement-nears.html.
40.	Zaur Shiriyev, "Turkmenistan, Turkey, and Azerbaijan: Potential for Trilateral Energy Strategy?" Eurasia Review, April 6, 2015, http://www.eurasiareview.com/06042015-turkmenistan-turkey-and-azerbaijan-potential-for-trilateral-energy-strategy-analysis/.
41.	U.S. Energy Information Administration, Technically Re coverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States, Washington, DC, June 13, 2013, http://www.eia.gov/analysis/studies/worldshalegas/. Reserves and resources are not the same in the energy industry. Reserves are considered a subset of resources as they indicate that a resource is producible using today's technology at today's prices. Estimated global natural gas reserves have increased from about 119 trillion cubic meters (TCM) in 1994 to 187 TCM in 2014 with the advent of shale gas, and future reserves are potentially even larger. The U.S. Energy Information Administration (EIA) estimates even higher technically recoverable shale gas resources, at 204 TCM in their 2013 report. Industry data has estimated 2014 consumption worldwide at 3.4 TCM.
42.	For additional information on Central Asia see CRS Report RL33458, Central Asia: Regional Developments and Implications for U.S. Interests, by [author name scrubbed] (out of print; available from the author of this report).
43.	"Flow of Natural Gas Through Central Asia," China National Petroleum Corporation, 2015, http://www.cnpc.com.cn/en/FlowofnaturalgasfromCentralAsia/FlowofnaturalgasfromCentralAsia2.shtml.
44.	U.S. Department of State, Secretary Clinton Co-Chairs the New Silk Road Ministerial Meeting, DipNote, September 23, 2011; Fact Sheet on New Silk Road Ministerial, September 22, 2011. See also U.S. Department of State, Remarks, Robert D. Hormats, Under Secretary for Economic, Energy and Agricultural Affairs, Address to the SAIS Central Asia-Caucasus Institute and CSIS Forum, September 29, 2011; William J. Burns, Deputy Secretary of State, Remarks at Istanbul Conference for Afghanistan, November 2, 2011.
45.	For additional information on Azerbaijan see CRS Report 97-522, Azerbaijan: Recent Developments and U.S. Interests, by [author name scrubbed] and [author name scrubbed].
46.	Ambassador Richard Morningstar, Special Envoy for Eurasian Energy, Speech to Plenary Session of Caspian Oil and Gas Conference, Embassy of the United States of America to Azerbaijan, June 8, 2011, http://photos.state.gov/libraries/azerbaijan/366196/Press%20Releases/MorningstarCOG%20speech-ENG.pdf.
47.	For additional information on U.S. sanctions towards Iran, see CRS Report RS20871, Iran Sanctions, by [author name scrubbed].
48.	For additional information on Kazakhstan see CRS Report 97-1058, Kazakhstan: Recent Developments and U.S. Interests, by [author name scrubbed].
49.	Columbia Center on Sustainable Investment, "Kazakhstan Associated Gas Utilization Study," December 2014, http://ccsi.columbia.edu/files/2014/03/Kazakhstan-APG-Utilitzation-Study-December-2014-CCSI.pdf.
50.	Isabel Gorst, "Russia Seals Caspian Gas Pipeline Deal," Financial Times, December 20, 2007, http://www.ft.com/intl/cms/s/0/674201a6-aefe-11dc-880f-0000779fd2ac.html.
51.	Gazprom, "Central Asia-Center," 2014, http://www.gazprom.com/about/production/projects/pipelines/central-asia/.
52.	Dmitry Solovyou, "Kazakh Gas Pipeline Operator Gets $2.5 Billion Loan from Chinese Banks," Reuters, August 19, 2015, http://www.reuters.com/article/2015/08/19/kaztransgas-loan-idUSL5N10U36D20150819#miQ93IXqxqwGXsmU.97.
53.	Beineu-Shymkent Pipeline, "About the Company," 2013, http://bsgp.kz/eng/sections/about_us.
54.	Daniel Graeber, United Press International, "Kazakhstan Keen on TAPI Gas Pipeline," December 3, 2014, http://www.upi.com/Business_News/Energy-Resources/2014/12/03/Kazakhstan-keen-on-TAPI-gas-pipeline/1741417604335/.
55.	Antonio Gómez, César Dopazo, Norberto Fueyo, "The Causes of the High Energy Intensity of the Kazakh Economy: A Characterization of Its Energy System," Energy, May 28, 2014, http://elrond.cps.unizar.es/dopazo/sites/default/files/pdf/Refereed%20Journals%20CD/89Energy.pdf.
56.	See graph of "Recorded waste," comprising flaring, venting, and shrinkage in billion cubic meters (bcm), divided by gross production in bcm. Note that the waste measured in the graph does not include Cedigaz's estimates of reinjection, which made up about one-third of Kazakhstan's gross production in 2013.
57.	Dmitry Solovyov, "Kazakhstan Creates Giant Energy Ministry as Economy Falters," Reuters, August 6, 2014: http://www.reuters.com/article/2014/08/06/oil-kazakhstan-idUSL6N0QC2AB20140806.
58.	For additional information on Turkmenistan see CRS Report 97-1055, Turkmenistan: Recent Developments and U.S. Interests, by [author name scrubbed].
59.	Aygun Badalova, "Will Trans-Caspian Pipeline Project Move Forward?" Trend, September 30, 2014, http://en.trend.az/business/energy/2317431.html.
60.	Jacopo Dettoni, "Russia and Iran Lock NATO Out of Caspian Sea," The Diplomat, October 1, 2014, http://thediplomat.com/2014/10/russia-and-iran-lock-nato-out-of-caspian-sea/.
61.	Ovunc Kutlu, "Caspian Sea's Surface Rights Resolved, Agreement Nears," AA Energy News Terminal, March 5, 2015: http://aaenergyterminal.com/newsRegion.php?newsid=4706198.
62.	John C.K. Daly, "Turkmenistan Opens Up to International Oil Companies," Silk Road Reporters, March 15, 2015, http://www.silkroadreporters.com/2015/03/15/turkmenistan-opens-up-to-international-oil-companies/.
63.	Vladimir Soldatkin, "Russia, Turkmenistan Extend Caspian Gas Link Freeze-Paper," Reuters, October 23, 2010, http://uk.reuters.com/article/2010/10/23/russia-turkmenistan-pipeline-idUKLDE69M02I20101023; Lyubov Pronina, "Turkmenistan May Seek Damages After Gas Pipeline Explosion," Bloomberg, April 13, 2009, http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aiRn.kxtjkxI.
64.	David Trilling, "Turkmenistan: Pipeline Spat with the Kremlin Turns into a Political Test of Strength," Eurasianet.org, April 14, 2009, http://www.eurasianet.org/departments/insightb/articles/eav041509.shtml.
65.	Chris Rickleton, "Is Turkmenistan's Gas Flowing Toward a One-Country Policy?" Eurasianet.org, August 18, 2014, http://www.eurasianet.org/node/69591.
66.	Bruce Pannier and Toymyrat Bugayev, "Is Turkmenistan Losing Iran as a Gas Customer?" Radio Free Europe/Radio Liberty, August 14, 2014, http://www.rferl.org/content/qishloq-ovozi-turkmenistan-iran-gas/26530894.html.
67.	For additional information on Uzbekistan see CRS Report RS21238, Uzbekistan: Recent Developments and U.S. Interests, by [author name scrubbed].
68.	Cedigaz, "Trends and Figures in 2013."
69.	Alexander Kim, "Political Scandal in Uzbekistan Harms Investment Climate," Jamestown Foundation, February 3, 2014, http://www.jamestown.org/single/?tx_ttnews%5Btt_news%5D=41908&no_cache=1#.VCst4PldVIE.
70.	"Asia Trans Gas Will Begin in 2014 Constructing the Central Asia Gas Pipeline's 4th Thread," Oilnews KZ, September 10, 2013, http://oilnews.kz/en/home/news/news-of-fuel-and-energy-complex-abroad/asia-trans-gas-will-begin-in-2014-constructing-the-central-asia-gas-pipeline%E2%80%99s-4th-thread/.
71.	"Uzbekistan to Start Exporting Gas to China in August," Kyiv Post, September 13, 2012, http://www.kyivpost.com/content/russia-and-former-soviet-union/uzbekistan-to-start-exporting-gas-to-china-in-august-312876.html.
72.	Cedigaz, "Trends and Figures in 2013."
73.	Demir Azizov, "LUKOIL Increases Investments in Hydrocarbon Exploration and Production in Uzbekistan," Trend, September 5, 2014, http://en.trend.az/business/energy/2308802.html.
74.	For additional information on current events in Algeria, see CRS Report RS21532, Algeria: Current Issues, by [author name scrubbed].
75.	Carlotta Gall, "Algeria: Violence Erupts at Protest Over Shale Gas Drilling Project," March 1, 2015.
76.	State Department, Bureau of Economic and Business Affairs, "2013 Investment Climate Statement—Algeria," February 2013, http://www.state.gov/e/eb/rls/othr/ics/2013/204588.htm.
77.	Samuel Ciszuk, "Abysmal Licensing Round Result in Algeria Confirms Energy Sector Malaise," IHS Global Insight, March 18, 2011; "Oil Companies Steer Clear of Algeria Due to Windfall Tax, Few Bid for Licenses," Africa Energy Intelligence, March 23, 2011.
78.	State Department, "2013 Investment Climate Statement—Algeria," February 2013.
79.	For additional information on current events in Egypt see CRS Report RL33003, Egypt: Background and U.S. Relations, by [author name scrubbed].
80.	Christopher Adams, "Eni Discovers 'Supergiant' Gasfield near Egypt," Financial Times, August 29, 2015.
81.	For additional information on current events in Libya see CRS Report RL33142, Libya: Transition and U.S. Policy, by [author name scrubbed].
82.	U.S. Energy Information Administration, Country Analysis Briefs - Libya, Washington, DC, February 2011, http://www.eia.gov/EMEU/cabs/Libya/pdf.pdf.
83.	For reference, the United States produced approximately 723 BCM in 2014.
84.	For additional information on energy issues in Lebanon see CRS Report R42816, Lebanon: Background and U.S. Policy, by [author name scrubbed], and for Turkey see CRS Report R41368, Turkey: Background and U.S. Relations, by [author name scrubbed].
85.	U.S. Energy Information Administration, World Shale Gas Resources: An Initial Assessment of 14 Regions Outside the United States, Washington, DC, April 2011, p. 4, http://www.eia.gov/analysis/studies/worldshalegas/32.	For more, see Jonathan Stern, The Russian-Ukrainian Gas Crisis of January 2006, Oxford Institute for Energy Studies, January 16, 2006; Simon Pirani, Jonathan Stern, and Katja Yafimava, The Russo-Ukrainian Gas Dispute of January 2009: A Comprehensive Assessment, Oxford Institute for Energy Studies, February 2009; Kirsten Westphal, Russian Gas, Ukrainian Pipelines, and European Supply Security: Lessons of the 2009 Controversies, German Institute for International and Security Affairs (SWP), September 2009; European Commission, The January 2009 Gas Supply Disruption to the EU: An Assessment, Commission Staff Working Document, COM (2009) 363; and Randall E. Newnham, "Pipeline Politics: Russian Energy Sanctions and the 2010 Ukrainian Elections," Journal of Eurasian Studies 4 (2013), pp. 115-122.
33.	European Commission, Securing Europe's Gas Supply: New Regulation Comes into Force, Brussels, October 30, 2017, https://ec.europa.eu/info/news/securing-europes-gas-supply-new-regulation-comes-force-2017-oct-27_en.
34.	See, for example, Deutsches Institut für Wirtschaftsforschung, European Natural Gas Infrastructure: The Role of Gazprom in European Natural Gas Supplies, Spring 2014.
35.	Office of the Director of National Intelligence, Background to "Assessing Russian Activities and Intentions in Recent U.S. Elections": The Analytic Process and Cyber Incident Attribution, Washington, DC, January 6, 2017, https://www.dni.gov/files/documents/ICA_2017_01.pdf.
36.	For more on Poland, see CRS Report R45784, Poland: Background and U.S. Relations, by Derek E. Mix.
37.	Jack Sharples, "Ukrainian Gas Transit: Still Vital for Russian Gas Supplies to Europe as Other Routes Reach Full Capacity," Oxford Institute for Energy Studies, May 2018.
38.	Nord Stream, "A Record Volume of 58.8 Billion Cubic Metres of Natural Gas Has Been Transported Through the Nord Stream Pipeline in 2018," press release, January 18, 2019. For more information, see CRS In Focus IF11138, Russia's Nord Stream 2 Pipeline: Will Sanctions Stop It?, by Paul Belkin, Michael Ratner, and Cory Welt.
39.	Henry Foy and Tobias Buck, "Nord Stream 2 Construction Begins in German Waters Despite Threats," Financial Times, August 30, 2018.
40.	For more on Ukraine, see CRS Report R45008, Ukraine: Background, Conflict with Russia, and U.S. Policy, by Cory Welt.
41.	For more on TurkStream, see CRS In Focus IF11177, TurkStream: Russia's Newest Gas Pipeline to Europe, by Sarah E. Garding et al.
42.	The Lisbon Treaty of 2009 established a specific legal basis for the EU's role in energy alongside member state competences.
43.	Frederic Simon, "Gas Market Liberalization: An Unsung EU Success Story?" Euractiv, May 14, 2018; Alex Benjamin Wilson and Alina Dobreva, "Energy Supply and Security," European Parliamentary Research Service, July 2019.
44.	European Parliament, "Internal Energy Market," May 2019; Anta Cotescu et al., "State of Implementation of the Third Energy Package in the Gas Sector," European Commission JRC Science for Policy Report, 2018.
45.	European Commission, "Third Energy Package," August 20, 2019, at https://ec.europa.eu/energy/en/topics/markets-and-consumers/market-legislation/third-energy-package;
46.	National regulators "shall refuse the certification" to TSOs controlled by a non-EU entity if the energy security of the member state and the EU is jeopardized (2009 Natural Gas Directive, Art. 11).
47.	Cotescu et al., "State of Implementation of the Third Energy Package," 2018 (footnote 44).
48.	European Commission, "Questions and Answers on the Third Legislative Package for an Internal EU Gas and Electricity Market," press release, March 2, 2011; European Commission, "Third Energy Package," August 20, 2019; Cotescu et al., "State of Implementation of the Third Energy Package," 2018 (footnote 44); Daniel D. Stein, "Trans Adriatic Pipeline Expansion," Atlantic Council, November 14, 2019.
49.	Rem Korteweg, "Energy as a Tool of Foreign Policy of Authoritarian States, in Particular Russia," European Parliament Policy Directorate for External Relations, April 2018; Anthony Teasdale and Timothy Bainbridge, Penguin Companion to the European Union (London: Penguin Books, 2012).
50.	"Russia Takes EU Energy Rules to WTO Arbitration," Euractiv, May 2, 2014; Tom Miles, "Russia Loses Bulk of WTO Challenge to EU Gas Pipeline Rules," Reuters, August 10, 2018.
51.	"South Stream Bilateral Deals Breach EU Law, Commission Says," Euractiv, December 4, 2013.
52.	Council of the European Union, "Council Adopts Gas Directive Amendment," press release, April 15, 2019; Wilson and Dobreva, "Energy Supply and Security," July 2019 (footnote 43); Benjamin L. Schmitt, "The Neue Ostpolitik Approach to Nord Stream 2: A Legal Fiction Carried a Little Too Far," Atlantic Council, December 6, 2019; "Germany Makes Legal Changes to Ease Completion of Russian Gas Pipeline," Reuters, November 13, 2019.
53.	Frederic Simon, "'Huge Progress' in EU Gas Markets But Supply Still an Issue," Euractiv, May 15, 2018; Agency for the Cooperation of Energy Regulators, ACER Market Monitoring Report 2018—Gas Wholesale Markets, October 1, 2019; Patrick Heather, European Traded Gas Hubs: A Decade of Change, Oxford Institute for Energy Studies, July 2019; Frederic Simon, "Gas Market Liberalization: An Unsung EU Success Story?" Euractiv, May 14, 2018.
54.	ACER Market Monitoring Report 2018 (footnote 53); Heather, European Traded Gas Hubs, July 2019 (footnote 53).
55.	Melanie Smith, "Briefing: Challenges in the Implementation of EU Law at National Level," European Parliament, November 2018.
56.	Marta Ballesteros, "Study: Monitoring the Implementation of EU Law—Tools and Challenges," European Parliament, November 2017.
57.	European Commission, "Infringement Procedure," at https://ec.europa.eu/info/law/law-making-process/applying-eu-law/infringement-procedure_en.
58.	"Bulgaria Faces Sanctions for Partial EU Energy Rules Transposition," Novinite, January 24, 2013; European Commission, "Infringement—Internal Energy Market: Commission Refers Germany and Hungary to the Court of Justice of the EU for Failure to Fully Comply with the Third Energy Package," July 19, 2018; European Commission, "July Infringements Package: Key Decisions," July 24, 2019. ECJ rulings may result in fines for member states.
59.	European Commission, "Antitrust: Commission Sends Statement of Objections to Gazprom for Alleged Abuse of Dominance on Central and Eastern European Gas Supply Markets," press release, April 22, 2015.
60.	Georgi Gotev, "As Expected, Vestager Lets Gazprom Off the Hook," Euractiv, May 24, 2018; "EU Ends Antitrust Case Against Gazprom Without Fines," Reuters, May 24, 2018.
61.	Ibid; Stanley Reed and Milan Schreuer, "EU Settles with Russia's Gazprom over Antitrust Charges," New York Times, May 24, 2018; European Commission, "Antitrust: Commission Imposes Binding Obligations on Gazprom to Enable Free Flow of Gas at Competitive Prices in Central and Eastern European Gas Markets," press release, May 24, 2018.
62.	The OPAL pipeline is 80% owned by WIGA, which is under the joint ownership of Gazprom and Germany's Wintershall. The commission decision approved an earlier decision made by German regulators; this approval permitted Gazprom to bid for an additional 12.8 BCM per year of OPAL's capacity and use capacity that had hitherto been underutilized.
63.	Agnieszka Barteczko and Alissa de Carbonnel, "EU's Top Court Curtails Gazprom Access to Nord Stream Pipeline Link," Reuters, September 10, 2019; Daniel D. Stein, "Impact of the European Court of Justice's Opal Decision," Atlantic Council, October 17, 2019.
64.	European Commission, "Innovation and Networks," available at https://ec.europa.eu/inea/connecting-europe-facility/cef-energy.
65.	Wilson and Dobreva, "Energy Supply and Security," July 2019 (footnote 43).
66.	European Commission, "Key Cross Border Infrastructure Projects," October 31, 2019.
67.	ERDF aims to reduce imbalances between EU regions. ERDF investment for Świnoujście is about €354 million ($393.8 million). See Wilson and Dobreva, "Energy Supply and Security," July 2019 (footnote 43); European Commission, "Work on Pogórska Wola-Tworzeń Gas Pipeline Advances," August 27, 2019; and European Commission, "Energy Union: EU Invests to Upgrade Polish Liquefied Natural Gas Terminal in Świnoujście," October 18, 2019.
68.	See European Commission, Investing in European Networks: The Connecting Europe Facility, Five Years Supporting European Infrastructure, July 2019; European Commission, "CEF Energy"; European Commission, "Construction of LNG Terminal Krk," December 2019.
69.	San Fleming and Leslie Hook, "EIB to Phase Out Lending to Fossil Fuel Projects by 2021," Financial Times, November 14, 2019; "European Investment Bank to Cease Funding Fossil Fuel Projects by End-2021," Reuters, November 14, 2019.
70.	For the purposes of this report, the Balkan region includes Albania, Bosnia and Herzegovina (Bosnia), Bulgaria, Croatia, Greece, Kosovo, Montenegro, North Macedonia, Romania, and Serbia. These countries are either EU member states or seek EU membership.
71.	Romania's offshore reserves are estimated to be approximately 200 BCM. "Romania's Black Sea Gas Projects Hanging by a Thread," Reuters, April 1, 2019.
72.	Simon Pirani, Russia-Ukraine Transit Talks: The Risks to Gas in Europe, Oxford Institute for Energy Studies, May 2019.
73.	Dimitar Bechev, Rival Power: Russia in Southeast Europe (New Haven: Yale University Press, 2017).
74.	"ICGB Project," available at https://www.icgb.eu/about/igb_project; European Commission, "EU Investment in Gas Interconnection Between Bulgaria and Serbia to Enhance Energy Security in the Region," May 17, 2018.
75.	EU energy market rules apply throughout the Balkan region. Bulgaria, Croatia, Greece, and Romania are treaty-bound to comply with EU energy rules as member states, while non-EU countries in the Western Balkans are obliged to transpose and implement key EU energy legislation (including the Third Energy Package) as signatories to the Energy Community (EC). The EC seeks to extend EU energy market rules to the bloc's neighborhood and monitors contracting parties' progress in transposing and implementing the rules. Frederic Simon, "'Huge Progress' in EU Gas Markets but Supply Still an Issue," Euractiv, May 15, 2018; ACER Market Monitoring Report 2018 (footnote 53); Heather, European Traded Gas Hubs, July 2019 (footnote 53).
76.	Heather, European Traded Gas Hubs, July 2019, pg. 22 (footnote 53).
77.	See, for example, European Commission, Report Under Article 7 of Decision 2006/500/EC, March 10, 2011; Energy Community Secretariat, Annual Implementation Report, September 1, 2018.
78.	Energy Community, "Serbia: State of Compliance (Gas)," 2019; European Commission, "Antitrust: Commission Fines BEH Group €77 Million," December 17, 2018.
79.	For additional information on EU climate policy, see CRS In Focus IF11431, EU Climate Action and Implications for the United States, by Kristin Archick, Jane A. Leggett, and Kezee Procita.
80.	Marc Ringel and Michele Knodt, "The Governance of the European Energy Union: Efficiency, Effectiveness and Acceptance of the Winter Package 2016," Energy Policy 112(2018): 209-220; Commission Mission Letter to Kadri Simson, September 10, 2019.
81.	Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, and the Committee of the Regions, "Energy Roadmap 2050," December 15, 2011.
82.	Fact Sheets on the European Union 2019, "Energy Policy: General Principles," at http://www.europarl.europa.eu/factsheets/en/sheet/68/energy-policy-general-principles.
83.	European Commission, "Climate Strategies and Targets," at https://ec.europa.eu/clima/policies/strategies_en.
84.	European Commission, "A European Green Deal," at https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en.
85.	Frederic Simon and Sam Morgan, "Green Deal Branded as 'Hallmark' of New European Commission," Euractiv, September 11, 2019.
86.
87.	Fiona Harvey, "Russia 'Secretly Working with Environmentalists to Oppose Fracking,'" Guardian, June 19, 2014; Andrew Higgins, "Russian Money Suspected Behind Fracking Protests," New York Times, November 30, 2014.
88.	Arthur Neslen, "The Rise and Fall of Fracking in Europe," Guardian, September 29, 2016.
89.	Gaurav Sharma, "North Sea Oil and Gas Exploration Still Attracting Billions of Investment Dollars," Forbes, October 29, 2018; Frederic Simon, "'Huge Progress' in EU Gas Markets but Supply Still an Issue," Euractiv, May 15, 2018.
90.	Adam Vaughan, "Discovery of Biggest UK Gasfield in a Decade Raises Industry Hopes," Guardian, January 29, 2019; Kevin Keane, "Gas Find in North Sea Hailed as 'Biggest in a Decade,'" BBC, January 29, 2019.
91.	For more on these countries, see CRS Report RS21532, Algeria: Current Issues, by Alexis Arieff; CRS Report RL33003, Egypt: Background and U.S. Relations, by Jeremy M. Sharp; and CRS Report RL33142, Libya: Transition and U.S. Policy, by Christopher M. Blanchard.
92.	Qatar has the world's third largest natural gas reserves. In 2018, Qatar was the second largest exporter of gas and first largest exporter of LNG. Qatar can export large volumes of gas because it does not flare or reinject a significant percentage of the gas it produces and because its domestic consumption is relatively low, due to its relatively small population. For more on Qatar, see CRS Report R44533, Qatar: Governance, Security, and U.S. Policy, by Kenneth Katzman.
93.	BP Statistical Review of World Energy 2019.
94.	Pipelines also operate close to capacity during the winter and are more utilized during the rest of the year when natural gas demand is not at its peak.
95.	BP Statistical Review of World Energy 2019.
96.	The term "Southern Gas Corridor" is mentioned in Commission of the European Communities, Second Strategic Energy Review: An EU Energy Security and Solidarity Action Plan, November 13, 2008.
97.	The South Caucasus Pipeline (SCP) began operations in 2006 and runs parallel to the Baku–Tbilisi–Ceyhan oil pipeline, which began operations the year before. SCP has the same shareholders as the Shah Deniz consortium (see below) but with different ownership percentages.
98.	"Trans Adriatic Pipeline," at https://www.tap-ag.com/pipeline-construction/project-progress. The TANAP/TAP pipeline will not be the first to provide Azerbaijani natural gas to EU member states. In 2007, Turkey and Greece opened a small pipeline between the two countries, thereby allowing some Azerbaijani natural gas to flow to Greece. Plans to extend the interconnector to Italy were supplanted by TAP.
99.	Gavin Jones, "Italy PM Conte Gives Green Light to Contested TAP Gas Pipeline," Reuters, October 26, 2018.
100.	BP, "Shah Deniz Stage 2, Azerbaijan," press release, at https://www.bp.com/en/global/corporate/investors/upstream-major-projects/major-projects-2018/shah-deniz-stage-2.html.
101.	BP Statistical Review of World Energy 2019.
102.	The Shah Deniz field is exempt from sanctions on Iran. The U.S. Department of the Treasury provides the relevant guidance. EIA, Background Reference: Azerbaijan, January 7, 2019, at https://www.eia.gov/beta/international/analysis.php?iso=AZE; U.S. Department of the Treasury, Industry Guidance: Shah Deniz Consortium, November 28, 2012, at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/shah_deniz_guidance.pdf.
103.	At various points during the past decade, Kazakhstan, Turkmenistan, and Uzbekistan all exported natural gas to Russia, meaning that some gas originating in one of those countries may have been exported to Europe. However, there has never been direct gas trade between the EU and Central Asia.
104.	In 2018, Kazakhstan consumed 79% of domestic production, Uzbekistan consumed 75%, and Turkmenistan 46%. BP Statistical Review of World Energy 2019.
105.	Stanislav Pritchin, "Russia's New Strategy for Caspian Relations," Chatham House, December 18, 2018, at https://www.chathamhouse.org/expert/comment/russia-s-new-strategy-caspian-relations.
106.	For more on the Arctic, see CRS Report R41153, Changes in the Arctic: Background and Issues for Congress, coordinated by Ronald O'Rourke.
107.
108.	Dimitar Bechev, "Politics Has Hijacked Eastern Mediterranean Gas," Ahval, January 6, 2020.
109.	"Eastern Mediterranean Countries to Form Regional Gas Market," Reuters, January 14, 2019.
110.	"Turkey Will Not Accept Attempts to Seize Eastern Mediterranean Resources, Erdogan Says," Daily Sabah, November 4, 2018.
111.	The Eurasian side is more gas-prone and the North American side is more oil-prone.
112.