Up stream - down stream

EDGaR projects at TPM

In the second half of the last century, 50% of European gas imports came from Russia. It was a safe source because Russia needed the money and was bound to deliver. The gas was transported through the Ukraine. But then there were disagreements between Russia and the Ukraine about prices, unpaid bills and accusations that the Ukraine was illegally siphoning off gas. Whatever was actually going on, Russia turned off the gas tap and major customers like Germany and Italy, and also Greece, Turkey, Austria, Romania, Serbia, Slovakia and the Czech Republic stopped receiving Russian gas.
“This example illustrates the importance of an understanding of the political relationships between countries that export (up stream) and import (down stream) gas”, says Correljé. “Are gas exporting countries reliable and dependable or are they guilty of opportunism?” Correljé is in charge of the project launched in 2010 entitled Up stream - down stream: securing gas supply and the governance of the gas value chain. This project is investigating all aspects of the security of energy supplies, and in particular gas. This immediately brings to mind the security of gas supplies. However, ensuring that the demand for gas remains stable is equally important. The research ultimately aims to develop a model to chart the geopolitical relationships, the role of sustainable forms of energy and unconventional gas and the reliability of the various players in the gas market.
The partners in the project are ECN (Energy Research Centre of the Netherlands), an established energy research institute, and Clingendael, the Netherlands Institute of International Relations.

Down stream

The European countries that depend on imported gas want secure gas supplies. “Security should primarily be seen in terms of availability. The certainty that gas will be supplied when it is needed and at reasonable prices”, says Correljé. In this process, the purchasers and producers are interdependent. As soon as there are several producers and purchasers, choices can be made and this dependency decreases. The development of a gas market is extremely important because it can replace this contractual dependency. The question is whether this will happen in Europe.

Up stream

As the main supplier of gas to Europe, Russia was reliable until conflicts emerged with the transit country Ukraine. This is why plans emerged for the Nabucco pipeline, to transport natural gas to Europe from the countries around the Caspian Sea (Azerbaijan, Turkmenistan). Russia does not support this project as it wishes to preserve its position of strength in the energy market. As an alternative to this pipeline, it has begun the construction of two pipelines through Germany (the recently-commissioned North Stream pipeline) and through Bulgaria (the South Stream pipeline). But this is just the technical context of the game.

The rules of the game

Ultimately, the researchers need to develop a model that shows how the behaviour of the different players in the market can be controlled by agreements and policy enshrined in regulations. Rules that determine who can take what from the ground and who can buy what and at what price. It is also possible to reduce the effects by ensuring that there are sufficient alternatives. These alternatives will involve making adjustments on the supply side, for example in the future role played by sustainable energy and unconventional gas. This is research in which economics, the politics of energy supply and international relations play a major role.