"Annexation" of Crimea and its rich natural resources by the Black Sea could drag Ukraine’s economic development. -Experts

By E. Gurkan Abay
ANKARA 
The loss of Crimea and its rich natural resources on the shores of the Black Sea could be a blow for Ukraine’s economic development as well as its energy security, experts have said. 
While Ukraine consumed 55 billion cubic meters of natural gas in 2013 -- nearly 60 percent of it imported from Russia -- between 5 and 10 trillion cubic meters of gas lie in reserves in Crimea’s offshore fields, according to Ukrainian government figures.

Chris Weafer, senior partner at Macro-Advisory Ltd, which provides economic and business consulting to foreign companies and investors in Russia and other Commonwealth of Independent States (CIS) countries, told The Anadolu Agency (AA) that it was impossible for either Ukraine or the European Union to materially reduce reliance on Russian gas in the short term. 
"There are no quick alternatives available," he said on Thursday.
Underlining that the best longterm option for Ukraine or the EU was the development of Iranian gas, Weafer stated that the earliest date for any meaningful supply -- even assuming sanctions ended and Iran attracted investment -- was the end of the decade.

• "The recoverable reserves in Crimea and along its shores should have eventually made Ukraine able to produce enough gas for it to be self-sufficient, and be able to export to its European neighbors," Weafer said. "Now, of course, that opportunity is lost to Ukraine."

- Political crisis
Ukraine agreed last September with energy giants such as ExxonMobil and Royal Dutch Shell to produce an annual 5 billion cubic meters of gas in the biggest offshore Crimean field, Skifska, which is estimated to hold nearly 250 billion cubic meters.
However, Exxon stated in January it had put the agreement on hold amid the political crisis in Ukraine.
"I expect that the international energy companies will do little more than signal their interest in continuing under new Russian contract terms," Weafer said. "They will do this quietly for now because of the sanctions risk and their reputational risk."
The South Stream project -- to transport natural gas to Europe by going under the Black Sea and bypassing Ukraine -- is another topic on the agenda following Crimea’s annexation by Russia.
A new route for the pipeline, crossing Crimea instead of the deep-sea bed of the Black Sea, would reduce the costs of the major investor in the project, Gazprom, by US$10 billion.

- Serious problems
But Aleksander Szpor, a policy analyst with the Poland-based scientific organization Institute for Structural Research, said Gazprom is facing increasingly serious problems with its reputation in the EU.

• The European Commission intervened in the project in 2012, claiming it had to be substantially improved in order to meet legal requirements.

Szpor said: "The failure of South Stream would not be a disaster for the EU," pointing out that Paolo Scaroni, the CEO of Italian energy giant ENI -- the second most important partner after Gazprom -- had expressed doubts about the viability of the project.
Szpor said the Nabucco pipeline project to connect the world’s richest gas regions -- the Caspian region and Middle East to the European consumer markets -- could be put back on the table.
He added: "In almost all Nabucco’s versions, which were announced over the last few years, the project relied on supplies from countries other than Russia and avoided the transit via Ukraine."

- Controversial referendum
The allure of Nabucco faded after Austria's gas and oil company OMV announced its detachment from the project and stated it had approved the Trans-Adriatic Pipeline, or TAP, as it was "more economic."

• The Trans-Adriatic Pipeline is a west-bound pipeline project to carry natural gas from the Caspian sea via Greece, Albania and the Adriatic Sea to Italy and further to Western Europe.

Azerbaijani natural gas would have been carried through Turkey, Bulgaria, Romania, Hungary and Austria to Europe within the scope of Nabucco project, in which Turkey was a member.
However, a consortium active in the Shah II sea field in Azerbaijan showed The Trans-Adriatic Pipeline to be an alternative to Nabucco, as it would carry gas along a shorter route through Turkey to Italy.
The Crimea crisis began after armed gunmen -- believed to be Russian Special Forces -- seized Simferopol airport and the Crimean parliament on February 27 and 28.
A controversial referendum was held on March 16, with 97 percent of the population voting in favor of joining Russia.
 aa.com.tr
27/3/14
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