For the Black Sea and its energy security the important period to look for is the medium term 5-10 years, and to try to foresee what dangers and possibilities arise for the countries during this time frame. The medium-term perspective is important for several reasons: it is the period that will be crucial for implementing the start of energy transition that will define their future in a net-zero world, Russia as a hydrocarbon energy power is more prone to act in order to secure advantages before 2030 and a medium-term framework is still in the realm of actual budgets and current initiatives that can have an influence in the region.
Coping with green policies
Countries that are in the EU (Bulgaria, Romania) will have to cut emissions according to EU strategy by 55% till 2030. In order to achieve this target and also due to increase costs of carbon both countries will have to cut coal power generation (in Romania representing 24%, Bulgaria 40% of energy generation,Ukraine 31.2%). The question remains what will replace coal? It can be either renewables sources, gas or nuclear. Bulgaria has signed an MoU with US for a Nuclear Power Plant and Romania signed a contract to build a nuclear reactor. But the new capacities will not be expected to be ready before 2028-2030. Romania and Bulgaria increased their renewable sources, but the target is not what EU expects (Romania proposed a 30%, Bulgaria-27.09% but not what EU wants 35%). One way to replace coal would be to use gas as a transition fuel in a 5-10year period and then decrease its use till 2050. Bulgaria does not have significant gas reserves, prospects for its offshore perimeters did not had positive results and it will have to rely on imports. Romania on the other hand found gas in its offshore Neptune Deep perimeter (42-80bcm), but the production will start in the most optimistic scenario in 2027. In the meantime, Romania gas production is declining by 10%/y and is expected to rely on 40% imports in 2030 if the Neptune Deep resources are not commercialized. Ukraine although not in the EU will try to reduce its carbon emissions in order to prove it is western oriented and a responsible international actor. But with no new nuclear power plant in project and not a sufficient boost in renewables it will probably use gas to reduce emissions in medium-term. And given the fact that gas consumption in Ukraine declined in line with decrease in economic activity from 2014 onward, it can be expected an increase in consumption if the economy rebounds and hopefully will grow. Ukraine also faces a more challenging situation where Russia could be in a position to cut its transit trough Ukraine after the construction of NS2, an action that will increase the cost of gas for Ukraine not been able to use virtual reverse flow and also to affect its economic viability of its transport system. In order to mitigate such a scenario Ukraine already is looking for western partners and signed MoU with OMV_Petrom (Romania), PGNiG (Poland) and Naphtha Israel to develop its domestic gas reserves. Armenia with its NPP in a condition that will require to be closed and not enough resources to invest in renewables will have to increase its gas imports from Russia to fulfill its energy needs, Armenian president even ask Russia for help to build another nuclear power plant. Georgia became a net electricity importer from 2019, it imports its energy from Azerbaijan or Russia. Another factor that will affect domestic electricity generation is due to climate change that is altering the water availability of rivers and implicitly can decrease hydropower generation. Given the fact that the future net-zero world will increase electricity consumption Georgia needs to develop and diversify further its domestic electricity production in order not to become dependent on Russia for energy imports. From the region Turkey is the most developed energy market due to its historic dependency it implemented policies to diversify both its sources and routes. Turkey diversified its routes and sources of gas import (pipeline and LNG), invested in wind and hydropower and is also building a nuclear power plant, and just recently announced another discovery in the Sakarya field increasing the findings to 540 billion cubic meters. Turkey desire is to tap the gas in the Black See as soon as 2023. But without western technology or partners the 2023 is a very optimistic term, and at the moment Türkiye Petrolleri Anonim Ortaklığı (TPAO) is looking for partners to develop the Black Sea field, among the possible participants been US firms like Exxon Mobile or Chevrom. Turkey could be a source of gas exports in the region, but it has to open its market for exports and to create a viable gas hub.
Russia and its perspective in the region in medium-term
Russia betted on hydrocarbons and the use of gas as a transition fuel till 2030 and beyond. In accordance with this view developed projects that will enhance its presence in the Black Sea area and will allow to sell more gas and have more leverage in negotiations due to alternative routes of supply. In order to achieve its objectives constructed the Turks Stream (on shore and offshore parts) and Nord Stream 2 pipelines. In Romania in medium-term as we mentioned above without offshore exploration and with nuclear power plants not constructed there is a possibility of 40% import of gas and most of it will come from Gazprom trough Turk Stream. Already in 2021 we saw an increase of Russian gas imports and Romania paid one of the highest prices in Europe in 2020 to Gazprom. In an scenario where gas is used as transition fuel, Bulgaria although it manage to receive gas from Azerbaijan trough TAP pipeline will still rely on Russian gas and most importantly Bulgaria remained a transit country for Russian gas to Romania, Serbia and soon to Hungary so its reliance on transit fees from Gazprom is still present in a different form. In Ukraine with the construction of Nord Stream 2 and Turk Stream in the next decade Gazprom will have the possibility to cut the transit trough the country and leave Ukraine without transit fees and with expensive gas imports in a medium-term perspective. In Armenia Russia has total control over the energy sector and the situation is likely to remain the same. Turkey although managed in a clever way by domestic production of electricity and diversification of sources of gas import to decrease Gazprom influence, it is building a nuclear power plant (Akkuyyu) with Rosatom in a built-own-operate (BOO) framework. As a result Russia influence decreased over gas affairs but will increase in the electricity sector with the Akkuyyu expected to provide (10%) of Turkey energy. The power plant will be owned and operated by Rosatom and also a port terminal will be constructed to be operated by Rosatom in Mediterana. It is worth mentioning that 70% of energy will be at a preferential price (Russia used electricity price to influence policy in Armenia). Given the fact that in a time frame beyond 2030 the need for hydrocarbons is expected to drop as the region will go to a net-zero world, Gazprom is expected to use all its leverage to extract as much benefit as it can from the riverain courtiers in a medium-term perspective especially if those countries will be in a position where they will have to use gas imports to meet their climate and energy needs.
What is to be done
           Accelerate the passe of current projects in the nuclear field. EU should work with US to facilitate the implementation of those projects. Support domestic gas production in Romania, Ukraine and Turkey that need technology to develop their resources. Use current infrastructure and apply EU law to create a more effective regional market. Finish interconnectors like Greece-Bulgaria (IGB) and use US initiative for infrastructure and 3 Seas Initiative for common projects to facilitate further flow of gas in the region from LNG terminals in Greece, Turkey, Croatia, Poland to Black Sea riverain countries. Encourage investment in renewable energy in the region like offshore wind and solar. All those are already measures in reach, but the pace of implementation needs to be increased in order to avoid the risk to have a mid-term period (2023-2030) where Russian gas will be the solution to meet energy and climate needs in the Black Sea region and solve the problems that were not dealt in a timely manner.
