Russian gas or alternative sources? – Serbia made its call

Russian gas or alternative sources? – Serbia made its call

Solar energy, wind energy, LNG. Are they real alternatives to Russian gas, or merely a naive vision for the future? Europe believes that the new solutions can swiftly enter the market after excluding Moscow, but the ability of member states and candidate countries to keep up with these expectations remains questionable.

ECONOMY WORLD JUNE 1. 2022 12:34

America’s „revolutionary” idea

There are a number of US projects designed to facilitate Serbia’s efficient energy supplies, including solar and wind energy and liquefied natural gas. All of these could be alternatives to Russian gas, Christopher Hill, US ambassador to Belgrade, recently told the daily Politika. The idea sounds good, but analysts advise caution, saying what Mr Hill offers is not any different from the promises his predecessors made, without concrete implementation. The only change is that LNG has shifted into focus in Europe in the wake of the war, and the idea to import gas from overseas, instead of Russia, has become popular. Politika’s journalist points out that no one can seriously believe that Serbia, which procures all the gas the country needs from Russia, would have ever rejected a cheaper and better solution proposed by the US. According to the paper, if the US really wanted to offer an alternative to Serbia, it could have done so before, but it never provided cheaper gas than Russia and never offered to build an LNG terminal for the country. As a reminder, Russia has invested heavily in the construction of the Balkan Stream gas pipeline.

Photo: EbS

LNG pros…

The United States is the world’s largest gas producer and consumer. Russia ranks second in terms of extraction. However, thanks to its technological advancement, the US is able to deliver liquefied natural gas to anywhere in the world. And LNG has become an increasingly popular alternative to conventional gas, as highlighted by Srecko Dukic, an economist and diplomat. He also points out that with no direct access to the sea, Serbia would have to procure LNG through a neighbouring country, which would cost money. Mr Dukic says that it is time for Serbia to decide whether to remain dependent on Russians, taking all the risks, or to look for other solutions.

…and cons

Mitar Kovac, the founder of the Eurasian Security Forum, holds opposite views. He says if Europe opts for importing gas from the US instead of Russia, it will only help Washington to achieve its political and energy policy interests. 10 per cent of Serbia’s energy needs can be supplied from solar and wind energy or liquefied natural gas, therefore, they are not realistic alternatives, Mr Kovac underlines. The expert says LNG is far more expensive than Russian gas, so Serbia would pay the price twice: the country would have to invest heavily into building a new system just to buy LNG at a higher price. This is something that would make no sense, he adds. Moreover, even after these heavy investments, the country would not be able to procure sufficient gas supplies to fully meet the needs of its industry and population. Even if the interconnector in Bulgaria was built, the capacity would be insufficient either at the terminal in Greece or on the transport route, he explains.

Serbia has retained its independence from European decision-makers, and it follows its own path regarding the purchase of energy sources, Mitar Kovac emphasized, adding that this is looked upon with contempt by both the European Union and the United States. Christopher Hill, the US Ambassador to Serbia, said that the country had to choose between turning to the West or the East, as there was no third option. Mr Kovac believes that there is a third path – namely cooperation with both sides and refraining from taking a position and this is what Serbia is trying to follow.

Photo: EbS

Serbia has made up its mind

The current contract of Serbia with Russia, which permits Serbia to buy gas at 270 dollars per cubic metre, expires on 1 June. President Aleksandar Vucic concluded another gas supply contract with Russian President Vladimir Putin at the weekend, for a period of three years. There are no details about the exact price, only the range: it will be between 310 and 408 dollars. “If we do everything we agreed upon with President Putin, we will have a calm winter in terms of gas supplies.

Only after the negotiations with Gazprom are over and the quantities are defined will we be able to tell the average price Serbia will need to pay for one cubic metre of natural gas. The current price would be one third of the market price, going down to one tenth of what the rest of Europe will pay in the winter.”

the Serbian president told the press.

This price applies for a consumption of 2.2bn cubic metres, while the price of an additional 800 million cubic metres still remains a question. The two heads of state also discussed the extension of storage capacities in the country. As V4NA reported earlier, Serbia does not have properly-sized gas storage facilities at the moment, so it stores a portion of its purchased gas supplies in Hungary. This agreement between Mr Vucic and Hungarian PM Orban was reached in Novi Sad recently, and the details hammered were out a few days later on a ministerial level in Budapest.

Serbia and the renewables

Besides LNG, Serbia should generate more energy by tapping wind and solar to a greater extent, to further reduce dependence on Russia, the US ambassador said. This would, however, require and even larger investment than switching to LNG, according to a compilation of the Republican Statistical Office based on data from 2019, which remains mostly applicable. The report suggests that solar power has a 0.01 per cent share in the country’s energy mix, with wind having 0.75 per cent. Water power is the largest contributor of renewables, with a proportion of 8.5 per cent.

Serbia, of course, is well aware that using renewables is a profitable and environmentally friendly way of generating energy in the long run. President Aleksandar Vucic has recently listed the five most important reforms to be worked out, with one of them being the drafting of a new energy policy. The country expects to receive assistance from Norway and Great Britain, and has already completed a round of negotiations with them. The partner countries will help Serbia with their experience and counsel. The country has to create the proper conditions for receiving renewable energy and regulate its exports. To that end, the Serbian government is mulling the construction of small-scale modular nuclear reactors. The president expressed his support of the idea, saying that other countries have already successfully introduced the technology.

ECONOMY WORLD

Tags:

gas, green energy, serbia