The impact of Nord Stream 2 on the European gas market bargaining positions

Balázs Sziklai, László Kóczy () and Dávid Csercsik

Energy Policy, 2020, vol. 144, issue C

Abstract: We investigate the impact and the possible consequences of the construction of the Nord Stream 2 pipeline. We model the European gas network as a cooperative game between regions as players over the pipeline network. Our model offers several novelties compared to earlier cooperative studies. Firstly, we focus on cost saving rather than on the profits of cooperation. Secondly, we introduce liquefied natural gas as a player. Thirdly, we apply an iterative linear program to account for the long term bilateral contracts that still drive the gas market. This modelling technique also allows us to identify individual gas flows. We focus on the change of influence of the players in three different scenarios. We investigate how the power of the agents shift when the Nord Stream pipeline is expanded, when the Ukrainian pipeline is shut down and finally when both of these happen. Our calculations show that when Nord Stream 2 is operational, Russia and Western Europe improve their position compared to the base scenario, while other suppliers, notably Norway, together with Central- Eastern- and Southern Europe suffer losses, especially when the Ukrainian route is dismissed. The results highlight that both the supporters and adversaries of Nord Stream 2 are governed by self-interest and solidarity and trust, the values proclaimed by the EU and the Energy Union, remain but a slogan.

Keywords: Gas supply; Pipeline network; Bargaining power; Shapley value; Cooperative games; Nord Stream (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:144:y:2020:i:c:s0301421520304201

DOI: 10.1016/j.enpol.2020.111692

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