By Kakia Papadopoulou
"Happiness is multiple pipelines", was a car-bumper sticker distributed by Americans in oil-producer Kazakhstan in the 1990s that highlights the energy-hungry West's desire to boost oil and gas supply routes.
But building pipelines - especially privately backed ones -- often means tackling political, environmental or most importantly supply obstacles that can take years to resolve. Greece will learn this lesson shortly, given that Europe would like pipelines free of the grip of Russia, the world's second biggest oil exporter and biggest natural gas producer.
However, Russia seems for the time being the most reliable supplier and the dominant player in this energy battlefield. Only last month, Gazprom and Italian energy firm Eni unveiled a plan for a big new pipeline the so-called South Stream to take Russian gas under the Black Sea to Europe, a move that exposed the lack of unity inside the 27-member bloc over forging a long-term energy security policy, according to commentators.
The much-touted and European Union-backed Nabucco pipeline seems to be loosing momentum for the time being. Stretching 3,300 kilometers, the Nabucco pipeline would tap into the same gas fields in Kazakhstan and Turkmenistan that the Russian-Italian venture was eyeing. Nabucco is led by OMV of Austria, with partners including Botas of Turkey, Bulgargaz of Bulgaria, MOL of Hungary and Transgas of Romania.
Additionally, the Nabucco project is facing financial difficulties and it has already run behind the schedule.
The much shorter- 900 km (560 mile) -"South Stream" pipeline would come ashore in Bulgaria and then branch to Austria and Slovenia in one spur and southern Italy in another, Eni's CEO Paolo Scaroni told a news conference with Gazprom Deputy Chief Executive Alexander Medvedev at his side.
At least some of the gas will come from fields previously operated by bankrupt oil firm YUKOS. Russian energy minister Viktor Khristenko told Vesti-24 television that the 30 billion cubic metre pipeline could also supply Greece and Bulgaria.
European Union’s attempts to diversify energy sources away from Russia do not seem much successful so far. Last month, the European Commission gave conditional approval to Greece and Italy to limit third-party access to the so-called Poseidon gas pipeline-the underwater section that will connect Italy and Greece through the Adriatic Sea-and will be built and operated by Edison and Greece’s Public Gas Corporation or DEPA.
The exemption, however, is strictly and conditionally limited, as other parties in the region should be given access to use at least 10 percent or 0.8 billion cubic metres of gas per year of the pipeline’s planned capacity. Then again, it will be very interesting to see where Edison and DEPA are planning to bring the gas from because the EU’s Commission is linking conditional exemption to such criteria.
The derogation has been given to the Poseidon pipeline under the condition that “the gas in question originates from “non-traditional” sources of gas supply to the Italian and Greek markets, compared to “traditional sources”.
On the other hand, Edison is planning to begin supplying 8 billion cubic metres/year of gas from Azerbaijan to the Italian market in 2012 although talks with Azerbaijan have hit an obstacle.
“We plan to finish construction of the line in 2012 and to take gas from the second phase of Shah-Deniz production which should be available in 2012-2013,” Edison’s IGI project manager Elio Ruggeri told a CERA conference in Istanbul last month.
But he admitted that talks with Azerbaijan over the supply of gas were currently stalled. “We can start final negotiations whenever the Azeris are ready,” he said, explaining that the Azeri side still had some legislative and bureaucratic work to do before finalizing the talks. However, at the Institute of Energy for South-east Europe conference in Thessaloniki last Friday, Statoil’s Helge Billington explained that the gas quantities from the first phase of the Shah-Deniz field are all contracted out by Azerbaijan, Georgia and Turkey and excess capacity for European exports can only become available after 2012-2014, when the second phase of the project will go on stream.
In the meantime, Edison will have to negotiate a transmission agreement with Botas, the Turkish gas transmission company, as its plans to use spare capacity in Turkey’s existing transmission infrastructure to carry the 8.0 BCM per year and apparently this has already been agreed under a trilateral agreement between Turkey, Greece, Italy.
Italy’s gas demand is seen rising sharply in the next five years from around 80 BCM per year currently to nearly 112 BCM by 2012-2013. The need for direct gas supplies to Italy is imperative and industry observers reckon that more than one pipeline will be needed.
Indeed, Switzerland’s EGL announced last November its plans for the Trans-Adriatic-Pipeline (TAP) project which will transport gas from Thessaloniki to Italy’s port of Brindisi through Albania, via a submarine route considerably shorter than Edison and DEPA’s Poseidon.
While Edison and DEPA so far have not disclosed their sources of gas for their Poseidon pipeline, EGL last month announced it has already secured more than half of its annual 10 BCM of gas requirements via a 25-year-long supply contract from Iran, more in line with the EC’s criteria to grant exemptions for non-traditional gas sources.
Most energy analysts agree that from the multitude of the gas pipelines announced and promoted so far, only a fraction, perhaps one or two, will eventually be built as the paramount criterion is the availability of secure gas supplies. In this sense, only very few of the current players can claim to have access to sizeable gas quantities.