VIENNA/ANKARA – A transit
deal for the Nabucco gas pipeline will bring political fanfare at its signing
next week but critical supply and financing questions may thwart progress as a
rival Russian plan edges ahead.
The Vienna-based Nabucco
consortium aims to reduce Europe’s energy dependence on Russia by transporting liquefied natural
gas from the Caspian and Middle East through the planned pipeline from 2014.
Some analysts say Nabucco
has better prospects than Russia’s South Stream pipeline in the long
run but that the consortium, hampered by the competing interests of its member
companies in six states, lacks assurances and momentum to get suppliers on
board.
“The major obstacles to
Nabucco still stand and supply is No 1,” said analyst Ana Jelenkovic at the
Eurasia Group.
“Without securing the
supplies you can’t have the pipeline, but without the pipeline you can’t secure
the supplies. They don’t actually have anything [on supply] signed.” Transit
countries Turkey, Bulgaria, Romania, Hungary and Austria will sign an accord on July 13 in Ankara. While it may help financing and
reassure supplier countries, it will not be a big leap forward for a project
already subject to delays.
A final financing decision
for the pipeline, due next year, will be a solid step but this also depends on
the supply issue.
Nabucco wants to pump 31
billion cubic meters of gas to Europe annually to meet some 5 percent of gas needs. It
could ship gas from Iraq, Egypt, Iran, Azerbaijan and possibly Russia and Turkmenistan.
Iraq’s Kurdistan region in May heralded a plan to export gas
from the semi-autonomous area through Nabucco but the central government
rejected the scheme.
The South Stream project
moved forward earlier this month when Azerbaijan promised Russia’s Gazprom priority in buying gas
from the second phase of the major Shakh Deniz project.
Gazprom’s more practical
strategy – signing basic cooperation agreements with supplier countries – gives
its pipeline a competitive edge by building relationships between companies,
Jelenkovic said.
“They are not an
intergovernmental agreement but they are strong political steps toward building
a pipeline,” she said.
She added that while the
2006 gas dispute between Russia and Ukraine led to a big push for
diversification, some countries in Southeast Europe were more cautious after a similar
row this year, especially the ones heavily reliant on Moscow for gas.
“It is unrealistic for
these countries to say they are going to be able to be independent from Russian
gas, with or without Nabucco... [Energy security] is more important to
them.”
Turkey, important for both projects and with few
hydrocarbon resources of its own, is keeping its options open. It has already
held up progress on Nabucco by demanding 15 percent of the pipeline’s capacity
for domestic usage or re-export.
“Right now we are working
on Nabucco, but will also evaluate South Stream with the Russians,” a Turkish
government source said.
“The important thing is
ensuring supply for Turkey,” another Turkish government source
said. “This is why we don’t see South Stream and Nabucco as rivals.” Romania has also signaled it has horizons
beyond Nabucco, saying in May that it will consider other projects if talks do
not push forward. Russia has said it is close to signing up Austria and Russia for South Stream.
Analysts say that although
the projects encourage competitive posturing from the companies and countries,
they are not necessarily fighting over supplies and have different aims.
“In a sense, it is
competing if you want to avoid Russia... but the major objective for Russia is
not to compete with Nabucco but to get gas out of the Ukrainian pipeline system
and to put it into South Stream,” said Susanne Nies at France’s IFRI think
tank.
But analysts do not see
both succeeding in their current form. “The market would not support more than
one pipeline,” said Mikhail Korchemkin from East European Gas Analysis.
Nabucco has to deal with a
range of countries unable to put their own interests aside in order to push the
pipeline forward, giving state-controlled giant Gazprom another advantage. But
while Nabucco’s problems are considerable, including how it would transport gas
across the Caspian
Sea,
analysts say Gazprom may have problems affording South Stream.
“Gazprom and the countries
in the project can move faster than a commercial project. But a money-losing
project cannot run forever,” Korchemkin said.
Nabucco is expected to cost
7.9 billion euros ($11.04 billion) and with its Europe-wide backing should find
it easier to secure funding in the long run, analysts said. Gazprom is Russia’s most indebted company with debts
of over $40 billion, excluding its former banking arm, Gazprombank. It wants to
invest 10 billion euros in South Stream but lower energy prices and depressed
exports have made business tough.
For several of the
countries eyeing both projects, Nabucco will also bring more benefits,
Korchemkin said.
“Turkey is unable to get gas from South
Stream, so it will benefit from Nabucco much more than from any other project.”
The attraction of Nabucco is also stronger for some supplier countries, he
said. “It is very clear that Nabucco will open the whole of Europe for Turkmenistan,” he said. “It is a very
important to step toward Turkmenistan.”
(as published in the newspaper "KATHIMERINI", 10/07/2009)