Just months before sellers of gas from a big new field in
the Caspian Sea are due to select a winner from three pipeline projects that
have been competing to carry gas into the European Union, a new pipeline
proposal appears to be gaining ground.
A consortium of energy giants such as BP PLC and Norway's Statoil ASA is
developing a $20 billion gas field called Shah Deniz II, offshore from
Azerbaijan's capital, Baku, and is expected to decide which pipeline project to
use to carry the gas to Europe in the first half of 2012. That gas is key for
Europe's efforts of increasing its energy security by diversifiying supplies
away from Russia.
Three projects--Nabucco, the Interconnector Turkey Greece Italy, or ITGI, and
the Trans Adriatic Pipeline, or TAP--have been competing for years to transport
that gas. However, in September--just weeks before an Oct. 1 deadline to
present offers on the transit terms--BP put forward another project, called
South East Europe Pipeline, which would move the gas from the EU-Turkish border
all the way to Austria, feeding the markets of Central and Eastern Europe, and
possibly the Balkans.
SEEP is at the moment more of a line on a map than a fully engineered project,
but the concept it represents is gaining ground in the pipeline battle.
Elmar Mammadyarov, the foreign affairs minister of Azerbaijan, explained in an
interview that one idea to bring his country's gas to Europe is to build a
dedicated pipeline across Turkey to the border with the EU.
It would then split up in two branches, one toward Greece and one to Bulgaria,
where it would split even further, "like a Christmas tree," feeding
Central European countries and the Balkans until it reaches Austria, the site
of one of the biggest European gas hubs, Mr. Mammadyarov explained in an
interview.
"Technically it is possible and from the financial point of view is also
one of the good ideas --not spending a lot of money," he said.
The pipeline would have a similar route to the bigger and potentially more expensive
Nabucco, which would cost more than EUR8 billion. But the innovative idea would
be that the capacity of the pipeline declines as it makes its way through
Europe, leaving gas in the national gas markets it crosses on its way up to
Austria.
Nabucco, on the contrary, is designed to carry 31 billion cubic meters of gas
annually from eastern Turkey all the way to Austria, betting on further gas
supplies from the Caspian, on top of the 10 bcm annually expected for Europe
from the Shah Deniz II field.
Experts are skeptical that more gas will be available in time for Nabucco, and
the companies developing Shah Deniz don't like Nabucco because they are afraid
that they will have to pay higher transit tariffs to cover for the resulting
spare capacity.
But the consortium seems to be keener on Central and Eastern Europe --where
most of the countries still heavily depend exclusively on gas from Russia-- as
a market for its gas, rather than the alternative route going to Greece and
Italy. Because that's the region most dependent on Russian gas imports, it's
the area where diversification of supply is really valuable.
On top of that, concerns are emerging about the Greece-Italy route and these
countries' future market potential.
ITGI is still the most advanced project, but the financial crisis that's taking
a heavy toll on Greece and Italy is raising concerns about the future gas
demand in these two countries, Mr. Mammadyarov said. He didn't elaborate on
TAP, which also has Italy as its ultimate market.
Corporate uncertainties surrounding ITGI's sponsors could also be taking a toll
on the project. Its Italian sponsor Edison is the focus of a battle for control
between its Italian and French shareholders, while the Greek government is
planning to sell most of its stake in DEPA, as part of an effort to raise cash
and cover its debt.
TAP has recently announced that its pipeline would start closer to the
Turkish-Greek border, a move interpreted as an effort to avoid operations in
Greece as much as possible.