20th Feb 2020

EU's gas pipe to Caspian Sea faces make or break decision

  • Nabucco countries agreed last year on the legal regime for the pipeline (Photo: Nabucco Consortium)

Countries bordering the Caspian sea need to sign supply contracts this year for Europe's long-planned Nabucco gas pipeline if the project is to go ahead, with a ‘big push' expected from the European Commission and member states involved, one of the stakeholders told this website.

Eight years into the preparation phase of the EU's most ambitious pipeline project, stakeholders are now increasingly nervous about securing the necessary gas supplies from Caspian littoral countries to make the investment worth while.

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"We are basically sitting at the borders of Azerbaijan and Turkmenistan and waiting. We're in discussions, but we need now to pull this together to get the supply commitments," Jeremy Ellis, head of business development at German energy company RWE, one of the Nabucco stakeholders told EUobserver in a phone interview.

The two countries, both of whom border the sea, have grown increasingly wary of the actual construction of the pipeline, as the years went by without the project coming to pass.

"The main hurdle now is giving Caspian producers the confidence that Nabucco is coming, because it is a big decision for them, to start committing these resources westwards," Mr Ellis said.

One argument in favour of the project, in the businessman's view, is that Turkey has finally ratified a key agreement on transit conditions for the pipeline, which was sealed last year in Ankara between the five states involved: Turkey, Bulgaria, Romania, Hungary and Austria.

More political backing, with a planned visit to the region by both the European Commission President Jose Manuel Barroso and energy commissioner Gunther Oettinger is also aimed at pushing things forward.

The commission earlier this month approved financial support to the tune of €200 million.

"We are going to see a lot more visibility and a big push in 2010 from the European Commission in helping us to pull this over the line. Everything that's been requested from the supplier countries, we've delivered. Now people need to make some decisions," he said.

Energy commissioner Oettinger however admitted that the EU aid may be used elsewhere if Nabucco does not go ahead this year.

The 3,300-kilometre-long pipeline would deliver 31 billion cubic metres annually, mainly from Azerbaijan and neighbouring Turkmenistan, with the possibility of including Iraqi and Egyptian gas at a later stage.

The confidence problems in Caspian littoral countries towards the European project are re-inforced by Russia's promotion of a rival pipeline, South Stream, which would run on the seabed of the Black Sea and redistribute the same Caspian gas via Russia.

Moscow is not the only competitor of the EU's central Asian energy ambitions. At the end of last year, China also scored against Europe's interests when it inaugurated a major new gas pipeline from Turkmenistan, pumping 40 billion cubic metres a year.

However, the Nabucco people remain convinced that their project will bring Caspian littoral countries a better deal.

"It is a question of choice: Nabucco offers the cheapest transportation route directly to Europe and the best value for their gas," Mr Ellis said, while agreeing that economic rationale sometimes yields to political decisions, especially in that region.

Russia not on board

Meanwhile, a Russian minister has strongly rejected the idea of his country joining Nabucco, an idea floated by Gazprom's Italian partner in the South Stream project, ENI.

"We are not discussing these issues at all," energy minister Sergei Shmatko told reporters in Moscow. He added that South Stream was "more competitive" than Nabucco, but maintained that they were not "rivals."

Russia has gas to fill the pipeline and has signed agreements with transit countries for the onshore section of the link, Mr Shmatko said. Austria, the proposed terminus country for South Stream's northern branch, has yet to sign an agreement with Russia.

In the Nabucco camp, however, South Stream is still seen as "years behind" the European project and costing at least twice the price of the onshore pipeline.

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