Sat, May 26 2012

The Nabucco alternative

How real are Europe's hopes for natural gas diversification?

Fri, Jan 16 2009 10:00 CET 3072 Views
The Nabucco alternative

Plans for gas diversification, backed by Europe and by the United States, are, theoretically at least, the only way to ensure constant, reliable and cheaper energy supply for the continent and Bulgaria in particular. Europe  wants to reduce its dependence on the 140bcm (billion cubic metres) of gas it currently receives from Russia.

The idea is to build a new pipeline, which is not controlled by Gazprom, the Russian monopolistic company that already controls 145 000km of gas delivery systems. The new pipeline would be built on the strategic stretch between Russia and Iran, the two countries with the world's largest reserves of gas, to central Europe. "If we have a dominant company like Gazprom trying to influence all inroads of gas to Europe, we need to develop an alternative to the supply of gas from Russia," says a senior European Commission official involved in energy policy. Given the worsening fallout from the Russia-Ukraine dispute, as well as the impact of last August's Russia-Georgia war on Caspian energy security, the Europeans are trying to accelerate the Nabucco plans.

"We have good reason to believe that Nabucco will fly," says Reinhard Mitschek, executive manager of the Nabucco consortium as quoted by the Guardian.

The Nabucco pipeline project, however, appears fundamentally flawed from the outset. "This is an attempt at reverse engineering in pipeline development," said a senior industry source. The worry is that before countries commit themselves to ivesting billions in building a complex pipeline network and installation, they have to find the resources first, or in this particular case - the gas - and then build the pipeline. With Nabucco it is the other way around.

Pierre Noel, an energy analyst at the European Council on Foreign Relations, claims that the concept is flawed because it is ludicrous to imagine that once you build a pipeline over a land that has little or no resources, the gas will start to flow. Yet this appears to be what Brussels is counting on - the one feasible alternative route of gas diversification that will save Europe from the monopoly of Gazprom and the new potent Russia that has been using its vast supplies of energy as a means of policy making.

Nabucco was originally planned to transport natural gas from Turkey to Austria, via Bulgaria, Romania, and Hungary, running from Erzurum in Turkey to Baumgarten an der March, a major natural gas hub in Austria. This pipeline is a diversion from the current methods of importing natural gas solely from Russia which exposes EC to dependence on the Kremlin and the whim of its practices. The project is backed by the European Union and the United States. The Americans, in particular, have always insisted that Europe - and particularly Bulgaria - ought to diversify their supply and not rely solely on one source. According to Eurasianet.com, the pipeline will connect Erzurum with the Tabriz-Erzurum pipeline, and with the South Caucasus Pipeline, connecting Nabucco Pipeline with the planned Trans-Caspian Gas Pipeline.

Construction of the pipeline has been postponed many times, principally because it appears to be a highly risky business calculation. From 2008 it has been forced back to 2010, and this, of course, is far from certain. It is estimated to cost eight billion euro. Brussels has already spent millions of euro on research for a pipeline from Turkey's eastern border through Bulgaria, Romania, and Hungary into Baumgarten on Austria's border with Slovakia.

The paramount question remains: is Nabucco worth all the effort?: "The most important issue regarding this project is to obtain enough gas," said Elmar Mammadyarov, Azerbaijan's foreign minister, as quoted by the Guardian. "This gas is expected from Azerbaijan, but Gazprom is competing fiercely for the Azerbaijani prize in a bidding war with the Europeans, offering above-market prices for the gas while the Kremlin dangles the political carrot of arranging the return of the disputed enclave of Nagorno-Karabakh to Baku's control. The Russians have offered a deal, but there are different options on the table. At the end of the story, it's our gas."  


Bulgarian President Georgi Purvanov has been one of the main campaigners for the Nabucco project despite the opposition's claims that he has had Russia's South Stream project as a priority.

The end of 2008 saw Purvanov visiting several countries that could potentially provide natural gas supplies for Nabucco. On December 19 he paid a visit to Turkmenistan where, on conferring with his counterpart Gurbanguly Berdimuhamedow, he said that Bulgaria was ready to buy two billion cu m of natural gas from the country every year. Turkmenistan has the world's fifth-largest reserves of natural gas and only its underdeveloped pipeline infrastructure prevents it from being a more important player on the global market.

On December 4 Minister of Economy and Energy Petar Dimitrov met Egyptian petrol minister Sameh Fahmi to negotiate the supply of one billion cu m of natural gas from Egypt after 2011. The supply will be made feasible via pipelines running through Greece, Turkey and Italy, although an alternative route is also possible through the Nabucco gas pipeline. In January 2009 Bulgarian Prime Minister Sergei Stanishev will visit Egypt where he will complete and sign a memorandum of co-operation with Egypt - specifically in the sphere of energy.

Earlier in 2008 Bulgaria had sealed gas supply deals with Azerbaijan and Uzbekistan.

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