Russian gas would put an end to 'Nabucco'
Material posted: Publication date: 31-05-2013

Grandiose plans of Europe in respect of the gas pipeline from the Caspian sea, which was to reduce the dependence of its Eastern States from Russia, may have been irreversibly upset even more ambitious Russian project.

As Azerbaijan nears a decision point on the question of which pipeline to choose for its future exports, the plan is Nabucco, which has long been a favorite of the European Union, can play a more modest TRANS Adriatic pipeline (TAP) via Greece to southern Italy.

In a complex equation based on politics no less than Economics, TAP is in a more advantageous position in comparison with the Nabucco pipeline to Austria, given the presence of the Russian project on construction of a $39 billion South stream.

"The question is, is that a viable Nabucco, if built "South stream", – says a senior energy analyst at the research center IHS Andrew Neff

The decision to choose between TAP and Nabucco is expected from the partners of the consortium "Shah Deniz", led by gas field operator BP and Azeri state energy company SOCAR, in June.

The European Union has no direct say in the choice, but his recent shift from supporting the "Nabucco" to "design neutrality" could play a significant role. Now the EU says that would be happy with any of the projects or even to both of them.

"There was a dramatic change," said Reuters Director for external relations of TAP Michael Hoffman.

Official representative Nabucco Christian Dolezal, however, said that the project still had strong political support.


Initially, the plan for Europe involved the construction of a single pipeline with a length of 3900 km from Azerbaijan, through Turkey and then through the Balkans. He was named "Nabucco" in honor of Verdi's epic with its rousing chorus, the founders listened to at the Vienna Opera in 2002.

Although the scope of the project with the participation of leading Austrian OMV and was reduced to 1,300-kilometer version, which is connected with the Turkish pipe, he continued to enjoy the favor of both Brussels and Washington.

And last but not least this was due to the fact that "Nabucco-West" was supposed to cross former Eastern bloc countries that are most dependent on Russia in terms of energy – even though initial Azeri gas supplies will provide just 2 per cent of the EU's needs.

The length of the TAP pipeline is only 800 km, including the land under the sea to southern Italy. Its leading shareholders are Swiss AXPO and Statoil, which has a stake in the Azeri gas fields.

The economic rationale seems to be relatively balanced in both projects.

The cost of the project can be estimated at less than $ 8 billion, according to estimates by an Azerbaijani expert, on TAP will be $ 500 million cheaper, but Nabucco could provide access to more markets.

"And that, both have advantages and disadvantages," says a leading researcher at the Center for strategic studies under the President of the Republic of Azerbaijan Gulmira Rzayeva.

All the above makes the policy even more important.

The trick

The choice in favor of TAP, which does not pass through the territories traditionally occupied Russia can be for Azerbaijan as a political ploy. The last in General was joined to the West, but not interested in conflict with its former Soviet master.

Russia has started building South stream in December and hopes to deliver to Europe gas well before 2019, when the European Union needs to come Azerbaijani gas.

Under the control of "Gazprom" 2500 km-long South stream will cross the Black sea and then will go the route close to the route of the "Nabucco-West". Plans for southern destinations, which could compete with the TAP, has been scrapped, which is another incentive for the rival Nabucco.

Benefit see and the countries of southern Europe.

Italy, which in the gas sector depends on Russia, from the politically unstable North Africa, is seeking to diversify supplies.

Making desperate efforts to exit the debt crisis, Greece would welcome additional cash income from the pipeline. Powerful Germany would be glad to everything that strengthens the Greek finances and reduce the likelihood of future cost of providing her with financial support.

A side benefit to the TRANS-Adriatic pipeline would be contributing to improving the level of cooperation between old rivals Greece and Turkey, said EU diplomats.

Bulgaria and Romania, the poorest European country, would appreciate the infrastructural investments in the case of installation of "Nabucco".

But their economy is not experiencing immediate pain, are of great concern to Greece, and through Bulgaria, Serbia, Hungary and Slovenia "South stream" also would bring economic benefits, even though it does not undermine the rule of Russia.

Washington is not so concerned about the pipeline routes of supplies to NATO allies, due to changes in global energy landscape caused by the mining boom offshore gas, which are pioneer in USA, as well as the increasing importance of liquefied natural gas, which can be delivered by sea.

In principle, the emergence of these alternative sources of gas have already caused controversy about whether long pipelines connecting end-users with relatively expensive contracts, to be justified on grounds of economy alone.


Tags: assessment , Russia , resources , gaz