Nabucco transit deal: Show me the money and supplies

Representatives from the five Nabucco transit countries — Austria, Turkey, Hungary, Bulgaria and Romania – were expected to sign in Ankara on July 13 a “milestone”  treaty on the EU-backed gas pipeline project, but the planned fanfare ceremony will do little to ease supply and financing concerns as Russia’s rival South Stream pipeline moves ahead. Germany is also a project partner in Nabucco, but has no transit role. Former German foreign minister Joschka Fischer was appointed as a “political communications advisor”  for the pipeline last week.

The European Commission hailed the treaty. “It’s a step in the right direction. There is still work to do but it’s a very important step. It’s a milestone actually in the realisation for Nabucco,” Ferran Tarradellas Espuny, spokesman for EU Energy Commissioner Andris Piebalgs, told New Europe on July 8.

The signing of the Nabucco transit agreement was delayed by demands from Turkey that it uses 15 percent of the planned pipeline’s 31-billion-cubic-metre capacity throughput to fulfill its domestic needs. “It’s important to underline that the question of security of supply of Turkey has been taken into consideration,” Tarradellas Espuny said.

European Commission President Jose Manuel Barroso said the Nabucco project was crucial for Europe’s energy security. But Konstantin Simonov, the general director of the Russian National Energy Security Fund, told New Europe from Moscow on July 9 Nabucco’s capacity will not be enough to fulfill Europe’s increasing energy needs. He said the EU has thrown down the gauntlet, challenging Russia to push ahead with its very own South Stream project. “Barroso wants to show to European countries that he is very active in this  project of so-called energy security of Europe. But in my opinion it is a serious waste of time and money and resources because this agreement is only a piece of paper. This agreement will not help Nabucco. Barroso only wants to show to (Russian Prime Minister Vladimir) Putin that ‘You see now we have this project.’ And Europe is involving Russia in this dangerous game,” Simonov said.

“Russia wants to react and that is why we go to Azerbaijan and ask Azerbaijan to sell this gas from Shah Deniz to us,” he said. Russian gas giant Gazprom in late June signed a document with Azerbaijan, agreeing to buy a modest 500 million cubic metres of Azeri gas from next year, and would increase these volumes going forward. While no details were disclosed about the price during the signing ceremony, according to press reports, Russia will purchase Azerbaijani gas at a record price of 350 USD per 1,000 cubic metres. Simonov said Azerbaijan can demand an even higher price to supply Nabucco.

“This (Russian) agreement with Azerbaijan is not the end of the Nabucco project. But what will be the price?” he asked. “(Azerbaijan President Ilham) Aliyev will try to blackmail Russia with Europe and Europe with Russia. It’s a very simple scenario,” Simonov said.

Nabucco Gas Pipeline International GmbH spokesman Christian Dolezal downplayed the Russian-Azerbaijan agreement, pointing out that the gas from Azerbaijan’s Shah Deniz II is not yet contracted.

“The (Nabucco) gas traders, who are now negotiating with the Shah Deniz consortium, will then make the open season process,” he told New Europe on July 8, adding that preparations for the open season process will start after the intergovernmental agreement is signed on July 13.

The EU energy spokesman said that after the intergovernmental agreement is signed, companies could go to Azerbaijan and buy gas and then with the contacts the Azerbaijanis can start to develop the fields.

However, Chris Weafer, chief strategist at Moscow’s UralSib bank told New Europe that “after Russia’s deal with Azerbaijan it seems that Gazprom is the preferred partner for Shah Deniz II output and Turkmenistan is out of reach with either a deal with Iran or a resolution to the status of the Caspian.”

Kostis Geropoulos

Source: New Europe, July 12 - 25, 2009