Pipelines enter post-Nabucco
era By
Vladimir Socor
For more than a decade,
Nabucco was the only pipeline project (and lately,
the frontrunner project) for transporting Caspian
gas to the European Union. Nabucco relied
exclusively on Azerbaijani gas for the pipeline's
first stage (the hopes to add gas volumes from
northern Iraq proved unrealistic in any usable
time-frame).
The European Commission
worked hard to align the financing and gas supply
guarantees for Nabucco, a strategic project on
three counts: its design capacity (31 billion
cubic meters [bcm] annually), its market
destinations
(Bulgaria-Romania-Hungary-Austria-Germany, all of
which need diversification from Russian Gazprom),
and its role to provide a transportation solution
for Azerbaijani and Turkmen gas through the same
pipeline.
The European Commission's
efforts notwithstanding, Nabucco lost momentum
and, ultimately, credibility in its existing form. The
tipping point may be traced
to November-December 2011, when several adverse
developments converged.
The
European financial crisis deepened (and the
prognoses worsened), indefinitely postponing any
decisions by lending institutions to finance
Nabucco. Nor did the project's management come
forth with a long-expected correction to its cost
estimates. The Shah Deniz gas producers'
consortium in Azerbaijan could no longer postpone
the investment decision in that project's Phase
Two, which necessitates determining the
transportation solution in early 2012.
With
that clock ticking, Nabucco was seen to be far
from ready with the solution. Conversely, the
Nabucco project's planning assumptions outran the
slow development of a trans-Caspian solution for
Turkmen gas.
Ultimately, British Petroleum
and Azerbaijan's State Oil Company (the most
influential shareholders in the Shah Deniz
producers' consortium) offered in October and
December 2011, respectively, transportation
solutions to replace Nabucco outright.
BP's
concept, the South East Europe Pipeline (SEEP),
however nebulous at this stage, would eliminate
Nabucco in its entirety, replacing it with a
non-strategic, 10 bcm per year concoction of other
owners' pipelines along Nabucco's original route.
BP is expected to develop this concept into a
project.
The Azerbaijan-Turkey
project, the Trans-Anatolia Gas Pipeline (TAGP;
Turkish acronym TANAP), would replace Nabucco
across Turkey's territory, with a planned capacity
of up to 30 bcm per year, comparable with
Nabucco's in strategic significance. This would
necessitate one or several continuation pipelines
into EU territory. A reconfigured Nabucco could
become one such continuation pipeline within the
EU, whether under the Nabucco brand or a different
name.
Nabucco's six shareholders
are staying with the consortium and the project
(while the Austrian management is redoubling
promotional efforts). No shareholder would quit
the Nabucco consortium. However, Nabucco's German
shareholder RWE is multiplying its public
overtures to TAGP. Turkey's government (also a
Nabucco shareholder through Botas) announces that
it has done "more than its share" for Nabucco and
is "prioritizing" TAGP, which is "easier to
implement" than Nabucco.
Romania, historically the
most loyal partner in the Nabucco consortium, is
drawing its own conclusions from Nabucco's loss of
momentum. Bucharest seeks to revive the AGRI
proposal for liquefied natural gas (LNG)
transportation from Azerbaijan via Georgia and the
Black Sea to Romania. AGRI is yet another
competitor (albeit a small one) against Nabucco
over Azerbaijani gas.
TAGP does not invalidate
Nabucco's basic rationale. At its core at least,
that rationale is common to Nabucco and TAGP:
transporting Azerbaijani and, potentially, Turkmen
gas to Europe (rather than Russia) through a
dedicated transit pipeline, on a route outside
Russian control. However, Nabucco seems far from
ready to proceed with implementation, while
Azerbaijan is capable of implementing its TAGP
project without delay from its own resources.
Emerging as a significant "gas nation", Azerbaijan
could no longer wait indefinitely for Nabucco to
proceed.
Gas extraction in Azerbaijan
is expected to reach 50 bcm annually by 2025, as
new fields come on stream in addition to Shah
Deniz. The lion's share of that production will be
available for export to points west (Georgia,
Turkey, Europe). At present, BP and possibly other
Shah Deniz consortium members want a quick
decision in early 2012 on how to sell those 10 bcm
post-2017. Azerbaijan, however, must plan for the
longer term and the larger volumes.
Azerbaijan holds the main
cards as gas producer country, with cash reserves
to build a pipeline that Europe seems unable to
finance, and coherent planning that eludes
Europeans outside the European Commission.
Thanks to Azerbaijan,
moreover, Turkey can finally advance toward its
goal of becoming a transit country for Caspian and
Mideastern gas to Europe. Other transit projects,
on which Turkey had based that hope, never came
close to implementation via Turkey (Russian Blue
Stream Two, Iranian gas, Nabucco, Arab Gas
Pipeline from Syria) while gas projects in
northern Iraq or offshore Cyprus look unrealistic
for the foreseeable future.
Thus
far, it is mainly Azerbaijan that has enabled
Turkey to become a transit country for oil
(Baku-Tbilisi-Ceyhan pipeline) and it is now
poised to make Turkey into a major transit country
for gas. Ankara could jeopardize that prospect,
however, in case it reverts to its former
ambitions to become a "hub" country, rather than a
transit country.
Caspian gas politics and the
investment decisions are clearly moving into a
post-Nabucco era. Among the five rival solutions
(TAGP, SEEP, Nabucco, ITGI, TAP), the
Azerbaijan-led TAGP holds an unmatched combination
of comparative advantages. Baku's decision to
proceed with TAGP in partnership with Turkey has
cut the decade-old Gordian knot of Caspian
pipeline projects.
Vladimir Socor is a
Senior Fellow of the Washington-based Jamestown
Foundation and its flagship publication, Eurasia
Daily Monitor, and is an internationally
recognized expert on the former Soviet-ruled
countries in Eastern Europe, the South Caucasus
and Central Asia. Socor is a regular guest
lecturer at the NATO Defense College and at
Harvard University’s National Security Program’s
Black Sea Program. He is a Romanian-born citizen
of the United States based in Munich, Germany.
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