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    Central Asia
     Feb 10, 2012

Bulgaria at Euro-Caspian energy crossroads
By Robert M Cutler

MONTREAL - Bulgaria, in southeastern Europe, is fast becoming a fiercely fought over territory amongst competing projects aimed at transporting Caspian natural gas to Europe.

US Secretary of State Hillary Clinton has just visited the country and is sending her Special Envoy for Eurasian Energy, Richard Morningstar, to Sofia next week. Alexei Miller, chief executive of Russian gas giant Gazprom is also scheduled to visit next week, following completion of a visit by a trio of Bulgarian government ministers to Moscow.

Morningstar's visit will come in the wake of a decision three weeks ago by the Bulgarian cabinet to ban the use of hydraulic


fracturing ("fracking") technology by the US oil firm Chevron, after having awarded it a license to explore the potential of shale-gas reserves in the northeast of the country.

At stake is the geo-economic shape of the extended and complex regions around the Black Sea and Caspian Sea basins, stretching from southeastern Europe to Central Asia, not to mention the future of the energy ledger of the European Union, which already imports gas from Russia via the newly opened North Stream pipeline under the Baltic Sea to Germany.

The newly announced Trans-Anatolian Gas Pipeline (TAGP, running east to west across Turkey, also called TANAP after its initials in Turkish), agreed bilaterally between Azerbaijan and Turkey just weeks ago and to be four-fifths directly financed by Azerbaijan, has stolen a march on the long-planned multilateral Nabucco project, backed by the European Union.

When first announced at the end of December, the TAGP was assigned an initial design volume of 16 bcm/y. In January it was made public that the final capacity would be set at 24 bcm/y. This figure has recently been raised to 30 bcm/y, equivalent for all intents and purposes to Nabucco's projected design volume of 31 bcm/y.

At the same time, advocates of Russia's South Stream project are trying to get their foot in the door by the end of this year, claiming landfall in Bulgaria in order to circumvent conditions of the EU's new energy package. Yet it is difficult to see how South Stream would increase security of supply to Bulgaria, which already depends on Russia for 90% of its natural gas.

Although this represents only 10% of its total primary energy supply, half of that goes for electricity generation, another quarter for industrial production, and most of the remainder for transport systems. A third of Bulgaria's total energy consumption is sourced from highly polluting coat and peat, and nearly a quarter from nuclear plants. The desire to move to more environmentally friendly natural gas is clear.

A number of obstacles stand in the way of the successful completion of the South Stream pipeline. Perhaps the most notable is the same obstacle over which Russian political and gas industry officials have continually criticized the Nabucco project: no sources for the gas to be transmitted have been identified.

South Stream's projected volume has always been declared at 63 billion cubic meters per year (bcm/y), and it is now clarified that this would putatively consist of four 15.5 bcm/y strings. In practice, that could mean starting with one string of 15.5 bcm/y with the potential for scaling up if quantities ever become available.

Nor is the route definitely established. Up until the end of December, Gazprom had touted two legs for South Stream, one through southeastern Europe to Austria and the other across Greece to Italy. Six weeks after the inauguration of the present Greek prime minister, Lucas Papademos, a technocrat and political independent, Gazprom's Miller and Russian Prime Minister Vladimir Putin in a joint television appearance discussed with one another dropping the second of the two legs.

Yet four weeks later, after Miller met in Moscow with Antonis Samaras, the head of Greece's New Democracy party, the company issued a statement putting it back on the table. Two weeks after that, an unnamed former energy minister in Athens told the weekly New Europe that the construction of the southern branch would not begin before 2015 (if it ever did). Yet the design criteria for the South Stream pipeline remain officially unchanged.

It is of interest that in November last year, before the TAGP was officially announced, Bulgaria and Turkey agreed on a natural gas contract for supply of gas via the ITG to a 115-kilometer Interconnector Greece-Bulgaria (IGB). At the time, the volumes being discussed were on the order of 1-3 bcm/y, with the possibility this might rise to 5 bcm/y. That quantity exceeds Bulgaria's current needs and could therefore allow for gas being sold onwards to other southeast European countries.

A small additional number of relatively inexpensive reversible interconnectors in the region such as the IGB (such a the already completed Arad-Szeged line from Romania to Hungary) could implement a gas ring in Southeast Europe sourced from Azerbaijan.

Thus, although the Nabucco project increasingly looks to be falling by the wayside, the new TAGP project could in effect take its place, and Bulgaria could draw advantage from this development.

Dr Robert M Cutler (http://www.robertcutler.org), educated at the Massachusetts Institute of Technology and The University of Michigan, has researched and taught at universities in the United States, Canada, France, Switzerland, and Russia. Now senior research fellow in the Institute of European, Russian and Eurasian Studies, Carleton University, Canada, he also consults privately in a variety of fields.

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