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    Central Asia
     Apr 26, 2012


Yusufov fights to keep bid for DEPA alive
By Robert M Cutler

MONTREAL - An investment vehicle created by a former Russian energy minister and Gazprom director has appealed against its exclusion from bidding for the Greek public gas utility DEPA. Igor Yusufov's Fund Energy has been suspected of being Gazprom's "Plan B" in the stakes for DEPA, which is being privatized as a result of the crisis in Greek government finances. Yusufov is "part of Russian Prime Minister Vladimir Putin's inner circle, and has already been active in Cyprus", according to the Athens newspaper Kathimerini.

Gazprom's interest in DEPA stems from the Greek utility's participation in the Interconnector Greece-Italy (IGI) project, a planned natural gas pipeline that has lost out against the Trans-Adriatic Pipeline (TAP) in the competition for candidacy for the

 

"western route" for Azerbaijan's offshore Shah Deniz gas to Europe.

That interest is present because of Gazprom's projected South Stream pipeline foresees one of its two branches eventually crossing Greece into Italy to penetrate the Southern European market.

South Stream's two branches, one into Southeastern Europe (via the Black Sea to Bulgaria through the Balkans to Austria) and the other into Southern Europe (via Greece and Italy), are supposed to transport up to 63 billion cubic meters per year (bcm/y) of natural gas from Russia. Putin has accelerated the first pipe-laying to December 2012 in order to seek to circumvent the application of new EU anti-trust rules, scheduled to enter into force in March next year, to the project and to Gazprom's participation in it.

The Shah Deniz consortium, for its part, is now deliberating over the candidate for the "northern route" from Turkey into Southeastern Europe. Once this is decided, it will make the final choice between the western route (ie, TAP) and the northern route's candidate.

The IGI was planned to carry 10 billion cubic meters per year (bcm/y) or natural gas for 810 kilometers, including the 220-kilometer "Poseidon" pipeline from Igoumenitsa in Greece to Otranto in Italy underneath the Ionian Sea. The TAP project on the other hand is 42.5% owned by the Norwegian firm Statoil, which also holds 25.5% of the Shah Deniz consortium, and while planned for 10 bcm/y in the first instance is also to be designed for later doubling of capacity to 20 bcm/y.

Meanwhile the South Stream principal is seeking to confuse the issue in Southeastern and Central Europe by announcing one day that the first section will be laid in Bulgaria before the end of the year, then several days later that the first section will be laid in Serbia, and then several days after that, that it will be laid in Austria.

The South Stream pipeline is an exclusively political project that will never find a sound commercial basis nor return its capital investment, Mikhail Krutikhin, an independent energy analyst of RusEnergy told Moscow newspaper Nezavisimaya gazeta. He estimates that the total cost of South Stream's construction could reach US$40 billion.

That was the case with the Blue Stream pipeline, constructed under the Black Sea also by Gazprom in cooperation with the Italian company Eni, at the end of the 1990s. The goal of Blue Stream, which has never reached full-capacity transmission and has not returned its economic investment, was to prevent construction of the Trans-Caspian Gas Pipeline (TCGP) project then being promoted by US-based companies GE Capital and Bechtel (later with the participation of Royal Dutch Shell).

The South Stream project began over the course of the last decade as a similar maneuver against the Nabucco pipeline project, the original 31 bcm/y volume of which was predicated upon availability of natural gas from Turkmenistan that would arrive by way of a reinvigorated, now European-sponsored TCGP.

Important progress towards the new EU-backed TCGP continues to be made, and the head of Azerbaijani state company SOCAR recently announced in Baku that Turkmenistan has agreed in principle to make at least 10 bcm/y available to Europe through such a means, pending conclusion of appropriate political and industrial contractual guarantees.

With the Azerbaijani-Turkish agreement to construct a Trans-Anatolian Gas Pipeline (TAGP, also called TANAP after its initials in Turkish), Nabucco has now been reduced to a "Nabucco West" project concentrated in Southeastern and East Central Europe, where it is competing with a BP-sponsored South East European Pipeline (SEEP) for Shah Deniz's "northern route" designation.

South Stream is driven on the one hand by Putin's obsession with circumventing Ukraine for Russian gas to Europe. Its construction would complete a pipeline pincer movement on Central Europe, of which the already operating North Stream, terminating in Germany from Russia under the Baltic Sea, is the other prong. The figurative target of the two prongs would be the Baumgarten distribution hub in Austria, but the EU has thrown out Gazprom's attempt to purchase half the hub's assets already on antitrust grounds.

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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