x Abu Dhabi, UAEMonday 24 July 2017

Many twists and turns still to come for the Nabucco pipeline

The convoluted route of the Nabucco pipelineis intended to connect the two energy centres of Azerbaijan and Baumgarten.

From Baku in Azerbaijan to Baumgarten an der March in Austria is some 2,700km as the crow flies. But no bird would follow the convoluted route of the Nabucco pipeline which is intended to connect the two energy centres when it is completed in 2014. The gas pipeline - agreement for which was finally signed at a multi-national summit in the Turkish city of Erzerum last week - twists and turns so violently that its final length will end up closer to 4,500km. Just as many deviations and diversions are likely in the face of the complex political and economic obstacles to the arrival of central Asian gas in European markets. The Erzerum deal was backed by Turkey and the four other countries through which Nabucco will pass - Austria, Bulgaria, Hungary and Romania. It will be 50 per cent funded by the EU, with the balance coming from energy companies in those countries and in Germany. At a total cost of ?8 billion (Dh41.5bn), it is the EU's largest single energy infrastructure commitment, and, for geopolitical reasons, also has the backing of the USA and other western countries. Nabucco is the holy grail of western energy policy. It aims to tap the huge gas resources of central Asia and transport that raw energy to European consumers - without passing through Russian territory. Europe wants to free itself from the tyranny of Russian interference in its energy supplies, and sees Nabucco as the answer. But while attention at the signing ceremony was focused on the western end of the project, there was a gentle reminder that the gas itself has its origins in the "stans" of central Asia, and is subject to the geopolitical realities of the energy business in that fractious part of the world. The Iranians offered to supply some of the Nabucco gas from the terminal in Tabriz in the north of the country. Generously, Iran said it could make up 50 per cent of Nabucco capacity. While the West, especially the US, would not want to substitute reliance on Russian energy supplies for Iranian, the offer highlighted the big problem with Nabucco: how to find enough gas to push through to Baumgarten to ensure the project is viable. The crux of the difficulty lies in Baku, capital of Azerbaijan and once the energy capital of the world. In 1900, the region around Baku produced 50 per cent of the world's crude, and even today the skyline of obsolete derricks and the ubiquitous stench of petroleum testifies to the city's energy-rich heritage. At the heart of the Caspian region's vast oil and gas fields, Baku dominates the central Asian energy industry. Azerbaijan still has plenty of oil, even though it is technically harder to access than in the days when Soviet oilmen rapaciously drained it. The Apsheron peninsula, on which the Azeri city is situated, is the centre of a gigantic spider's web of oil and gas pipelines that will connect central Asia to Russia and Europe. In particular, it is intended to be the landing stage of the TransCaspian Pipeline (TCP), which aims to give Turkmenistan and Kazakhstan an outlet for their huge gas fields. The project is still at the planning stage, and will require massive financial commitments before work can begin. To hook all these supplies up via Baku, for onward shipment to Turkey and Europe, is an enormous technological and engineering challenge. But just as daunting are the political obstacles the project faces, the most significant of which lie in Azerbaijan. The Azeris have been dominated by their northern neighbours for centuries, first as Tsarist colonisers then as Soviet conquerors. An independent republic since 1991, Azerbaijan still fears the influence of the Russians, who regard all the former Soviet lands as their "near abroad" sphere of influence. The Russians were angered in 1994 when Azerbaijan signed the "deal of the century" to grant Western oil companies a major say in their exploration and production, but were unable to do anything about it then. But under presidents Vladimir Putin and now Dmitry Medvedev, Russia is much more assertive in its former backyard. Ilham Aliyev, president of Azerbaijan, knows he has to keep the Russians sweet on energy, or risk confrontation with them, even military intervention. The one-sided war between Russian and Georgia last year - which halted Azeri oil exports over the new Baku-Tblisi-Ceylan pipeline - was read by Baku as a sign of what Medvedev could do to disrupt their energy supplies if he chose to. The Russians could also use their proxies in Armenia - still theoretically in a state of war with Azerbaijan - to stymie Azeri energy exports. Earlier this month, just before the Nabucco signing, Aliyev travelled to Moscow to sign another deal with Medvedev, by which he promised to send some Azeri gas northwards on existing pipelines to the Russian energy giant, Gazprom. But there is a limit to how much gas the Azeris can produce, even from the abundance of the Shah Deniz field, or import across the Caspian. Hence the very real fears over their ability to fill the Nabucco pipeline. Signing the Erzerum deal was the easy part for Europe and its energy allies. There are huge imponderables over the eastern end of the Nabucco project, from the technical challenges of marshalling gas supplies, through doubts over Azeri ability to ship it, to the more-or-less open determination of the Russians and Iranians to disrupt the project. If gas arrives in Baumgarten in any meaningful quantity in 2014, many global energy experts will be very surprised indeed. fkane@thenational.ae