x Abu Dhabi, UAEFriday 21 July 2017

Nabucco gas pipeline 'inevitable'

Region Middle Eastern gas delivered along the proposed pipeline would reduce European energy dependence on Russia.

The Nabucco pipeline project, which would link Caspian and Middle-Eastern gas suppliers to Europe, bypassing Russia, took a major step forward when five countries agreed on gas transit terms. The deal in Ankara, the Turkish capital, was signed by the five Nabucco member countries after months of delay amid concerns that Moscow was buying up crucial central Asian gas supplies as Europe hesitated in presenting a unified front on energy. The deal will allow the Nabucco consortium, led by the Austrian energy group OMV, to proceed with crucial negotiations for gas supplies for the ?7.9 billion (Dh40.37bn) project. Despite widespread doubts about Nabucco's viability, the European Commission president, Jose Barroso, said the project's completion was now "inevitable rather than just probable" and "of crucial importance for EU's and Turkey's energy security". Recep Erdogan, the Turkish prime minister, said at yesterday's signing ceremony: "The Nabucco project is being labelled a pipe dream. This project will be a success story that will prove the doubters wrong." Nabucco has attracted official support from the EU and US because of its potential to reduce Europe's reliance on Russia for a quarter of its gas. "Today, the European Union demonstrates unity of purpose on energy security and stands strongly with Turkey, Georgia and Azerbaijan," said Dick Lugar, a US Republican senator, who had been invited to the ceremony as an observer. Nabucco "is a signal to the world that partner governments will not acquiesce to manipulation of energy supply for political ends", Mr Lugar added. His remarks appeared to be aimed at downplaying concerns that the EU's lack of policy cohesion could hamper its efforts to diversify supplies, and at warning Russia not to use its huge oil and gas reserves and control over oil and gas pipelines to apply political pressure. In January, Russia cut off 20 per cent of Europe's gas supply for two bitterly cold weeks over a contractual dispute with Ukraine, a key transit country for Russian gas. That prompted the EU to pledge financial support for Nabucco. Last August, Russia waged a five-day war with Georgia that shut down the Black Sea port of Poti, from which Caspian oil is shipped to Europe and North America. Even after those developments, some of the Nabucco transit countries, including Turkey and Bulgaria, held talks with Moscow over gas supplies through the rival South Stream project to supply Russian and Central Asian gas to Europe through a proposed Russian-controlled pipeline under the Caspian Sea. The Turkish government, keen to maintain good relations with its neighbour and major trade partner, has argued that the two pipelines would be complementary. That increased fears that the Nabucco consortium would fail to obtain enough gas to fill the pipeline, which is scheduled to start delivering up to 31 billion cubic metres a year to Europe in 2014. Those doubts were heightened last month when Azerbaijan, a key Caspian gas producer, agreed to give Russia first rights to future gas output from the second phase of a project to develop the giant Shah Deniz gasfield. Yesterday, Natik Aliyev, the Azeri industry and oil minister, said Azerbaijan was interested in supplying Nabucco, as the Caspian country wanted to diversify its energy export routes. Turkmenistan, Egypt, and Iraq have also said they want to provide gas to the project. Iran said yesterday it could export large gas volumes to Europe through Turkey, without indicating whether it would specifically support Nabucco. Mr Erdogan said Turkey wanted Iran to supply gas to Nabucco "when conditions allow", but the US special envoy, Richard Morningstar, on Sunday repeated Washington's opposition to such an arrangement until it normalises relations with Tehran. The US and Iran are at odds over Iran's uranium enrichment programme, which Washington alleges is linked to covert nuclear arms development. Another problem that had been holding up progress over Nabucco was Turkey's efforts to negotiate a divisive side deal allowing it to take 15 per cent of Nabucco's gas supply at a discount to European prices. But on Sunday, the Turkish energy minister, Taner Yildiz, said Ankara had dropped the demand and that signing the accord would give Turkey access to European gas stores and the right to bid on up to 50 per cent of Nabucco's gas. Mr Erdogan said the Nabucco consortium would sign separate agreements over the next six months with the five participating countries to create a legal framework for the pipeline's construction. "The more steps we take, the more the interest of supplier countries will grow," he predicted. But Gordon Bajnai, the Hungarian prime minister, warned of "extremely difficult moments in the coming years that will require the highest level of commitment" if Nabucco is to be realised. The project's five member countries are Austria, Bulgaria, Hungary, Romania and Turkey. The Nabucco consortium's six partners are OMV, Hungary's MOL, Bulgarian Energy, the Romanian and Turkish pipeline companies Transgaz and Botas, and the German utility RWE. tcarlisle@thenational.ae