20 Mayıs 2013 Pazartesi

Nabucco West and TAP: Going head to head

Amanda Paul     Today's Zaman

At the end of June, the long-awaited decision regarding which pipeline will be selected to transport natural gas from Azerbaijan’s Shah Deniz II field across Turkey to the EU market will be made.
This decision will be followed by the final investment decision in late 2013. Production is expected to begin in 2018 at some 16 billion cubic meters (bcm) per year: 10 bcm for Europe and 6 bcm for Turkey.

Last year the field of runners was narrowed to two: Nabucco West and the Trans-Adriatic Pipeline (TAP). The available gas is only enough to fill one of them. Both projects not only have economic but also political implications.

Officials from both Nabucco West and TAP are currently engaged in major lobbying campaigns to promote their respective projects to the Shah Deniz partners, the Azerbaijani government and the developers of the proposed TANAP pipeline across Turkey that would feed into their projects. While the Shah Deniz II Consortium will present their opinion to Azerbaijan over which pipe should be chosen, Azerbaijan is not obliged to follow this advice.

Nabucco West has always been labeled a geostrategic project. It would ship gas from Turkey’s western border via Bulgaria, Romania and Hungary and into the Baumgarten hub in Austria and into Central and Eastern Europe where it is badly needed with many of the countries heavily, or in some cases fully dependent, on Russian gas.

TAP would bring gas across Greece to Italy.  However, the recipient countries do not urgently require further diversification of their gas supplies. Italy is quite saturated, with gas coming from several pipelines and liquefied natural gas (LNG) from North Africa, Russia and the Middle East. Bankrupt Greece regards TAP as a good opportunity to help drag the country out of its economic crisis and turn Greece into a strategic transit point. Greek Prime Minister Antonis Samaras is due to visit Azerbaijan shortly to lobby for TAP. Azerbaijan is interested in expanding its strategic cooperation with Greece, including possibly buying up Greece’s DESFA pipeline, while also having an interest in upstream projects and investing in other sectors too.

The selected route is supposed to be the most commercially viable and the selected market able to offer to the seller’s long-term security of demand for a period of at least 20-25 years. While presently TAP is more commercially viable -- the Nabucco offer currently has a negative revenue flow and a high transportation tariff -- at the same time TAP has lagged behind in terms of certain legal preparations, and it does not enjoy the same political support as Nabucco West, which is backed by an inter-governmental agreement. Moreover, while TAP may be an attractive corporate business project, it does not reflect the strategic goals and priorities that had inspired the European Commission to design the Southern Gas Corridor. The Nabucco Consortium members have called on the EU to back their project, underlining the strategic rationale of the project and the European Commission’s own criteria.

Nabucco West is not appreciated by Russia, and Moscow has tried to erode support amongst the countries involved. With Russian gas currently representing some 30 percent of all EU gas imports, it is Russia’s largest export market. Meanwhile, the Russians are also moving ahead with their South Stream project that they claim will be on line in 2015 before Nabucco and that will bring further volumes of Russian gas to the EU market.

As for Azerbaijan, Baku’s official position is that both pipelines will be judged pragmatically on a commercial basis, ruling out political considerations. Yet clearly there will be political considerations that could tip the decision, and key meetings will take place between Brussels and Baku in the coming weeks.  Moreover, the EU and Azerbaijan are moving ahead with talks on a new strategic relationship that aims to underline the importance of the EU-Azerbaijan partnership, while Baku would clearly welcome greater support from the EU on the issue of its territorial integrity in terms of explicit recognition -- something that the EU has so far found impossible to do.

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