European pipelines in final push

Chris BRYANT          The Financial Times

At times the European Gas Conference in Vienna felt more like a television dating gameshow than a humdrum industry get-together.


It is make-or-break-time for Europe’s ambition to open up the so-called “Southern Corridor” – the bid to access alternative gas supplies in the Caspian region (which holds one quarter of the world’s reserves)  and thereby break the continent’s dependency on Russian gas.

Rival bids
Companies developing Azerbaijan’s Shah Deniz II gas field are due to finalise their allocation plans in the coming weeks.

With the clock ticking, the backers of rival European pipelines who convened this week in the Austrian capital were therefore keen to show themselves in the most flattering light.

The best-known of these projects is of course Nabucco – a 3900km, €7.9bn gas link that, in theory, could start bringing gas from the Caspian all the way to Vienna in 2015.


But smaller rival projects TAP (Trans-Adriatic pipeline – 10bcm-20bcm/yr), ITGI (Interconnector Turkey, Greece, Italy – 8bcm-12bcm/yr) are also in the running.


They argue that a shorter-route which makes use of existing infrastructure where possible (and upgrading it where necessary) would be more cost efficient.

(White Stream, another Caspian-EU gas pipeline project, routed via Georgia and under the Black Sea, sees itself as complementary to Nabucco)

Azeri gas pledge
Jose Manuel Barroso, European Commission president, returned from a visit to the Caspian earlier this month with a pledge from Ilham Aliyev, Azerbaijan’s president, to supply “substantial volumes of gas” to Europe.
However, cynics said the agreement was a triumph of style over substance.

Moreover, only around 10bcm of Azeri gas is currently thought to be up for grabs – sufficient to supply the smaller Southern Corridor projects but far less than Nabucco’s total 31bcm capacity.

The Nabucco consortium is therefore pinning its hopes on providing buyers with additional supplies from Turkmenistan and northern Iraq.

However,  for a variety of technical and political reasons these are likely to take several more years to develop – a worry for the Azeris who will not wish to shoulder the whole burden.

“There’s more gas [in the Caspian region] – the issue is when it can be made available,” Kjetil Tungland, TAP’s managing director, said.

Plea for unity
 The best-known of these projects is of course Nabucco – a 3900km, €7.9bn gas link that, in theory, could start bringing gas from the Caspian all the way to Vienna in 2015.


But smaller rival projects TAP (Trans-Adriatic pipeline – 10bcm-20bcm/yr), ITGI (Interconnector Turkey, Greece, Italy – 8bcm-12bcm/yr) are also in the running.

They argue that a shorter-route which makes use of existing infrastructure where possible (and upgrading it where necessary) would be more cost efficient.

(White Stream, another Caspian-EU gas pipeline project, routed via Georgia and under the Black Sea, sees itself as complementary to Nabucco)

Azeri gas pledge
Jose Manuel Barroso, European Commission president, returned from a visit to the Caspian earlier this month with a pledge from Ilham Aliyev, Azerbaijan’s president, to supply “substantial volumes of gas” to Europe.
However, cynics said the agreement was a triumph of style over substance.

Moreover, only around 10bcm of Azeri gas is currently thought to be up for grabs – sufficient to supply the smaller Southern Corridor projects but far less than Nabucco’s total 31bcm capacity.

The Nabucco consortium is therefore pinning its hopes on providing buyers with additional supplies from Turkmenistan and northern Iraq.

However,  for a variety of technical and political reasons these are likely to take several more years to develop – a worry for the Azeris who will not wish to shoulder the whole burden.

“There’s more gas [in the Caspian region] – the issue is when it can be made available,” Kjetil Tungland, TAP’s managing director, said.

Plea for unity
 Nevertheless, many delegates were surprised when Joschka Fischer, former German foreign minister and an advisor RWE ( a member of the Nabucco consortium) made a plea to bring the various European Southern Corridor projects all under one roof.


“We have to try to integrate several European projects into one. There’s a strong wish also in Brussels to do this, and I think this is doable,” Fischer said. “One project – that’s what I mean.”

A Nabucco spokesman quickly poured cold water on the suggestion but not before conference-goers had raised a collective eyebrow amid doubts about where all the gas would come from to supply so many pipelines.

Fischer said it was vital that Europe opened the Southern Corridor because the battle for Caspian, central Asian and Middle Eastern gas was now “a competition between east and west”.

Russian competition
But the various Southern Corridor projects are also in competition with Russia, whose proposed 63bcm/yr South Stream gas pipeline could one day bring more Russian gas to Europe via the Black Sea.

Critics say the project is designed chiefly to stymie Nabucco. In typically bullish form Fischer said that by definition South Stream was “not a European project” (although its consortium includes several European energy companies).

In response, Marcel Kramer, chief executive of South Stream, said its consortium simply desired a level playing field and audaciously invited conference-goers to the opening of his pipeline in 2015.

The next few weeks may determine whether he is forced to rescind that invitation.

Source:
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