Gas pipeline deal
July 13, 2009
The prime ministers of Turkey, Austria, Bulgaria, Romania and Hungary signed the deal in Ankara on Monday to allow the Nabucco pipeline to cross their countries.
Turkey's Prime Minister Recep Tayyip Erdogan said the deal was a "historic moment."
The pipeline is expected to pump as much as 31 billion cubic meters from the Caspian Sea to Austria via Turkey and the Balkans, bypassing Russia, in what is seen as a bid by the EU to wean itself off its dependency on Moscow's supplies.
Europe has suffered from almost annual spats between Russia and its transit countries, specifically Ukraine, which have left some EU countries with drastically reduced oil and gas supplies, sometimes in the depths of winter.
The Nabucco line is expected to be the first move away from the Russian supply line and is seen as a rival to Russia's South Stream project. That project has been developed by Russian gas giant Gazprom and Italy's Eni, which will channel Russian gas through Bulgaria to Western Europe under the Black Sea.
The Nabucco pipeline is meant to become operational in 2014 and estimated to cost 7.9 billion euros ($10.9 billion).
Two European banks have expressed readiness to support the project financially, but analysts say securing the funds could be difficult amid the global economic slowdown, and point out that there's uncertainty as to who the main suppliers will be.
"Even if the necessary financing is found after some delay, there is still the big question of procurement" of gas, said Necdet Pamir, a Turkish energy expert.
But the project appeared to get a boost Friday when Turkmenistan's President Gurbanguly Berdymukhamedov said his country was prepared to supply Nabucco with gas.
Turkmenistan steps in as potential supplier
Geologists have determined that the Central Asian country has enough natural gas to become involved in the supply of gas to Europe, President Berdymukhamedov told Parliament, according to a report by the RIA Novosti news agency.
According to Berdymukhamedov, Turkmenistan has "a surplus of natural gas" that can be sold abroad. Local geologists had confirmed "colossal" natural gas reserves, he said.
Official reports said Turkmenistan's Caspian Sea region had around 6 trillion cubic meters of gas. In April, the government in Ashgabat and German energy giant RWE signed an agreement for the exploration of the gas fields.
In May, Turkmenistan and two other potential suppliers, Kazakhstan and Uzbekistan, held off their support to the pipeline at a meeting in Prague.
"Without these three countries, Azerbaijan will be the main provider, but it does not have sufficient gas for this project," Turkish energy expert Necdet Pamir explained.
He estimated that Baku could provide only about 4.0 billion cubic meters of gas a year to Nabucco after fulfilling its existing export commitments.
"This amount will not satisfy anyone," Pamir said.
Azerbaijan claims it has the capacity to supply Nabucco, but last month it signed an agreement to export gas to Russia starting in 2010, raising concerns among Nabucco proponents.
Iraq, Iran and Egypt are also seen as potential providers, although Pamir described their participation as "not credible."
Turkey sees boost to pipeline credibility and EU hopes
A Turkish foreign ministry official argued that the signing of the intergovernmental agreement would "serve to boost credibility in the Nabucco project and will lead gas suppliers to think seriously about the pipeline."
The signing of the agreement has been delayed several times by Turkey's demands to use 15 percent of the gas flowing through Nabucco for domestic use or even for re-export.
"It is normal for Turkey to protect its interests in such a project," a Turkish diplomat told AFP on condition of anonymity, without specifying whether Ankara's demand had been accepted or not. "Further negotiations will be held in the future with the interested parties," he added.
The Turkish foreign ministry said this week that the Nabucco project was a top priority which it hoped would strengthen Ankara's ties with the EU.
"The Nabucco project is expected to bring a new dimension to our relations, based on mutual trust and cooperation, with the European Union," a ministry statement said.
nda/AFP/dpa
Editor: R.Balasubramanyam