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â€œThe Financial Timesâ€: â€œThe last deal between Turkey and Azerbaijan maybe new shock for Nabuccoâ€

29 December 2011 12:07 (UTC +04:00)

Taner Yildiz, the Turkish energy minister, handed Vladimir Putin, Russian prime minister, written permission for the construction of the South Stream pipeline across the Black Sea, removing a big obstacle to a project that is central to Russiaâ€™s plan to tighten its grip on European gas markets. Turkish approval for South Stream was hailed by Mr Putin as â€œa big event in Europeâ€™s energy sphereâ€.

South Stream will transport up to 63bn cubic metres a year of Russian gas to south and central Europe from 2015, reducing Russiaâ€™s overwhelming dependence on gas export routes across Ukraine. In November, the first Russian gas was pumped to Germany under the Baltic Sea through the new Nord Stream pipeline, which will carry 55bn cubic metres of gas by 2013.

The $20bn South Stream project is seen as a competitor to the European Union-backed Nabucco pipeline to ship Caspian and central Asian gas to Europe and reduce reliance on Russian energy supplies. But Turkey, which is carving a role as an east-west energy transit hub, said the two pipelines should complement each other.

Nabuccoâ€™s future has looked uncertain as investors struggle to identify gas supplies to fill the 32bn cubic metres a year pipeline and justify the â‚¬12bn-â‚¬15bn construction costs. Azerbaijan is being courted by rival pipeline groups for rights to ship gas from the BP-operated Shah Deniz field across Turkey to Europe. It warned this month the Nabucco project might be too ambitious to suit its near-term needs.

In another blow to Nabuccoâ€™s prospects, Turkey this week signed a preliminary deal with Azerbaijan to build a pipeline to carry up to 16bn cubic metres of gas a year from Shah Deniz to the Turkish-Bulgarian border.