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Azerbaijan-Turkey difference on transit issue may delay Caspian gas export

17 March 2009 12:11 (UTC +04:00)

Baku. Elmin Ibrahimov â€“ APA-Economics. The failure thus far of Azerbaijan and Turkey to resolve their differences over gas transit is threatening to push back the timetable for the launch of phase-two gas production and exports from Azerbaijan’s Shah Deniz field, according to participants at an industry conference in Ankara, BNE reported.

This could then have a ripple effect on the Nabucco pipeline, pushing the project back from its current timetable of 2014. However, Nabucco CEO Reinhard Mitschek told participants at the conference that partners in the Nabucco consortium are still expecting gas from phase two of Shah Deniz to be available by 2014, although he acknowledged that "we may have to move the schedule to accommodate the gas producers".

Mitschek, however, sought to downplay one of the persistent concerns about Nabucco-the pipeline’s ability to source enough Caspian and Middle Eastern gas to be commercially viable-by saying that the pipeline could go ahead with "as little as 8 bcm" rather than 17 bcm that some have suggested. The feasibility of the pipeline at the lower volume may be key as Turkey and Azerbaijan continue to haggle over transit and Turkey’s desire to serve as a gas trader for phase-two Shah Deniz supplies rather than merely a transit state.

The stalemate over the transit deal is partly the result of a related dispute over gas prices for Azerbaijani gas exports to Turkey from Shah Deniz-in the first phase of the field’s development-in 2007. In addition, Turkey has been holding out on a demand for the right to offtake some 15% of transit gas via Nabucco, putting the country at odds with other pipeline consortium members.
Meanwhile, Gazprom said it received an invitation to join the Nabucco pipeline project to pump gas from Central Asia to Europe, but would not take up the offer, a deputy head of Russia’s energy giant said.
In an interview with Vesti TV on Monday, Alexander Medvedev said Gazprom would stick with its South Stream project and stay out of Nabucco.
"Unlike in the case of Nabucco, we have everything we need for this project [South Stream] to materialize," he said. "We have gas, the market, experience in implementing complex projects, and corporate management."
The executive said Gazprom was not prepared to split its operations between two projects simultaneously.
"You chase two rabbits, you catch neither. We have a rabbit we know, and we will chase it," he said.
This also coincided with the report that the Nabucco gas pipeline has been deleted from a list of projects to be financed by a five-billion euro EU stimulus plan, it emerged after a meeting of the bloc’s foreign ministers on March 16.
EU officials confirmed yesterday that the pipeline, once considered a flagship EU venture, had disappeared from the list of energy projects to be financed under the plan.
The move was apparently made at the request of German Chancellor Angela Merkel, who insists that no public money should be spent on a project in which Berlin has little interest.
Czech Deputy Prime Minister Alexandr Vondra confirmed that the ministers had failed to agree on the stimulus plan, as "some member states want to look at the package again" ahead of the EU summit on 19-20 March.
However, he added that a "strong group of countries want Nabucco to be part of a set of projects". "I told that group of countries we still support Nabucco," Vondra said, hinting that the Union was now divided along the lines of those supporting the pipeline and those who doubt its merits. During the ministerial meeting, Romania - an important transit country for Nabucco - was reported to be very critical of the project’s deletion from the list.
For its part, the European Commission insists that Nabucco can still receive funding under the revised plan. "The fact that we have changed the name doesn’t mean that Nabucco has disappeared. It’s there with another name," Commission spokesperson Ferran Tarradellas Espuny told EurActiv.
The lack of consensus at ministerial level over the stimulus package hardly comes as a surprise, as diplomats revealed to EurActiv that Angela Merkel had indicated she wanted the issue to be decided at the EU summit this week. But the looming battle appears to be a tough one and the decision, to be adopted by qualified majority vote, uncertain.
An initial draft earmarked 250 million euro for the establishment of a risk-sharing facility for Nabucco, intended to help secure loans from banks at better conditions than those offered on the market.
A second version of the plan cut this amount to 200 million. But the latest version now appears to have weakened Nabucco even more, diplomats admitted.
The Nabucco pipeline is planned to run from Turkey via the Balkans to central Europe, with gas from phase two of Shah Deniz expected to be the primary source of initial supplies for the 31-bcm-year-capacity pipeline.