It has not been a good week for the Nabucco pipeline; first the AGRI project – a planned Azerbaijan-Georgia-Romania-Interconnection (AGRI) project to transport LNG from Azerbaijan to the EU through Georgia and Romania – was said to be moving rapidly to being finalised ahead of Nabucco and today, the development of Azerbaijan’s Shah-Deniz gas field, one of the main sources of gas for the European pipeline, was pushed back.
Azerbaijan report stated that the delaying of the development of the second stage of its large Shah-Deniz gas field was due to the lack of a way to export the gas to Europe. As such, gas is not expected to be yielded from the site until 2016 which means the Nabucco Pipeline is officially in trouble.
Without a source of gas, there is a good chance the project could be scrapped. While Azerbaijan and Turkey are in active talks on gas supplies during which they are discussing gas prices, transport tariffs and volumes to be supplied to Turkey and Europe, the lack of an official agreement could halt construction of the pipeline designed to relieve Russian energy dependency.
It is however not the only blow dealt to Nabucco this week
South Stream support grows
Meanwhile, one of Nabucco’s main rivals - the South Stream project – has been finding support in Europe with Italy’s ENI and France’s EDF officially joining the plan to transport Russian gas past the Ukraine and under the Black Sea to Bulgaria and inwards to Serbia and Europe.
However, news that Austria has also come on board the project could put the final nail in the Nabucco coffin. Prime Minister Putin is planning to visit both Austria and Italy at the end of the week, and Russian Energy Minister Sergey Shmatko has hinted that agreements could be signed during the trip.
“Inter-governmental agreements on building South Stream are issues that are determined by those who are authorized,” Shmatko said.
If Austria is on board, that would mean that it joins a host of other European countries supporting South Stream: Turkey, Bulgaria, Serbia, Hungary, Greece and Italy.
The EU-backed Nabucco Pipeline has arguably been on its last legs for months now, with European firms jumping ship to the Russian alternative South Stream one after the other. However, it appears Russia has finished torturing the European pipeline with news that it has discussed its alternative pipeline with German utility RWE, another clear attempt to undermine the Nabucco project.
RWE is one of the last remaining participants to the Nabucco Pipeline, which has long been planned to end continental dependency on Russian supplies, but has faced frequent obstacles.
Reuters has sources that both state that Gazprom and RWE met to discuss the South Stream project that aims to deliver gas to Europe under the Black Sea, however both companies are playing their cards close to their chest.
“It was just a preliminary discussion, nothing concrete. They are interested in entering the project,” a Gazprom source said. An RWE source said the project had been discussed but declined further comment, saying it remained committed to Nabucco as “the best project for RWE at the moment”.
Nabucco’s plan was to see gas delivered from Azerbaijan, central Asia and Iraq to southern Europe, but delays have seen the Russian South Stream project gain momentum. On top of that, Russia has often described Nabucco as “politically-motivated” and “not economically viable project” saying it lacked firm gas contracts. With the recent Azerbaijan delay, it is fair to say this is an accurate assessment.
Russia’s dominance of the situation has also continued with Gazprom winning a gas imports deal with Azerbaijan and signing another key Nabucco member, Austria’s OMV, for South Stream.
Other European suppliers that have switched to South Stream include Italy’s Eni and France’s EDF, while the Nabucco consortium also includes Hungary’s MOL, Turkish Botas, Bulgaria’s Bulgargaz and Romania’s Transgaz, although there are rumours that Transgaz may also be close to switching.
According to Upstreamonline.com, RWE would not be the first Nabucco shareholder to have a hand in both projects. Austrian energy group OMV, which has close business ties with Gazprom, signed up to build part of South Stream in May but maintains that Nabucco is its priority.