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Gas will become an even more important energy source for Europe following Germany's decision to shut all its nuclear reactors by 2022, the European Union's energy commissioner said on Monday.
Hence, Merkel is shutting down nuclear plants to increase the importance of Nabucco. This reinforces an aggressive NATO stance toward Central Asia, Iraq and Iran.
Turkey's Nabucco initiative ahead of upcoming elections has found no response from Azerbaijan, leaving the future of the U.S.-backed natural gas pipeline project aimed at pumping Middle Eastern or Caspian gas to Europe in limbo.
Baku has not yet responded to a Turkish invitation to participate in the official signing ceremony on June 8 of an agreement between the participatory governments and the consortium of the Nabucco gas transit pipeline project.
“We have received an invitation from the Turkish side but it is not yet clear if we’ll attend,” an Azerbaijani source speaking on condition of anonymity told the Hürriyet Daily News.
The ceremony on the Project Support Agreement, one of the sub-deals to realize the long-running project, is set to take place in the Central Anatolian province of Kayseri, the hometown of Turkish Energy Minister Taner Yıldız.
Azerbaijan is one of the largest potential suppliers of the project and its non-participation would be a strong signal showing the colors of Baku toward the multi-national project.
"The invitation has been extended to Azerbaijan but, as of now, there has been no [reply]," a Turkish Energy Ministry official said.
Azerbaijan has yet to decide among three other projects, namely the Interconnect Turkey-Greece-Italy, or ITGI, to ship gas from Azerbaijan via Turkey to Greece and Italy; the Trans-Adriatic Pipeline, or TAP, allowing gas to flow directly from the Caspian basin and the Middle East into European markets; and Nabucco, an Azerbaijani source told the Daily News.
“We’ll have to decide between the three and eventually take part in one which will be the most profitable for us,” the source said.
The uncertainties surrounding the European Union’s flagship Nabucco project stemming from a lack of alternative sources to fill the pipeline is causing Baku to have second thoughts about its ultimate involvement. Azerbaijan is reluctant to meet all the gas needs of the project alone and says it would be profitable for it to commit to a project with a narrower volume instead of the multi-national Nabucco project, which is expected to ship 30 billion cubic meters of gas annually when it comes into force in 2015, the source added.
“Different countries are being depicted as an alternative source to fill the Nabucco pipeline but there is nothing concrete yet,” said the source.
Azerbaijan may consider involvement in Nabucco only if it shares full capacity of the pipeline with alternative countries. In the initial stages of the project, Turkey pressed for the Iranian gas to directly flow into the proposed pipeline; however, the ongoing sanctions imposed on the Islamic republic due to its controversial nuclear program have hampered this option.
Currently, Iraqi gas is being considered for the project but energy analysts say Iraq’s involvement requires the construction of a nearly 757-kilometer pipeline, adding that it was unclear who would undertake its construction on the Iraqi side of the border given that the energy fields of the country were in the hands of international companies. Additionally, ongoing political instability in Iraq, as well as a lack of agreement over the hydrocarbon law between the Kurdish regional administration and the central government in Baghdad, makes gas from the country unreliable, according to reports.
“We are ready to support energy projects aimed at shipping gas to Europe but commercial concerns will play a key role in shaping our position,” according to an Azeri source. “But at this current stage, there has been no decision on the part of the Azerbaijani government which project is to be supported.”
Baku keeps quiet
Sources said that even if the Azerbaijani side accepted the Turkish invitation to attend the June 8 ceremony, it would not be a criterion for Baku’s participation in the Nabucco project. Azerbaijan’s industry and oil minister, Natik Aliyev, participated in the ceremony of the Nabucco inter-governmental agreement in Ankara in July 2009.
The Nabucco project is being developed by a consortium of six international companies, including Bulgaria’s Bulgargaz, Austria’s OMV, Turkey’s BOTAŞ, Romania’s Transgaz, Hungary’s Mol Natural Gas and Germany’s RWE. The companies and government representatives of the participant countries are expected to be present at the event, as well as the EU's energy commissioner.
“This is going to be a standard agreement which every participant country has to sign from a legal point of view,” said a European diplomat. “The ceremony will be one step closer to realize the project; without it the project cannot proceed.”
A senior energy analyst, meanwhile, criticized the timing of the ceremony that comes just ahead of June 12 elections.
“This is a step geared toward domestic politics. Couldn’t Mr. Minister find an hour of time to travel to Ankara for the signing ceremony, instead of hosting it in his election constituency, Kayseri?” said Mete Göknel, BOTAŞ’s former general manager.
Yıldız is a front-running candidate for the Justice and Development Party, or AKP, government from Kayseri.
“No progress has been made regarding the Nabucco project. I cannot understand what this agreement is about. I consider this a political campaign,” said Göknel.
In the corridors of Brussels’ elegant Stanhope Hotel on Wednesday afternoon, the well-turned-out movers-and-shakers of the European energy world were marveling at the sizeable budget and high-profile guest list for the event they were attending.
Soon to share a dais were Günther Oettinger, the European energy commissioner; his Russian counterpart, Sergey Shmatko; Alexei Miller, the chairman of Russia’s Gazprom; and Paolo Scaroni, the chief executive of Italy’s Eni. The ballroom was appointed with flat-screen video monitors and rows of chairs with corporate gift boxes.
The event was a sort of a Brussels coming-out party (and charm offensive) for South Stream, a Gazprom-backed pipeline project that aims to carry Russian and Caspian gas under the Black Sea to Bulgaria, where it would then fork off to Italy and Austria. South Stream’s backers, which include Eni, and now BASF, are due to decide next year whether or not to push ahead with the €15.5bn investment necessary to complete the sprawling project.
There is one big problem hanging over South Stream: it is a direct competitor to the rival Nabucco pipeline backed by the European Commission. For the Commission, the great appeal of Nabucco is that it would bring Azeri gas to Europe while skirting Russia and Ukraine, thus helping to ease Europe’s dependence on its biggest supplier and transit country, both of which have proven dangerously unreliable in the past.
In Brussels, officials tend to regard South Stream warily as a spoiler devised to thwart Nabucco and extend Russia’s dominance over the European energy market. Hence the fancy party, and the determination to prove that South Stream might be something else.
One after another, Miller, Scaroni and others took turns praising its virtues, arguing that their pipeline would be essential to help quench an ever-increasing European demand for gas, particularly at a time when nuclear energy appears to be in retreat.
Oettinger, whose remarks were the most anticipated, proceeded cautiously, explaining that he had come to the event “to listen and to learn.” South Stream gas could help Europe’s goal of diversification by tapping into new supplies and a new transit route, he conceded. He also promised that the EU would not impose undue administrative burdens on the project.
But, to the disappointment of his hosts, the commissioner insisted that the EU would enforce its energy liberalization rules on any pipeline crossing into its territory. Those rules would require Gazprom to open South Stream to independent suppliers, something the vertically-integrated Russian company is loath to do.
Undaunted, the project’s advocates pressed the case that Europe had nothing to fear from Russia. Shmatko argued that the two parties were, in fact, inter-dependent, since Europe was Russia’s biggest energy customer. In a well-tuned historical reference, he argued that such mutual dependence was at the heart of the peaceful bargain that France and Germany struck when they launched the EU.
Miller, meanwhile, insisted that Gazprom’s pipeline investments were not a threat to EU projects, but a sign of its commitment to be a truly reliable supplier. “In the 21st century, we can supply as much gas to Europe as Europe will demand,” he promised.
The business case for South Stream certainly seems more appealing at a time when Nabucco is being plagued by doubts about its projected costs and whether its backers can round up enough gas to fill the pipe. Just last month, they announced a one-year delay to the project.
Oettinger, however, left early. The most significant message of the afternoon might have come from someone who was not even in the room: it was an email from the commissioner’s assistant, which arrived in the middle of the South Stream presentation, reminding reporters: “EU strategy has not changed. Southern Corridor – including Nabucco – is EU priority.”
Germany's ruling coalition announced the policy reversal on Monday in reaction to Japan's Fukushima disaster. [ID:nLDE74T0GY] "We need more gas. After Berlin's decision gas will be a driver of growth," Guenther Oettinger told a conference in Vienna.
He said the EU-backed Nabucco gas pipeline, which has faced delays and a rise in costs, would be a boon for Austria as well as Europe.
Austria's Baumgarten gas hub is the planned end point for the pipeline which aims to bring gas to Europe from the Caspian region and Middle East from 2017 and reduce dependence on Russian gas.
"If Nabucco happens it will also strengthen Austria's economy and the importance of the Vienna hub," he said. Austria's OMV (OMVV.VI: Quote) runs Baumgarten and is one of Nabucco's six shareholders.
Fresh gas supplies were important because Europe's energy demand was growing but production falling, leaving it very reliant on imports, Oettinger said....
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