Robert M Cutler
Momentum for the Nabucco pipeline project to transport gas from Turkmenistan and Azerbaijan to southeast and east central Europe via Turkey has increased following an absence of apparent progress developing from a Brussels conference this spring dedicated to the rival South Stream gas pipeline project.... http://eegas.com/toc.htm
The European Commission is now seeking authorization from the European Union's member states to mediate between Azerbaijan and Turkmenistan concerning plans for a natural gas pipeline to be laid on the Caspian seabed (Trans-Caspian Gas Pipeline, TCGP), according to a Dow Jones report from Baku. The two Caspian littoral countries have already been holding meetings to discuss the matter in Brussels.
The development is in line with a Bloomberg report last August that the EU's energy regulator had made available a non-binding document to Azerbaijan and Turkmenistan as a proposed basis for discussion for the project of building "at least one" pipeline under the Caspian Sea. Turkmenistan has also reportedly sought advice from the United Nations in New York concerning international legal issues in the framework of an energy transit agreement with an unnamed partner country.
In fact, the issues of international law have all been examined and resolved at the technical level by experts. The solution involves building the pipeline without trying first to resolve competing claims by the two Caspian littoral states over certain subsoil resources under the seabed. This is the procedure followed by Norway and the United Kingdom over exploration and development of certain deposits in the North Sea. What is now involved is the construction of the precise form of language that permits that solution to be integrated with the expressed political will on the part of the two governments' political executive to move forward with the execution of the TCGP project.
The document in question is reported to incorporate, insofar as possible, the competitiveness requirements of the third EU energy liberalization package, on which the EU had also insisted to Russia in respect of its South Stream project, which would pipe Russian gas under the Black Sea to either Bulgaria or Romania.
In particular, Azerbaijan and Turkmenistan would agree on a list of entities that could offer gas for transit through Nabucco, and the pipeline's owners would have to operate it in an optimal fashion under market conditions - meaning they would have to make information about unused capacity transparently available, and they would not be able to refuse offers to use any available capacity from the listed entities. Also, the pipeline would be so constructed as to allow gas transit in either direction, that is, west to east as well as east to west.
Such matters of equitable access to the pipeline were at issue at the March 25 South Stream conference in Brussels, mentioned above, on South Stream, which could well be seen in retrospect as the final nail in the coffin of the Russian-sponsored project.
At the conference, sponsored by Russia's Gazprom, EU Energy Commissioner Guenther Oettinger resisted pressure from Moscow on several fronts while promising the South Stream project equitable treatment in its administrative and regulatory applications to the requisite EU instances.
However, he was candid in declaring that "South Stream is not our top priority". Indeed, in light of the European decision for a Southern Gas Corridor (SGC) project in May 2009 he could not have pretended otherwise.
Indeed, the most widely quoted passage in Oettinger's speech may have been the one in which he lays out the concerns that prevent South Stream from being taken seriously: "What we know is that the gas in South Stream will leave Russia, cross the Black Sea and arrive in Europe. Beyond that, there are a number of questions. Where will the gas actually come from? Where will it arrive? How will it arrive, by ship or by pipeline? Will it divert gas from Ukraine? Once it gets to Europe, what will happen? Most importantly, who can ship gas in the project? Is it only Gazprom, or also other players?"
None of the speakers from the Russian side really addressed any of these questions in the detail required for a serious pipeline project. It is even possible that Russian Prime Minister Vladimir Putin knew that things would turn out poorly. Despite his personally touting the project earlier in the year on a visit to Brussels with a full complement of ministers from his government, ostensibly to discuss EU-Russia energy cooperation in the perspective of the next four decades, nevertheless it was Russian President Dmitry Medvedev, rather than Putin, who made the trek to Brussels for the South Stream conference.
There are two more interesting recent developments around this complex of issues. First, the Russian news agency Novosti quoted Vitaly Beilyarbekov, a deputy vice chairman of the State Oil Company of the Azerbaijani Republic, as commenting that Russia had would not participate in Baku's talks with Ashgabat over the TCGP. (An earlier version of the article, now scrubbed from the site, had said that Russia had "declined an invitation" to participate.)
Novosti further attributes to Beilyarbekov the view that Russia "will not create obstacles on this project". This runs counter to recent protests in the press by Russia's ambassador to Azerbaijan, and the fact that the report was carried by any Russian news agency is in itself significant.
Second, the Bloomberg News reference to "at least one" trans-Caspian pipeline signifies that the EU is discussing not only Nabucco but also White Stream with Azerbaijan and Turkmenistan. White Stream would transport natural gas from the Caspian region to Romania and Ukraine with further supplies to Central Europe.
Further according to Beilyarbekov, construction of the (first) TCGP will begin within two years. This is the first time that an industry figure in the region has publicly assigned a date to the project's construction. Gas from Turkmenistan (or Iraq) is necessary, because the 31 billion cubic meter per year pipeline will be only about one-third supplied by Azerbaijan, and it will be built in one stage despite earlier talk of a two-stage construction and entry into force.
The necessary conclusion would appear to be that the EU has rejected the view that the SGC is best developed slowly and first of all with Russian gas, and that it has actually taken specific steps towards realizing the project as originally intended. Oettinger correctly spoke in March about the possibility of finally moving forward with creation of the Caspian Development Corporation, an instrumentality of the SGC foreseen two years ago by the May 2009 summit that originally decided in the SGC's favor.