Notwithstanding Jose Manuel Barroso’s reverential trips to Baku, Nabucco seems unlikely to happen for the foreseeable future. The prospect of gas imports through Iraq or Iran is more feasible, but it still needs proven reliability and political backing to be viable, writes Paolo Sorbello.
Without any Trans-Caspian gas, a pipeline system with too much capacity would be a waste of money and an “energy monument” with little significance for the diversification aims of the European Commission.
The project of the Nabucco pipeline has been put on hold. Neither dead, nor in a coma, it simply was not what the Shah Deniz consortium was looking for. Let’s not forget that this project is a private venture, albeit one championed by state and state-owned energy companies, and none of the stakeholders have a geographic or market interest in where the pipeline ends. It cannot feasibly end in Norway or the UK and it does not compete with the markets in northern Europe. The only interest is economic. Commercially, before laying a pipe, you should find customers for your gas. Greece and Italy are more lucrative markets than Bulgaria or Romania, according to BP.
Financially, the Trans-Adriatic Pipeline was backed by a Swiss energy holding, Axpo, which guaranteed the reliability of the investment. On 30 July, Axpo sold 90% of its shares, keeping a symbolic 5% stake in the project. A similar move was made by Statoil (whose stake was reduced from 42.5% to 20%) and E.On (from 15% to 9%). As a result, the companies that will provide the SD gas now own the bulk of the shares: chiefly BP and SOCAR (each purchased 20%), but also Total and Fluxys (10% and 16% respectively).
Above all, the idea of a Southern Corridor is being concretely pursued: the construction of TAP needs the same Turkish leg as Nabucco would. The Trans-Anatolian pipeline’s (TANAP) shareholders are all Azeri and Turkish (SOCAR 80%, BOTAŞ 15%, and TPAO 5%), something which needs to happen if you want to ship gas across 2,000 km of Turkey, where approximately 6 bcm of SD gas will be used domestically. The rest, 10 bcm, will go through TAP. This goes to show that SD is just not ready to supply 31 bcm to the European customers (without accounting for the Turkish cut) as was envisaged with Nabucco.
European wishful thinking (and lobbying) for a Trans-Caspian pipeline will not come true unless a revolutionary breakthrough happens. Russia says it will actively counter any bilateral projects in the Caspian that do not seek the approval of all littoral states, since the legal status of the body of water has not yet been decided unanimously. Iran has no intention of conceding ground to “national sectors”, because it would get the short end of the stick. Turkmenistan and Azerbaijan have yet to settle their border dispute in the narrower section of the Caspian, where most of the offshore gas is located.
TAP’s 10 bcm will go to the Greek and Italian market, and will make gas at the Baumgarten hub available for customers other than Italy. Not much, but a step forward. Together with increasing imports of Liquefied Natural Gas and the construction of several LNG terminals, this would go towards the goal of increasing diversification. To what extent “diversification” is a correct policy remains to be seen, since Russia has not been unreliable for the countries that push for diversification in European forums. In that respect, a pipeline going through Bulgaria, Romania, etc. would have been preferrable. However, the same could be achieved through the construction of South Stream, which would lock Gazprom’s export capacity westwards and help interconnect Southeastern Europe.
The loser par excellence in this pipeline game is Ukraine, which is neither a reliable transit country nor in the EU. However, practically all other players in the pipeline game place the economic feasibility of this project above Ukraine’s interests.