ROAR: Nabucco vs. South Stream

14 July, 2009, 12:28

Many Russian observers believe the signing of an agreement on the Nabucco gas pipeline is motivated by political reasons and is aimed at frustrating the South Stream project.

ROAR: Nabucco vs. South Stream

14 July, 2009, 12:28

Many Russian observers believe the signing of an agreement on the Nabucco gas pipeline is motivated by political reasons and is aimed at frustrating the South Stream project.

Representatives from Turkey, Austria, Hungary, Bulgaria and Romania have signed an agreement on the construction of the Nabucco gas pipeline, considered to be the main rival of Russia’s South Stream project.

Read more

Nabucco will pump natural gas from Turkey to Austria and should diversify the gas supplies for Europe. Azerbaijan and Turkmenistan have supported the project. Turkmenian President Gurbanguly Berdymukhammedov, after long hesitation, said his country has enough gas for Nabucco.

Evgenia Voyko, an expert of the Russian Center of Political Conjuncture, believes that the agreement that was signed in Ankara may remain the only achievement of the lobbyists for the project in the mid-term perspective.

“The problem is that Nabucco is first of all a political project, and its economic component has not been fully developed,” she said. However, she noted that Berdymukhammedov’s statement of support for Nabucco came after Russia had started purchasing less of Turkmenistan’s gas.

Turkmenistan is considered the key supplier of gas for Nabucco, but Ashgabat prefers not to disclose exact data about gas resources at Turkmen gas fields, the expert said.

This approach, she believes, blocks the attempts of Europeans to establish contacts with the republic, the leadership of which is known for its inconstancy in foreign policy.

“In particular, during the South Corridor summit in Prague in May, representatives of Turkmenistan, Kazakhstan and Uzbekistan refused to sign a declaration on this project,” Voyko said.

“Now it seems that [the Turkmen President] intends to press Russia with his statement [on Nabucco] to increase the volume of gas that Turkmenistan sells to Russia,” she added.

The Russian media also reported on the change of Bulgaria’s position on the projects of the South Stream pipeline and the Belene nuclear power plant.

After the center-right political party Citizens for European Development of Bulgaria (GERB) won the July 5 Bulgarian general election, its head Boiko Borisov demanded a detailed analysis of the terms for South Stream, which had been agreed upon with Russia.

South Stream is supposed to link Russia and Bulgaria via the Black Sea to pump Russian natural gas to Bulgaria, and then to Italy and Austria, Kommersant daily wrote. The estimated cost of the underwater section is $10 billion, the paper added.

Borisov, who is to take office as prime minister this week, also wants to suspend contruction of the Belene nuclear power plant in northern Bulgaria. The project has Russian participation.

The politician has claimed his decision is motivated “by receiving some ‘alarming signals’ about the activities of a number of big companies which do not take into consideration the state’s interests,” Rossiyskaya Gazeta daily said.

The mutual energy projects of Bulgaria and Russia could resume after a “detailed analysis” by the experts of the new government in Sofia. The South Stream project was supposed to be completed by 2015.

Kommersant quoted an anonymous Russian Energy Ministry official as saying: “We do not expect this pause to last long, because the intoxication with victory passes quickly.”

Russian observers stress that participants of the Nabucco project will have difficulties in getting enough gas for the pipeline. Rossiyskaya Gazeta wrote that “Europeans have decided first to construct the pipeline and then find gas for it.”

For a long period of time, owners of gas fields were not in a hurry to support the project, saying that the pipeline should be constructed first, the paper wrote. “But investors refused to give money for the construction until it was not clear which gas would flow in the pipeline. And the estimated cost of the project is no less than 8 billion euros,” it added.

Now the situation has changed, Rossiyskaya Gazeta noted, saying that the organizers of the project will fill the pipeline with Azeri gas at the first stage, and in the future with gas from Turkmenistan, Iraq, Syria and Egypt, and liquefied gas from Qatar.

Observers note that Azerbaijan recently signed an agreement to supply gas to Russia’s Gazprom, and Turkmenistan will have to construct a new pipeline to link with Nabucco. Also, from the states which are potential suppliers of the Nabucco project, “only Azerbaijan may boast of the stability and faithfulness to the agreements,” Moskovsky Komsomolets wrote.

Rustam Tankaev, a leading expert of the Russian Union of Oil and Gas Industrialists, told Rossiyskaya Gazeta that, “since it has been decided to increase the capacity of the South Stream to more than 60 million tons of gas per year, Nabucco has become a direct rival to this project.”

Some 30 million tons of gas would be enough for Europe, the expert said. “With the increased capacity [of South Stream], one of these projects is superfluous. Either Nabucco or South Stream will lack gas to fill the pipeline.”

Experts doubt that Nabucco would be a real project for economic reasons. “But Europe needs it for political reasons,” Tankaev said. “No doubt, from the technical point of view, it could be constructed. In this case problems may arise with the filling of South Stream.”

Troika Dialog analyst Valery Nesterov told Nezavisimaya Gazeta daily that, “it is premature to speak about which of the projects – Nabucco or South Stream – will be fulfilled sooner.”

“However, in any case, the implementation of one of them will at least postpone the fulfillment of the other and most likely affect its scale,” Nesterov said. “Europe does not need the volume of gas that, in some years, could be delivered by gas pipelines that exist, are being constructed or planned.”

In this situation, Russia should prepare “for exporting liquefied gas and not to retain its tough position in promoting South Stream to suppress Nabucco,” Nesterov said.

Ivan Danilin, a senior research fellow of the Institute of World Economy and International Relations agrees that Russia should develop production of liquefied gas, “maybe even at the cost of more attractive and important projects.”

He told the Regnum news agency that taking into account the falling prices on resources and transportation, the choice of liquefied gas “is becoming more real than before.”

Sergey Borisov, RT