Energy: The troubles of Nabucco

After eight years of negotiations and talks, a final decision on investment in the Nabucco pipeline project has been once again delayed until the first quarter of 2011.

The project seemed to be nearing an official launch in recent months, with a decision about the shape of the final investments by the consortium of investing companies - European energy giants like Austria's OMV, MOL of Hungary, RWE of Germany and others - scheduled to be made by the end of 2010. However, talks broke down over concerns about gas supplies and reported hard bargaining on the part of Azerbaijan, a key supplier nation that can now take its pick of pipeline offers from both Europe and Russia.

Backed by the European Union, the Nabucco pipeline is meant to channel Central Asian gas to the heart of Europe, linking Eastern Turkey with Austria via Bulgaria, Romania and Hungary. It's the central component of the so-called Southern Corridor Project, the main goal of which is to prevent gas shortages and decrease dependency on Russian energy.

Europe currently relies on Russia for 25 percent of its gas, around 80 percent of which flows through Ukrainian pipelines. This is a perennial cause of consternation for EU member states, as repeated payment disputes between the two nations in recent winters have caused Russia to cut off supplies during the coldest months.

This most recent delay to the Nabucco project has led to speculation by European Energy Commissioner Günther Oettinger that the rival South Stream pipeline project, which is backed by Russia and would tunnel under the Black Sea, presents serious competition.

The European Commission (EC) hoped to rejuvenate the Nabucco project by approving a 200 million euro package in March of this year. The package has been criticized as risky since the final approval on investment has not yet been agreed by the Nabucco Consortium and shareholders, but EC spokeswoman Nicole Bockstaller is confident a final decision can realistically be reached by March 1, 2011.

"As you know, the development of the Southern Corridor remains a commission priority because we can diversify our gas supply," she said. "The aim is to create a direct link with the largest deposits of gas in the world. We are supporting several pipelines in the Southern Corridor, and Nabucco is the main project in the region."

Gabriele Egartner, a spokeswoman for the Nabucco Consortium, said the delay is not only a question of financing, but also of gas availability, maintaining it makes little sense to move on the pipeline if it's uncertain the product it is meant to transport will be available.

"We have to align ourselves with the gas availability, and sufficient supply is expected from 2015," she said.

Suppliers for the gas are expected to be countries from the Caspian region: Azerbaijan and Turkmenistan, and possibly Iraq and Egypt through an additional network of pipelines.

Czech Ambassador-at-Large for Energy Security Václav Bartuška also voiced concern about future gas supplies.

"Azerbaijan and Iraq can only be considered substitution sources for the gas supplies," he said. "Since the discussion with Iran ended, there is no sufficient source. If you don't have sources, there is no point in constructing a pipeline of this length."

He also added that the reliability of the negotiations with Azerbaijan is rather uncertain because Azerbaijan continues to negotiate with Russia at the same time.

During Russian President Dmitry Medvedev's recent visit to Azerbaijan, an agreement was struck to increase supplies fourfold to the Russian state-owned monopoly Gazprom.

But the Czech ambassador to Azerbaijan, Radek Matula, argued the delays are definitely not caused by Azerbaijan, saying the country has declared a clear interest in intensive cooperation with the EU.

"Azerbaijan is calling for a more decisive approach on the part of the EU in order to ensure the necessary actions to guarantee the supply of Azerbaijan's gas on the European market," Matula said. "On the part of [Azerbaijan], you can only hear words of readiness to supply gas - but first, the pipeline must be constructed."

Although a pro-Kremlin government has taken power in Kyiv, Bartuška believes the Russian-Ukrainian "gas war" will continue in future years, adding that when the supplier holds such a strong position, it will always resort to price manipulation.

Klára Jiřičná can be reached at
kjiricna@praguepost.com