Brussels, 13/07/2009 (Agence Europe) - In Ankara on Monday 13 July, the heads of government of the five EU stakeholders in the Nabucco project (Austria, Bulgaria, Germany, Hungary and Romania) and Turkey, flanked by European Commission President José Manuel Barroso, Energy Commissioner Andris Piebalgs, US Special Envoy for Energy in Eurasia Richard Morningstar, the Iraqi Prime Minister Nouri al-Maliki, the Georgian President Mikhail Saakashvili and a representative of Azerbaijan, signed an intergovernmental agreement for the construction of the gas pipeline which will carry gas from Central Asia and the Middle East to Europe, by-passing Russia. The aim is to reduce EU dependence on Russian gas, 25% of total European gas consumption, and also to counter the threat of breaks in gas flows resulting from the recurrent financial dispute between Russia and Ukraine, through which 80% of Russian gas for Europe passes. According to the Commission, Nabucco will have the capacity to satisfy 5-10% of European gas demand but, in those countries which currently depend totally on one single supply route, it will ensure immediate security. Nabucco will be in competition with an alternative Russian project led by Gazprom and Italian group ENI, which will link Russia to Bulgaria, via the Black Sea.
Confirmed by the signing in Ankara on Monday, the intergovernmental agreement concluded between Berlin, Bucharest, Sofia, Vienna and Ankara is the first step, the political stage, towards making the Nabucco project a reality. It provides an international legal and regulatory framework for arrangements for the export and transport of gas along the 3,300 kilometre long gas pipeline, with its maximum capacity of 31 billion M3 per year, will link Turkey to Austria, via Bulgaria, Romania and Hungary, and will be built by a consortium of six energy companies - ÖMV of Austria, MOL of Hungary, Transgaz of Romania, Bulgargaz of Bulgaria, Botas of Turkey and RWE of Germany.
The work, which will begin in 2010 is due to be completed by 2014, with the gas beginning to flow that same year. The cost is estimated at €8 billion, but there remain doubts over its funding. Nabucco should, however, be supported by the envelope granted as part of the European recovery plan proposed by the Commission for priority energy projects, and also by a €2 billion loan from the European Investment Bank.
Also to be settled is the thorny issue of where the pipeline will get its supplies of gas: it could be linked to two possible connection points at the Turkish border, one in the north east with Georgia and the other in the south east with Iraq. Another possibility would be a link, further south in Syria to the trans-Arab gas pipeline. At this point, only Azerbaijan, which signed the final declaration of the Southern Corridor Summit in Prague in May, has undertaken to supply a substantial part of the gas the will flow through Nabucco. Experts say, however, that its gas field of Shah Deniz can only supply 4 billion m3, not enough to make the project viable. Furthermore, Baku and Moscow recently signed an agreement for the purchase of Azeri gas from 2010, although this should not affect the project. Ultimately, gas could come from Iraq, Kazakhstan, Uzbekistan, Turkmenistan and also Iran, if relations with the EU and the US return to normal. Turkmenistan, with its vast reserves, brought valuable support to Nabucco on Friday with its announcement that it was ready to join the project. The EU expects similar commitments from Kazakhstan and Uzbekistan, former Soviet republics still under the Moscow's sway. The Iraqi prime minister has said that his country could probably provide 15 billion m3.
The next stage for the Nabucco project, in the second half of this year, will be to conclude capacity contracts. Commitments to transport gas through the pipeline for a fixed period are not the sole reserve of states, sellers and buyers can make such commitments. The funding of the Nabucco project depends on these commitments. Nabucco is open to third parties. At least 50% of its capacity will be sold on the open market, with nay transporter being able to buy gas to have transported. The remaining 50% will be subject to a right of pre-emption on behalf of the pipeline owners and their subsidiaries. If these companies do not exercise their right, that capacity will be put on the open market.
One issue has already been settled: arrangements for transporting the gas through Turkey. After months of bitter negotiation, Ankara has finally given up on its demand for 15% of the gas carried at preferential rates. Turkey hopes, nevertheless, to take between 50 and 60% of the tax revenue, close to €400-450 million per year, or more. To persuade Ankara, the Commission promised that Nabucco would carry gas both from the east to the west and in the opposite direction. A flow reversibility clause will mean that, in times of crisis, the EU will be able to supply gas to Turkey which depends on Russia for 60% of its imports. In addition, Ankara has scored some Brownie points on its accession to the EU. Barroso, has not hidden that Nabucco “could open the door to a new era in relations between Turkey and the EU, and beyond”. (E.H./transl.rt)