Pipeliners

04-20-2009 - Upstream OnLine - The Nabucco pipeline project, designed to ease the European Union's dependence on Russian gas, could be headed for failure unless the EU commits to buying Caspian gas quickly, analysts have warned. Competition for resources from the energy rich central Asian region is growing with Russia, China and Iran buying up the available gas, while the EU lacks a coherent plan and diplomatic resolve to compete, analysts said. Four months after a cut-off in Russian supplies to Europe that shut down factories and left thousands of people without heating, the 27-member bloc has done little to secure supplies for the stalled Nabucco project. "The time is running out, there are many competing projects, and there are many actors competing for the same gas. I haven't seen any significant progress," Agata Loskot-Strachota of the Warsaw-based Centre for European Studies think tank, told Reuters. The January dispute between Moscow and transit country Ukraine was a wake up call for the EU, which gets a quarter of its gas from Russia and has been talking about reducing its reliance since a similar row in 2006. At a summit last month, EU leaders again voiced their support for the €7.9 billion ($10.25 billion) Nabucco project. The proposed link will carry 30 billion cubic metres of mainly Caspian gas per year through Turkey, Bulgaria, Romania and Hungary to Austria. But the EU has not given Azerbaijan, Turkmenistan and other potential suppliers any real incentive to supply the project. "Europe's problem is that there are too many cooks, that it does too much talking and too little acting," Borut Grgic, a Caspian and energy expert at the Brussels-based Institute for Strategic Studies, told Reuters. "Europeans who think that all the Caspian gas is available for them are dreaming," he said. "Smart geopolitics suggests if you are sitting in Baku or Ashgabat to sell a little bit of gas to everybody." Critics say the EU has not given as much cash or political support to projects such as Nabucco as Russia or China have to their own energy projects. Last year, state-run Russian export monopoly Gazprom offered to buy Azeri gas at European market prices. Azerbaijan agreed in March to start talks on selling Russia gas to export to Europe from 2010. Earlier this year, Iran sent a high-level official to Baku with an offer in hand. China has also signed a deal with Central Asia's top exporter Turkmenistan to buy more of its gas. By contrast, EU member countries organise summits instead of working to overcome internal divisions or engaging the Caspian suppliers, analysts said. Part of the problem lies in major powers which tend to back projects that secure their own energy supplies rather than work with the whole bloc to make Nabucco, which will benefit mainly eastern Europe, a reality, they said. All the Nabucco project leaders have secured is a promise by Baku to provide 3 Bcm of gas but nothing has been put on paper. Analysts told the news agency that the EU must take advantage of Ashgabat's strained ties with Moscow over a gas pipeline explosion and quickly come up with an offer for Turkmen gas. "Even if Turkmenistan stays reluctant to commit seriously, such an offer would be an important signal of the EU's interest, commitment and readiness to engage not only with Turkmenistan but with the whole Central Asian region," said Loskot-Strachota. Analysts have said Central Asian producers, fearful of angering Russia, may be reluctant to make any written committments to Nabucco unless Brussels makes guarantees on its timing, transit arrangements and financing. And with so many other options around, nations in the Caspian will likely spread their bets. "The supplying countries are shopping around for the best deal ... They are not going to hurry to jump into bed with anyone," said Mark Rowley of legal firm Baker Botts. To speed up work on diversification, Bulgaria - the country worst hit by the January gas cut-off - is organising a conference of central Asian, Russian and European officials from 24 April to 25 April. The summit comes three months after a similar event in Hungary and two weeks before a Caspian-EU summit in Prague. Analysts said the overlapping forums in Sofia and Prague would achieve little, like the one in Budapest, due to the expected absence of Turkey's Prime Minister Tayyip Erdogan, whose country has also become an obstacle to Nabucco. Turkey wants to exploit its geographical position and turn into a gas supplier to Europe, hoping to buy Azeri gas cheaply and re-selling it at a higher price to the EU. Brussels has so far failed to reach a deal with Turkey, which has once again delayed the signing of an intergovernmental deal needed to launch the project to June.