Pipeliners

11 May 2009 - New Europe by Kostis Geropoulos - Two weeks after the Sofia energy summit, the EU made yet another attempt to reduce its reliance on Russian natural gas this time during the Prague summit with the participation of the countries of the so-called southern corridor. The EU did what it does best issuing a lukewarm statement signed by the participants, agreeing “to give the necessary political support, and where possible technical and financial assistance to the construction” of the project. WOW! Talk about spin control. The agreement was signed by the leaders of Egypt, Turkey, Georgia and Azerbaijan. The representatives of Kazakhstan, Turkmenistan and Uzbekistan did not sign it, possibly succumbing to pressure from Moscow. Iraq, which was also invited at the Prague summit, did not send anyone, although it is expected to sign an energy agreement with the EU soon. So far, efforts to build new pipelines bypassing Russia have failed to produce results, with energy firms wanting promises of gas supplies from producers, energy-rich states demanding that the firms first lay their pipes, and transit states issuing high demands for their services. Still, you can’t blame the EU for trying. “It’s understandable. The EU wants to diversify their gas supplies because they are not very reliable from Russia because of the disputes. They want gas from the Caspian region, LNG from Qatar and also from Iraq through pipeline,” Muhammad-Ali Zainy, a senior oil economist and analyst at the Centre for Global Energy Studies, told New Europe, telephonically from London. However, Zainy, who is a native of Iraq and was once a senior official at the ministry of oil before defecting to escape Saddam Hussein’s regime, explained that for the time being the only Iraqi gas available is free gas from Iraq’s Akkas field, close to the border with Syria. The field is believed to contain up to seven trillion cubic feet of gas - representing up to six percent of Iraq’s gas reserves. Gas from the Akkas field could go through Syria and Turkey via the planned Arab Gas pipeline to supply a pipeline to Europe, Zainy said. Asked if Iraq is a feasible source for Nabucco, Zainy said: “Not now. Not even after a few years.” Iraq is not producing a lot of gas. He explained that most of Iraq’s gas is associated gas and that comes with oil production. In order for Iraq to have enough gas to meet domestic demand and have a surplus, Iraq would need to start producing four to six million barrels per day - maybe in 2015. “But, at this time it would be really difficult for Iraq,” he said. Zainy has little faith in Iraq’s government and the ministry of oil to manage the country’s resources. “So far I found them inept and they don’t know what is good for Iraq,” Zainy said. London-based HSBC analyst Paul Spedding said Iraq’s gas infrastructure is not developed. “It’s more a case of having it as another option. The more potential suppliers you have for Nabucco or any other southern export route the better,” he told New Europe, adding that the EU is putting its hopes into gas supplies from Turkmenistan and Azerbaijan. The Nabucco project faces difficulties due to its political complexity and cost. The issue of transit via Turkey, which doesn’t want to be just a transit country, also remains a challenge. But Zainy said this is not time for Ankara to be difficult. “I really don’t think Turkey is going to be a sticking point because Turkey would really like to be a hub for gas that goes to Europe and they will try to be reasonable,” he said. “There are prospects for gas to pass through Turkey and one of them is the Nabucco pipeline that will gather gas from Azerbaijan and perhaps Turkmenistan, but they also have to address the Iran situation, which is geopolitical.”