Eric Watkins
Oil Diplomacy Editor
LOS ANGELES, Nov. 10 -- The European Union energy commissioner Andris Piebalgs, following meetings in Turkey and Azerbaijan, has reaffirmed the strategic importance of the southern gas corridor, which aims to supply Europe with natural gas from Caspian and Central Asian nations.
Piebalgs' visits were well-timed, coming just days before publication of the European Commission's second Strategic Energy Review due to be released Nov. 13. The review is expected to include a communication on the security of European gas supply—a point the commissioner stressed on his journey.
"Recent events in the Caucasus have shown once again that this is a critical time for energy issues in the region," Piebalgs said, referring to the disruption of oil and gas supplies that occurred in August and September during the conflict between Russia and Georgia.
Aiming to shore up support, Piebalgs' remarks echo earlier statements made during the conflict that particularly stressed the need for developing the Nabucco gas pipeline—which would bypass Russia—in delivering natural gas to Europe from the Caspian and Central Asian region.
"Our objective of diversifying our sources and routes is even more important after the events in Georgia," Piebalgs said in September. "We need more political engagement to remove all the obstacles to Nabucco to bring gas from the Caspian basin to the EU."
The commissioner was responding to analysts' earlier comments that hopes of constructing the Nabucco line were quickly fading, especially after the conflict in Georgia increased doubts about the security of investing in the turbulent region.
The meetings
Piebalgs' most recent remarks urging support for the southern gas corridor came after a meeting in Baku with Azeribaijan's President Ilham Aliyev as well as Minister of Energy and Industry Natig Aliyev and Minister of Foreign Affairs Elmar Mammadyarov.
During the meeting, Piebalgs stressed the importance of Azerbaijan as a strategic partner of the EU and, in particular, reaffirmed the EU's commitment to enhancing the energy partnership between the two sides.
Further support for exploration and development of Caspian resources was also highlighted during the meeting in Baku.
"The EU will pursue its efforts toward increased energy security and diversification, along with full support to stability and progress in the region as a whole," the EU Commission said.
Piebalgs' meeting in Azerbaijan came after an earlier discussion with Turkey's President Abdullah Gul, Prime Minister Recep Tayyip Erdogan, and Energy Minister Hilmi Guler that likewise stressed the southern gas corridor.
"Both Turkey and the European Union have a lot of interest in promoting this project, which will increase our respective security of supply. I consider the southern gas corridor as the flagship of energy cooperation between Turkey and Europe," Piebalgs said.
Turkey and the EU will work to conclude an intergovernmental agreement for the Nabucco project, with the aim of finalizing the document for signature in Turkey in January 2009.
European officials expect the signing of the intergovernmental agreement on Nabucco to be followed by development of the entire southern corridor route delivering gas from the Caspian and Middle Eastern regions to the EU.
As with Azerbaijan, Piebalgs' office said the EU will work with Turkey "jointly to develop upstream gas and oil availability and, for gas specifically, will develop a joint private, corporate venture to accelerate development."
However, Turkey and the EU could not resolve their differences concerning the price mechanism of the Nabucco project.
Trouble ahead
Turkey wants to become a trade-hub for the pipeline by diverting part of the natural gas for domestic use and selling the rest to Europe. As a result, Turkey has rejected the EU's offer of receiving only a transit fee.
"It is very clear that Turkey does not want to be just a transit country," said Piebalgs. The commissioner downplayed the problem, saying that "this is not an issue of us against Turkey" and that the two sides can solve the issue together.
The problem, according to one analyst, is less about transit fees and more about Turkey's own growing need for natural gas. That need, together with competition from Russia, is complicating the project.
"Faced with a serious challenge in the form of the Russian-backed South Stream pipeline which threatens to poach its potential customers in central and southeast Europe," said Business Middle East, "the Nabucco pipeline continues to have difficulty finding enough gas to make the line viable. "The more so given that Nabucco's gas needs appear increasingly to be in conflict with those of its main transit country, Turkey, which also needs to find new sources of gas both to meet increasing demand and to reduce dependence on Russia," said BME.
The planned 3,300-km Nabucco pipeline will transport 30 billion cu m/year of natural gas from Turkey to Austria, via Bulgaria, Romania, and Hungary. It will extend from Erzurum in Turkey to Baumgarten an der March, a major natural gas hub in Austria.
With a view to securing gas supplies for the line, the EU has already signed agreements with Turkmenistan, Azerbaijan, Kazakhstan, and Ukraine to help develop their reserves. The EU also is eyeing Egypt and Iraq as possible future suppliers.
Participants in the Nabucco project, all of which hold equal 16.67% stakes, include Turkey's Botas AS, Bulgaria's Bulgargaz Holding EAD, Romania's Transgaz SA, Hungary's Mol Rt., Austria's OMV Gas & Power GMBH, and Germany's RWE AG.
Contact Eric Watkins at [email protected].
