Turkey, EU Nations Sign Landmark Gas Pipeline Agreement

Nabucco-South Stream race: bets accepted

MOSCOW. (RIA Novosti economic commentator Oleg Mityayev) - Four EU states and Turkey signed an agreement on July 13 in Ankara paving the way for the Nabucco pipeline to transport gas to Europe bypassing Russia.

The pipeline could become a serious rival to Russia's South Stream, which is designed to bring gas to south and central Europe. Bulgaria, which is involved in both projects, is planning to bargain for better terms under energy agreements with Russia.

The agreement, signed in Ankara by Austria, Hungary, Bulgaria, Romania and Turkey, stipulates building a 3,300 km (2,051 mile) pipeline with a throughput capacity of 31 billion cubic meters annually between Erzurum in eastern Turkey and Austria's gas distribution hub at Baumgarten across Bulgaria, Romania and Hungary. The 7.9 billion euro project is to be commissioned in 2015-2016.

The signing of the agreement has been postponed several times because Turkey demanded that 15% of the gas to be shipped through the pipeline must be sold to it at a discount. But the demand made Europe's main gas project unprofitable, and eventually the EU convinced Turkey to withdraw its demand.

Nabucco's other, and bigger, problem is a lack of gas. Project initiators now say that Nabucco will pump 8-10 billion cu m of natural gas annually in the first stage, mostly from Azerbaijan, but its capacity will be gradually increased. The Baku-Tbilisi-Erzurum pipeline has been built and commissioned.

Under the project, Nabucco is to receive 7-8 billion cu m from Azerbaijan annually by 2015, the same amount from Iran, and up to 2 billion cu m from Egypt. However, an Iranian spokesman said shortly before the signing of the agreement that his country did not have surplus gas for Nabucco, and that Iran would sell its gas on the domestic market.

Unexpectedly, Turkmenistan supported the project last Friday. President Gurbanguly Berdymukhamedov said that Turkmenistan, committed to diversifying its external energy routes, would use every available option to take part in large international projects, "such as Nabucco."

The Nabucco authors were happy, as they have always dreamed of linking Turkmenistan to Nabucco through the Trans-Caspian Pipeline, which is to link Turkmenistan with Azerbaijan across the Caspian Sea.

Under a 2003 agreement Russian energy giant Gazprom has the monopoly right to buy up to 50 billion cu m of Turkmen natural gas annually for 25 years. However, last spring Gazprom dramatically decreased the acquisition of Turkmen gas due to a decline in demand, actually pushing Turkmenistan toward Nabucco. But the Chinese proved to be faster than Europeans. A new pipeline with an annual capacity of 40 billion cu m to deliver Turkmen gas to China is to be commissioned as soon as this fall.

Without Turkmen gas, Russia may have problems with the South Stream pipeline, which would link Russia with Bulgaria along the Black Sea bottom. The cost of construction of the underwater section of the pipe has been estimated at $10 billion. Once in Bulgaria, the pipeline is to run in two directions, one leg to southern Italy via Greece, and the other to Austria via Serbia and Hungary.

The South Stream project has come across problems in Bulgaria, which will have a new government after the July 5 parliamentary elections. Sofia Mayor Boyko Borisov, whose party, Citizens for the European Development of Bulgaria (GERB), won the elections, has said that the talks on joint energy projects with Russia, including South Stream, should be suspended.

The new Bulgarian authorities will most likely demand more favorable terms now that Bulgaria has signed the Nabucco agreement.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

en.rian.ru...

Without Russia, Europe has no reliable source of gas

MOSCOW. (RIA Novosti commentator Dmitry Babich) - "There has been no change on the gas supply market." In the past few months, this phrase has brought for the EU, Ukraine and Russia more anxiety than calm, because no change means that the question over the supply of Russian natural gas to the EU this coming winter has not been settled.

In early July, the EU's Gas Coordination Group met in Brussels to examine the level of preparedness of the EU and the Energy Community (EnCT) to face a possible gas supply disruption in the coming weeks or months. It established that the gas storage situation in Ukraine remained uncertain, and that it was still unclear who would finance Ukraine's acquisition of the required amount of gas.

Russia is fed up of lending money to the Yushchenko government, which only pokes insults at Russia, and has proposed that the EU provide several billion dollars to the "democratic" Ukrainian government.

Unwilling to part with such a large sum, Europe asked if Ukraine could save itself, or if half of the required sum would suffice.

Kiev and Moscow argue that democracies in a market economy cannot be saved without investment. To paraphrase Vladimir Lenin, any democracy is worth something only if someone can pay for it. In the case of Ukraine, it could be a permanent EU agency such as the European Commission. Its president, Jose Manuel Barroso, has been conducting endless meetings on the issue with his colleagues and pondering over the problem alone, but has so far not approved the allocation of funds to Ukraine.

Mr. Barroso is acting unwisely from the viewpoint of European values and ideology. Why not give money to the young Ukrainian democracy, which has been calling, in unison with some East European EU members, for the need to fight "Russian imperialism"?

However, one can also understand the European Commission president's stance, as such allocations may never be recouped. If West European companies pay in advance for the gas that Russia has not yet supplied to Ukraine, who can guarantee that they will receive the contracted gas?

European companies, which have had negative experience of dealing with Viktor Yushchenko and Yulia Tymoshenko, refuse to believe the two again.

The Ukrainian president and prime minister, the current darlings of the European public, have promised to transit the Russian gas. But they may quarrel again, with Yushchenko again sanctioning searches in the office of Ukraine's national oil and gas firm Naftogaz, as he did last spring, or even halting Russian gas and thereby stopping its transit to Europe.

In this situation, the European Commission has reminded the EU countries of "the need to fill storage units and seek further regional arrangements before any possible new disruption occurs." As of late June, EU storage units contained 4.5 billion cubic meters (bcm) of gas less than in June 2008, according to Swiss investment bank UBS.

Kiev paid for Russian gas supplies in May and June at the last possible moment. Gazprom spokesman Sergei Kupriyanov said that Ukraine planned to dramatically increase gas purchases in July.

Ukraine, which consumed 33 million cu m (mcm) of gas per day in mid-June, has contracted 120 mcm for July.

Does it have enough money to pay for the contracted amount? Ukraine "scraped and scratched" to pay $300 million for gas in June, but Prime Minister Yulia Tymoshenko has recently said that her government was planning to increase the authorized capital of Naftogaz to $2.45 billion.

Ms. Tymoshenko has also said in an interview that Ukraine needs $4.2 billion to buy the required 16 bcm of gas for the country's underground storage facilities, while President Yushchenko said $1.6-$2 billion would suffice.

Which of them is lying?

The European Commission is keeping silent, but Russian sources in Brussels say that even the most tolerant Eurocrats are losing patience with the Ukrainian leaders.

A solution was proposed to the European Commission five years ago. According to it, the EU, Russia and Ukraine should set up a consortium to ensure the transit of Russian natural gas across Ukraine. Unveiled in 2002, the idea of the consortium was an unwanted child for the EU, because it does not conform to its ideology. How can Europe work with Russia and not against it, helping the "new imperialist," which is seeking to restore its former influence in the ex-Soviet countries, in a joint project?

As a result, the consortium kicked the bucket.

Making another go at this policy, the EU signed a separate agreement with Ukraine last spring to modernize its gas transportation system. But its enthusiasm waned when the question of paying for the project was raised.

Maybe it is considering cooperation with the "gas imperialist" ahead of the winter colds?

en.rian.ru...

Hum, Why would they include Russia? unless it's to appease them I can guarantee all of you that if they were not included in this deal we would be hearing from Medvedev and more importantly Putin about how this threatens Russias national security.

[edit on 013131p://2426 by mike dangerously]

They will include Russia just so they can make money. But wont reply on them anymore.

Even if those behind Nabucco wanted Russians to supply gas through the pipeline, Russia likely wouldn't. Russia has its own competing pipeline project - South Stream - underway, and together with current pipelines and Nord Stream Russia's export capacity should be adequately met by its own pipeline projects.

In addition to this Russia opposes Nabucco and the interests behind it (NATO and US). So connecting the pipeline to the Russian gas network is out of the question.

reply to post by maloy

Nabucco Pipeline Competition for Russian Gas

The Nabucco project will be competing with Russia's South Stream pipeline, which is to deliver Central Asian gas from Russia under the Black Sea to Europe, circumventing Ukraine. Russia has made generous offers to potential suppliers in the Caspian region in an attempt to corner the gas market. Last month, Moscow agreed to pay Azerbaijan $350 per 1,000 cubic meters in a deal for 500 million cubic meters of gas that analysts say was aimed at heading off the Nabucco project.

reply to post by maloy

Medvedev Casts Doubt on Nabucco as Merkel Defends Gas Pipeline

Officials from Turkey, Bulgaria, Romania, Hungary and Austria signed an accord in the Turkish capital Ankara on July 13 for the Nabucco project, which has been in planning since at least 2004. The U.S.-backed venture has been delayed by a lack of commitments from customers, transit nations and gas suppliers.

Gas would flow into Turkey from three of four possible competing entry points: Georgia, Iran, Iraq and Syria, according to the European Union, which helped broker the accord.

The EU is now trying its best to find excuses to cancel the North Stream 2 pipeline ...
It's hard to do that without direct US intervention .... isn't it ?

a reply to: Flanker86

The KGB, I mean, Putin can do no wrong these days. Nord stream 2 will weaken the EU and US stance.