EU Officials Upbeat On Prospects For Caspian Gas Link

EU Energy Commissioner Andris Piebalgs said on November 22 that the diversification of gas deliveries will cut prices for European consumers and increase the bloc's security of supply. The European Commission has long identified the countries surrounding the Caspian Sea as potentially a major alternative Russian supplies. The majority of those countries' gas exports to Europe today transits through Russia.

After a meeting with Piebalgs, the EU-appointed coordinator for the Nabucco gas pipeline from Turkey to Austria, Jozias van Aartsen, said he believes the project is feasible. He said all EU countries whose territories it crosses are resolved to proceed with Nabucco.

"What I've [achieved] in the past two months is that all the four countries in the EU side -- Austria, Hungary, Bulgaria, and Romania -- are glued to the project again, are really involved again, and do see the project as a priority for their countries," van Aartsen said.

Van Aartsen said the two main hurdles remaining are funds and the EU's own bureaucracy.

Thus, the European Commission must rule whether to exempt the Nabucco consortium from EU rules that require all infrastructure to be freely accessible to all companies active in the field. Investors in Nabucco say an exemption is necessary to make the project attractive for investors. The ruling is due in January 2008.

Aartsen also said the energy companies of the countries involved have indicated they are prepared to commit the necessary funds to the project. Aartsen said Austria's national energy giant OMV, which heads the Nabucco consortium, is particularly "positive."

Opening The 'Southern Corridor'

He added that funding may also be available for other "southern corridor" projects. This could be a reference to EU-backed plans to build a pipeline across the Caspian Sea to extend the list of Nabucco's suppliers to Turkmenistan and Kazakhstan. EU officials say they will in the coming few days unveil the results of two feasibility studies on the prospects for a trans-Caspian route.

But initially, investors in Nabucco have confined their calculations to gas from Azerbaijan. Talks are under way with Iran -- which has the largest proven gas reserves in the world. Egypt could also become a supplier.

If Nabucco manages to tap into Central Asian gas reserves, it could in future supply between 10-15 percent of the EU's total consumption. The pipeline's initial capacity will be just under 30 billion cubic meters. This would put it on a par with the projected Nord Stream pipeline from Russia through the Baltic Sea to Germany.

Turkey would become a key transit hub. EU officials have predicted that it's role could rival that of Ukraine in 10-15 years' time.

Van Aartsen's earlier comment about the newfound resolve of the Nabucco partner countries was a tacit reference to Russia's attempts to derail Nabucco. Moscow has sought to conclude bilateral supply and transit deals with all these countries, as well as Italy and Greece, in a bid to render Nabucco commercially unviable.

But van Aartsen said Moscow's obstructionism appears to have waned since the summer, and he reiterated that Nabucco is not conceived by the EU as an "anti-Russian" project.

"I [have] stated from the start, that the Nabucco project, which is one of the important projects in the [EU's] southern corridor is not an 'anti-this' or 'pro-that' project," van Aartsen said. "It's not an anti-Russian project, but just about the need for diversification of the EU['s supplies]. The European Union, in the longer term, [if] you look 10 or 15 years ahead, can't accept, of course, a monopoly of supply out of this region."

Van Aartsen said he hopes "the Russians can understand that." His optimism, however, may prove to be exaggerated, as gas exports to Europe, of which transit from Central Asia forms a major part, are a major source of income for Moscow. The EU's dependence on Russian gas supplies -- which amount to more than a quarter of its total consumption -- is also increasingly being exploited by Moscow as a lever to influence the bloc's foreign-policy choices.