Are you sure?

Europe must commit now to Nabucco gas pipeline

European governments and gas consumers must now pledge to back the Nabucco gas pipeline if Europe is to reduce its reliance on Russian gas, an energy security conference in Sofia heard.

The €7.9 billion pipeline project to pump gas from the Caspian region via Turkey, Bulgaria, Romania and Hungary to Austria needs immediate political and financial agreement as well as financial backing after years of squabbling over terms.

“It is time for the poker game to end and decisions to be made,” Jeremy Ellis, head of business development at RWE Supply and Trading, a shareholder in the EU-backed pipeline project, told the conference.

“Europe and Turkey must now show their hands; the supply countries and investors will not wait for ever ... The gas reserves in the Middle East and the Caspian offer an opportunity for opening the southern corridor.”

Four months after a cut-off in Russian supplies to Europe that idled factories and left thousands of people without heating, the 27-member bloc has done little to turn words into action and secure supplies for the stalled Nabucco.

It has secured only a fifth of the gas needed to be viable.

A final investment decision, expected in 2010, to build the Nabucco gas pipeline should spur a multi-national search for gas to fill it, Nabucco project leader Reinhard Mitschek said.

At a summit last month, the EU leaders yet again voiced their support for the project but have not given Azerbaijan, Turkmenistan and other potential suppliers an incentive to supply the project.

“Nabucco is one of competing buyer groups...but the key is we have no knowledge about the transit,” Kristian Hausken, President of StatoilHydro Azerbaijan, told Reuters on the sidelines of the conference.

“There is no use to talk about who you want to buy from unless you don't know how to get there,” he added.

StatoilHydro and BP control Azeri's Shakh-Deniz gas field, which is expected to be the main supplier for Nabucco.

Turkey and Azerbaijan are in talks regarding the transit of gas but this has hit a snag due to demands from Ankara for a share of the gas as it crosses the country.

Hausken said the lack of clarity over transit conditions would delay the startup of the second production phase of Shakh-Deniz to around 2016. This is two years behind the planned launch of Nabucco in 2014.

“Time is flying, we can go North,” Hausken warned.

Competition for resources from the energy rich central Asian region is growing with Russia, China and Iran buying up the available gas.

Critics also say the EU keeps being reluctant to put as much cash and diplomatic resolve as Russia or China have used to promote their own projects.

Last year, Gazprom made an offer to buy Azeri gas at European market prices and last month Baku signed a memorandum of understanding with Moscow about starting talks on selling it gas for exports to Europe from 2010.

Turkmenistan, the other major potential supplier, is keen on the EU-backed Nabucco gas pipeline but needs Brussels to come up with concrete proposals on its implementation, a senior US official told Reuters on Friday.

Bulgaria, the country worst hit by the January cut-off in Russian gas supplies, called for an acceleration of big pipeline projects to ease the region's heavy dependence on Russian gas.

“The pure economic logic says that most likely we will see a delay in these projects and some of them might even be abandoned,” Economy and Energy Minister Petar Dimitrov said.

“We all see the sharp decline in demand due to the economic crisis. But the political logic says “no,” we should not allow delays. On the contrary, we must speed them up.”

Dimitriv said rich west European consumer countries and international financial institutions should follow the EU's example and provide funding for the Nabucco project. (Reuters)