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Weekly UpdatesThe July 13 the Nabucco consortium agreement was signed in Ankara by PM Erdo?an and his counterparts from Austria, Bulgaria, Hungary and Romania. EU Commission President Jose Manuel Barroso, PM Maleki and Georgian President Mikheil Saakashvili attended the ceremony. In a speech, Barroso said: "This is a historic day for European energy security" and the ties with the related supplier countries. The 3,300-km pipeline is to pump gas through Turkey and the four EU countries to Austria and Germany, bypassing Russia, which now meets 25% of Europe's gas demand.
Talks about the pipeline began in 2002. The US and EU have pushed for the project after Russia-Ukraine price disputes disrupted gas supplies to Europe in the past two winters, but progress was slow due to uncertainties about suppliers. Viewed as a turning point in facilitating the Nabucco project, the agreement laid down principles for issues like taxation during the management of the pipeline. After the agreement, all signatory states will sign further accords covering detailed guidelines through multilateral talks in six months.
Turkish leaders then said Ankara hoped Azerbaijan, Turkmenistan, Iraq, Syria, Egypt and Qatar will jointly contribute to the Nabucco gas supply. Erdo?an said it was possible for Iran and Russia to become Nabucco suppliers, adding: "The more steps we take [on the project], the more the interest of supplier countries will grow".
The EU had signed a deal in May with Azerbaijan and Egypt - main suppliers - and Turkey and Georgia - the main transit routes - to speed up work on Nabucco. But key suppliers like Kazakhstan, Turkmenistan and Uzbekistan refused to sign up. In another blow to the JV, Gazprom in late June signed an initial agreement with Baku to buy Azeri gas starting from Jan. 1, 2010, but the volume and other issues were left for further negotiations. Barroso said with the July 13 agreement, the Nabucco pipeline became "inevitable rather than just probable".
The pipeline should pump 31 BCM/y by 2020, or about 5 to 10% of total EU gas use by then. Construction of the pipeline from eastern Turkey is to begin in 2010 with a total cost of 7.9bn ($11bn). The project will be run by six equal partners: OMV, MOL, RWE of Germany, Transgaz of Romania, Bulgargaz of Bulgaria and Bota? of Turkey. The European Investment Bank (EIB) is to finance 25% of the JV. The European Bank for Reconstruction and Development (EBRC) has said it is willing to provide financing once it sees gas supply contracts, completion agreements and the technical parameters.
Nabucco is a boost to Turkey's long-delayed bid for EU membership. Erdo?an said the project will further improve Turkey's relationships with the EU in energy and enhance Turkey's position in regional and global energy security. Barroso said the deal was "a powerful illustration of the strategic bonds between Turkey and the EU". (Turkey became an EU candidate-member in December 1999 and began accession talks in October 2005. But it has only begun negotiations in 11 policy areas out of 35 needed before its entry, with talks in the energy area yet to open).
Richard Lugar, the most senior Republican in the US Senate, said the pact was "a signal to the rest of the world that partner governments will not acquiesce to [Russian] manipulation of energy supplies for political ends". US energy envoy Richard Morningstar on July 13 described Azeri gas as a "necessary condition" but not sufficient for Nabucco. EU Energy Commissioner Andris Piebalgs said the EU's focus now would be on encouraging Turkmenistan to participate. Stefan Judisch of RWE said Turkmenistan would be able to supply 10 BCM/y in the pipeline's Phase-I, but would first have to find a way through disputes over the Caspian Sea. In the previous week, Turkmen President Gurbanguly Berdymukhammedov said his participation in the project would help his country - which is locked in a dispute with Russia over gas supplies - to diversify its gas export routes.
Morningstar said Russia was free to supply gas to Nabucco, if the JV's shareholders accepted Gazprom as a partner. But he reiterated Washington's opposition to the use of Iranian gas. Egyptian gas would reach Nabucco via Syria and Turkey, with the gas being pumped from Sinai to Jordan and Syria. Its link to Turkey is nearly ready.
The July 13 pact was made possible after Turkey agreed to withdraw a bid to take 15% of Nabucco's flow for use as it wished. But Ankara agreed to a substantial cash transit fee instead. Giles Merritt, director of the Security & Defence Agenda, a think tank in Brussels, warns that this deal is "triumphalism" designed to "cock a snoot" at Moscow. But he says the EU would move ahead with the pipeline as a way to force "a catalyst for Europe's energy security strategy". He says this deal forces a change in EU politics, adding: "We've had uplifting rhetoric [on a common energy strategy], but now we will need to define the details The solidarity of EU nations will now be tested".
FEED