Nabucco Pipeline Could be Doomed by Rival TAP
- May. 29 2013 00:00
- Last edited 16:33
VIENNA / BRUSSELS — Europe's grand plan for a gas pipeline from the Caspian Sea that would make its eastern states less reliant onáRussia may have been fatally undermined byáRussia's even bigger project.
AsáAzerbaijanánears a decision on which pipeline to choose for its future exports, theáNabuccoáplan that was long theáEuropean Unionáfavorite could lose out to the more modest Trans Adriatic Pipeline, or TAP, acrossá Greeceátoásouthern Italy.
In a complex equation based on politics as much as economics, TAP is in the ascendancy over theáNabucco pipelineátoáAustriaáin the face ofáRussia's $39 billion South Stream plan.
"The question is: 'IsáNabuccoáviable if South Stream is built?'" saidáAndrew Neff, a Moscow-based principal energy analyst with the research firm IHS.
'Is the Nabucco gas pipeline project viable if South Stream is built?'
Analyst at IHS
The decision between TAP andáNabuccoáis expected in June from partners in the Shah Deniz consortium, led by gas field operatoráBPáand Azeri state energy companyáSocar.
TheáEuropean Unionáwon't have a direct say in the choice, but its recent switch to "project neutrality" from support foráNabuccoácould make a big difference. It now says it would be happy with either pipeline or even both.
"There has been a dramatic shift," TAP's External Affairs Director Michael Hoffmann told Reuters.
NabuccoáspokesmanáChristian Dolezal, however, said his project retained strong political support.
Europe's original plan was one 3,900-kilometer pipeline all the way fromáAzerbaijan, acrossáTurkeyáand up through theáBalkans. It was namedáNabuccoáafter the epic Verdi opera, with its rousing chorus, that the founding parties had listened to at theáVienna opera houseáin 2002.
Although the plan, led byáAustria's OMV, was scaled back to a 1,300-kilometer version linked to a Turkish pipe, it had kept the favor of botháBrusselsáand Washington.
That was not least because 'NabuccoáWest' would cross former eastern bloc countries that depend the most onáRussiaáfor energy — even though initial Azeri gas supplies will account for a mere 2 percent of EU needs.
TheáTAP pipelineáis only 800 kilometers, including a stretch under the sea toásouthern Italy. Its shareholders are led by Swiss AXPO andáStatoil, which has a stake in the Azeri gas fields.
The business case for the two appears relatively balanced.
Nabuccoáwould be estimated to cost less than $8 billion with one Azeri expert reckoning TAP would be $500 million cheaper, butáNabuccoámight bring access to more markets.
"Both have advantages and disadvantages," said Gulmira Rzayeva, a leading research fellow at the Center for Strategic Studies under the President of the Republic of Azerbaijan.
All of which makes the politics even more important.
Choosing TAP, which does not cut through territory thatáRussiaátraditionally dominated, could be politically expedient foráAzerbaijan, which is broadly aligned with the West but has no interest in conflict with its former Soviet overlord.
Russiaábeganábuilding South Streamáin December and hopes to deliver gas toáEuropeáwell before 2019, when the Azeri gas is due to start flowing to theáEuropean Union..
The Gazprom-led 2,500-kilometer South Stream will cross theáBlack Seaáand then closely follow the line ofáNabuccoáWest. Plans for a southern route that could have competed with TAP were scrapped, another boost foráNabucco's rival.
Southern European states see benefits for themselves too.
Italy, which relies for gas on politically unstable North Africa as well asáRussia, is keen to diversify supply.
Struggling to recover from its debt crisis,áGreeceáwould welcome the additional revenue from the pipeline. InfluentialáGermanyáwould be happy with anything that strengthens Greek finances and reduces potential future bailout costs.
TheáTrans Adriatic Pipelineáwould have the side benefit of forcing greater cooperation between old rivalsáGreeceáandáTurkey, EU diplomats said.
BulgariaáandáRomania, the poorest European Countries, would appreciate the infrastructure investments ifáNabuccoáwere built.
But their economies do not face the immediate pain thatáGreece's does, and a South Stream pipeline througháBulgaria,áSerbia,áHungaryáandáSloveniaáwould also bring economic benefits, even though it would not breakáRussia's dominance.
Washington is less concerned about the pipeline supply route to NATO allies than it was, given the change in the global energy picture as a result of the U.S.-led shale gas boom and the increasing importance of liquefied natural gas, which can be shipped by sea.
In fact, the emergence of those alternative gas supplies has raised debate about whether long pipelines which tie end users into relatively expensive contracts can be justified by the economics alone.