|Supply concerns haunt Nabucco despite Azerbaijan deal|
|June 13, 2010|
(BAKU) - Azerbaijan has boosted Europe's Nabucco pipeline by agreeing a gas transit deal with Turkey, but experts say the ex-Soviet republic alone cannot supply enough gas to secure the project's future.
The June 7 deal, which sets the fee Azerbaijan will pay for transiting its gas through Turkey, will open the door for Baku to begin commercial negotiations on providing more gas to Europe.
It is a key first step in securing supplies for the ambitious Nabucco project.
But experts said that despite Azerbaijan's significant gas reserves, Nabucco's long-term viability will depend on other suppliers from the energy-rich Caspian Sea region coming on board.
"Azerbaijan now has the unique opportunity to become the first supplier of gas to Nabucco," said Ilham Shaban, the director of the Baku-based Centre for Oil Studies.
But "Nabucco can hardly be viable without other countries from the region" and significant obstacles remain to other regional suppliers, such as Iran and Turkmenistan, agreeing supply deals, Shaban said.
The Nabucco project is a key component in the European Union's Southern Corridor plan to bypass Russia in bringing Caspian Sea gas through Turkey to Europe.
The EU sees Nabucco as vital to energy security following a number of disputes that disrupted supplies of Russian gas to some countries in eastern and central Europe.
The 3,300-kilometre (2,050-mile) conduit between Turkey and Austria, estimated to cost 7.9 billion euros (10.5 billion dollars), is scheduled to be completed by 2014. It aims to transport up to 31 billion cubic metres (bcm) of gas annually.
The conduit is a rival to another pipeline, South Stream, backed by Russia, which aims to pump Russian gas under the Black Sea to Bulgaria and then on to other European countries.
Analysts said Azerbaijan's deal with Turkey will assuage fears that Baku was considering boosting supplies to Russia or Iran instead of to Europe. Over the last year, Azerbaijan has signed gas supply deals with both Moscow and Tehran.
But even if Europe is Baku's export priority, Azerbaijani supplies will hardly be enough to fill Nabucco, said Nazim Mamedov, an Azerbaijani economist and member of parliament.
"Azerbaijan cannot deliver more than 10 billion cubic metres of gas (per year), so I think Azerbaijan may be able to provide up to a third of the gas for Nabucco," he said.
Critics of Nabucco, including Russian Prime Minister Vladimir Putin, have said the project will not be viable without gas from Iran, but the United States strongly opposes Iranian involvement in the project.
Washington has instead been pushing for the Central Asian state of Turkmenistan, across the Caspian from Azerbaijan, to use its ample gas supplies to feed Nabucco.
But Shaban said Turkmenistan, which has been pursuing closer energy ties with China and Iran, is unlikely to sign on to Nabucco and in any case would face significant hurdles in shipping its gas across the Caspian.
"For now others in the Caspian cannot help," he said.
Iraq's Kurdistan region has been touted as another potential major supplier, but experts warn that instability in Iraq could make it difficult for supplies from the region to make it to Europe.
"The Azerbaijan deal is a positive thing, but it's really not enough," said Arno Behrens, an energy expert with the Brussels-based Centre for European Policy Studies.
"It remains to be seen what other contracts they can reach. I wouldn't write it off, the (Nabucco) consortium is very determined to go ahead and it has the backing of the EU," he said.
"But there's a lot of scepticism in the face of these (supply) problems and the fact that other pipelines are moving ahead quite quickly."
Copyright © 2010 AFP. All rights reserved.
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