After more than a decade of political and commercial wrangling, the Shah Deniz consortium announced on 28 June it has selected the Trans Adriatic Pipeline (TAP) to deliver gas volumes from Azerbaijan to customers in Greece, Italy and South Eastern Europe.
“I think the decision on a route to carry Azerbaijan’s gas onwards from western Turkey into Europe is based on a combination of sales prices for the gas and transport tariffs through the delivery pipeline,” Julian Lee, senior energy analyst at London’s Centre for Global Energy Studies (CGES) told New Europe. “The route offering the best combination of those two factors has won the contest,” Lee added.
For the Nabucco supporters, it became clear they backed the wrong horse out of the gate as it was a no-starter from Day One. Its shareholders later opted for Nabucco West, a short-cut version of the Nabucco project, which envisaged construction of a pipeline from the Turkish-Bulgarian border to Austria. They hoped that it would connect to the planned Trans Anatolian Pipeline or TANAP, which will bring gas from Azerbaijan to the European edge of Turkey. However, Shah Deniz decided on 28 June to connect TANAP with TAP, leaving Nabucco completely out of the equation.
“The Nabucco project is over for us,” Gerhard Roiss, CEO of Austria’s OMV, the leading company in Nabucco West, told news conference on 26 June, dismissing the suggestion that Nabucco could also be built eventually. But Nabucco Gas Pipeline International said in a statement on 28 June its shareholders will now discuss the next steps and are confident of developing the Central and South Eastern Europe market based on alternative gas sources.
OMV said it was told higher gas prices in Greece and Italy tipped decision in favour of TAP. Indeed, gas prices are higher in Greece and Italy, making the project more commercially attractive. Also, Russian gas monopoly Gazprom reportedly promised “Nabucco countries,” including Bulgaria, lower prices through the Moscow-backed South Stream gas pipeline.
Lee said Russia has long opposed Nabucco when it was envisaged as a 30 billion cubic metre gas transit corridor for Azerbaijan, Turkmenistan and the Middle East. However, he noted that “the Nabucco project is now a shadow of its former self”.
Nevertheless, the selection of TAP by Shah Deniz is probably a welcomed development for Moscow since TAP’s southern supply route doesn’t seriously affect Russia’s interests in Central and South Eastern Europe.
Lee noted that there will be room for Nabucco in the future. “Europe still wants to boost its pipeline gas imports from new suppliers. If, or when, volumes increase from Azerbaijan, or Iraq, or even Iran in a new political era, more pipelines will be needed. Nabucco could then deliver ‘new’ gas to south-eastern Europe, where dependence on a single supplier (Gazprom) remains worryingly high,” the CGES energy analyst said.
However, it is unlikely that Nabucco shareholders will wait that long. As an industry executive told New Europe earlier in the week, “As the saying goes, it ain't over until the fat lady sings”.
Well, it looks like appropriate ending for Nabucco, an opera, because the fat lady is going to sing.
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