Where Will “War Of Pipelines” Lead?

By Daria Manina

It looks like towards the end of the year, a number of countries have, for some reason, rushed to sign gas contracts with one another.

Russia received Turkey’s approval for its ambitious project to build the “South Stream” pipeline.

Turkey and Azerbaijan also signed an agreement to jointly build the Trans-Anatolian gas pipeline, which will form part of the so-called “South gas corridor”. The other parts are the much-discussed “NABUCCO” and the less known ITGI (which stands for “Interconnector Turkey-Greece-Italy”).

According to experts’ assessments, the implementation of the Turkish-Azeri joint project will cost $ 5 bln. The new pipeline’s capacity will amount to 35 bln cubic meters per year.

It is expected that the Trans-Anatolian pipeline will start pumping oil from 2017.

The President of Azerbaijan’s State Oil and Gas Company Rovnag Abdullaev has promised that the construction of the Trans-Anatolian line would not hinder other gas pipeline construction projects in the region, including “NABUCCO”. However, experts claim that although it can’t hinder the construction of “NABUCCO”, the Trans-Anatolian line could become its serious competitor. In fact, the objectives of these two projects are the same – to pump gas from Iran and the Caspian Sea (to which Azerbaijan has access) via Turkey to Europe.

Russian analyst Azhar Kurtov says:

“The NABUCCO project is the “protégé” of a number of European counties, and Turkey’s plan to build an alternative pipeline, of course, is a challenge to Europe. On the one hand, Turkey obviously has fewer financial resources than most European countries. On the other, Turkey’s advantage here is its territorial, ethnic and cultural proximity to Azerbaijan. However, there have been quite a lot of instances when Turkey reneged on its obligations on gas contracts with several countries, including Russia. Thus, the “gas battle” is not yet over, and it is hard to say at this moment what it lead to. We’ll have to wait and see what the response of NABUCCO’s stockholders will be.”

Experts say that with the appearance of the Trans-Anatolian pipeline, “NABUCCO” could become almost redundant. First of all, “NABUCCO’s” capacity will most certainly be smaller than that of the Anatolian pipeline. Initially, it was planned that “NABUCCO” would pump up to 30 bln cubic meters of gas a year. But it has turned out that the gas fields in Iran and the Caspian Sea simply cannot produce such amounts of gas.

Russian oil and gas expert Valery Nesterov says:

“”NABUCCO” is a very cumbersome structure – in fact, it is too big for the amounts of gas which exist in the places where it is meant to pump the gas from. Nevertheless, this project is being backed by a number of influential European politicians. But the same time, there are quite a few circumstances which could still hamper its implementation. For example, one of the countries which have access to the Caspian Sea, Turkmenistan, cannot unilaterally allow the laying of a pipeline across the sea bottom without a permission from Russia and Azerbaijan. Moreover, Turkey and Azerbaijan have not yet come to an agreement on how they would share the income from gas sales. Another obstacle is that Iran is still against the “NABUCCO” project. All this casts very strong doubt on whether the whole project is viable at all.”

Still, for Europe, the Trans-Anatolian pipeline is hardly a very promising alternative to “NABUCCO”. Although the former will probably supply Europe with more gas than the latter, it still won’t be able to meet all of Europe’s demand for natural gas.

“This means that Russia should hurry up to complete the construction of the “South Stream”,” the Director of the Russian Foundation of Energy Development Sergey Pikin believes.

“The Russian pipeline won’t be in competition with the Trans-Anatolian one. Its capacity will be almost the same as “NABUCCO’s” – about 30 bln cubic meters a year. Azerbaijani gas is cheaper than Russian – but this doesn’t necessarily mean for sure that Europe will prefer purchasing gas from Azerbaijan. There might be some other circumstances which could influence Europe’s decision – for example, they might depend on whether it prefers to purchase gas on the spot market or sign long-term gas purchase contracts. The current trends show that Turkey is pinning its hopes on spot sales, while Russia’s policy is aimed at long-term contracts.”

Until recently, Turkey has dreamed of dominating at the European gas market. It was hoping to fill its coffers by transporting gas from Iran, Iraq and Azerbaijan to Europe. But now that the implementation of the “NABUCCO” project has been postponed, this dream has little chance of coming true.