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SOUTH STREAM LIKELY TO OUTPACE BOTH NORD STREAM AND NABUCCO
Aleksandr Shustov
en.fondsk.ru
05.11.2009
The end of October was marked by Russia's serious achievements in
"pipeline politics". Denmark consented to the Nord Stream construction
in its territorial waters, Turkey greenlighted the research related
to South Stream in its exclusive marine zone, and deals on the
construction of the Serbian segment of South Stream and the upgrade of
the Banatski Dvor gas storage facility were penned during the visit of
Russian President Medvedev to Belgrade. As a result of the impressive
progress in promoting South Stream, Russian President V. Putin made a
sensational statement that the pipeline would possibly be constructed
earlier than Nord Stream. The implementation of pipeline projects in
Southern Europe should make it possible for Russia not only to keep
the role of the main transiter for the Central Asian gas export,
but potentially to channel across its territory most of the natural
gas exported by Azerbaijan as well.
Extracting from Turkey the license for the South Stream-related
research was certainly the biggest of the above accomplishments. While
the project to construct the pipeline across the Black Sea bed
linking Novorossiysk (Russia) and Varnu (Bulgaria) and then forking
to reach Italy and Austria appeared ambitious, until recently there
was no clarity as to in which country's territorial waters it would
be located. Naturally, Ukraine as the country currently hosting
most of the gas export avenues to Europe was reluctant to issue a
license to construct a pipeline bypassing its territory. According
to the existing plan, South Stream - a pipeline costing Euro 25 bn
and ensuring the throughput of 63 bn cu m of gas annually - must be
phased in in 2013 and finalized by 2015. Now it transpired that the
pipeline is going to be constructed in Turkey's exclusive marine
zone, while Russia has paid for the decision by consenting to the
construction of the Samsun-Ceyhan oil pipeline across Turkey.
The new oil pipeline will run from Samsun at the Black Sea to Ceyhan
at the Mediterranean Sea, have the target capacity of 60-70 mln tons
of oil annually, and serve as an alternative to both the transit via
the Bosporus and the Burgas-Alexandroupoli pipeline via Greece and
Bulgaria, concerning which the Bulgarian government remains undecided.
Russia's Rosneft, Transneft, and Sovkomflot, Turkey's Calik, and
Italy's Eni (which is also Gazprom's key partner in the South Stream
project) will cooperate in constructing the Samsun-Ceyhan pipeline.
Russia's Lukoil also expressed interest in joining the project,
and Kazakhstan said it would be one of pipeline's suppliers.
The pipeline situation in South Europe is taking one more turn
favorable to Russia. The increasingly likely recovery in the relations
between Armenia and Turkey is paralleled by emerging tensions between
Turkey and Azerbaijan. On October 16, Azerbaijani President I. Aliyev
said at a government meeting that Turkey impedes the export of natural
gas from Azerbaijan to Europe. He said Turkey's transit fees are 70%
higher than the regional average, while Azerbaijan is selling gas
to Turkey at $120 per 1,000 cu m which is only a third of the normal
international market price. Azerbaijani President said that over the
past two years Baku has been trying to address the problem gently
and to have all disagreements settled via negotiations but everything
Turkey offered in response was unacceptable.
Currently Azerbaijan supplies to Turkey some 6 bn cu m of natural
gas via the Baku-Tbilisi-Erzerum pipeline phased in in 2006. The
disagreements over transit fees affect the implementation of a much
bigger project - the construction of the Nabucco pipeline with the
31 bn cu m annual throughput, which is to link the Caspian region and
Europe via Turkey. The plan of the project consortium is to initially
feed only half of the amount to the pipeline, with Northern Iraq and
Azerbaijan contributing 8 bn cu m of natural gas each. Commenting on
the position of Azerbaijan, Radio Free Europe - Radio Liberty said
"Aliyev's move has heightened fears that Azerbaijan may be moving
quickly into Moscow's orbit, some observers say he could be bluffing
in an attempt to influence Turkey's parliament".
Azerbaijan is actively relying on Russia as a counterforce to Turkey.
Practically at the time when Russia and Turkey were holding talks over
South Stream, Gazprom and State Oil Company of Azerbaijan Republic
signed a deal to start supplying gas from Azerbaijan to Russia
starting January 1, 2010. Initially the amount to be supplied - 0.5
bn cu m annually - is relatively modest, but it is to reach 3 bn cu m
annually in the future. Russia already stated that it would gladly buy
all the gas produced at the second phase of the Shah Deniz field. The
Azerbaijani expert community seems keenly interested in opportunities
to broaden the country's oil and gas export to Russia. Once the
relations between Turkey and Armenia started reverting to normalcy,
Baku was prompt to realize that the throughput of its currently idle
northern export outlet is about 7.7 bn cu m of gas annually, and
transit via the Baku-Novorossiysk pipeline is much cheaper that across
Georgia. Azerbaijan could act as the supplier for South Stream upon
the completion of the construction in the framework of the project.
The position of Turkmenistan, supposedly the main supplier for Nabucco,
contributes to the dire outlook for the project. Turkmen ambassador
to Russia Khalnagar Agakhanov said in an interview to Nezavisimaya
Gazeta that despite Ashgabat's strategy of diversifying the country's
export routes at present the disputes between it and Azerbaijan over a
number of Caspian offshore oil and gas fields inhibit the construction
of a gas pipeline across the Caspian seabed.
Western commentators say that due to the lack of precedents the
chances that the international arbitration invited by Turkmenistan
will help to resolve the disputes are fairly slim. At the same time,
Khalnagar Agakhanov, for example, sees no serious obstacles in the
way of constructing the Caspian pipeline along the Caspian shore,
stretching to Russia via Kazakhstan.
On the whole, there is an impression that, given the momentum gathered
by the Russian leadership's pipeline initiatives in the south, South
Stream is likely to be constructed ahead of not only Nord Stream,
but also Nabucco which is supposed to become operational in 2014.
Aleksandr Shustov
en.fondsk.ru
05.11.2009
The end of October was marked by Russia's serious achievements in
"pipeline politics". Denmark consented to the Nord Stream construction
in its territorial waters, Turkey greenlighted the research related
to South Stream in its exclusive marine zone, and deals on the
construction of the Serbian segment of South Stream and the upgrade of
the Banatski Dvor gas storage facility were penned during the visit of
Russian President Medvedev to Belgrade. As a result of the impressive
progress in promoting South Stream, Russian President V. Putin made a
sensational statement that the pipeline would possibly be constructed
earlier than Nord Stream. The implementation of pipeline projects in
Southern Europe should make it possible for Russia not only to keep
the role of the main transiter for the Central Asian gas export,
but potentially to channel across its territory most of the natural
gas exported by Azerbaijan as well.
Extracting from Turkey the license for the South Stream-related
research was certainly the biggest of the above accomplishments. While
the project to construct the pipeline across the Black Sea bed
linking Novorossiysk (Russia) and Varnu (Bulgaria) and then forking
to reach Italy and Austria appeared ambitious, until recently there
was no clarity as to in which country's territorial waters it would
be located. Naturally, Ukraine as the country currently hosting
most of the gas export avenues to Europe was reluctant to issue a
license to construct a pipeline bypassing its territory. According
to the existing plan, South Stream - a pipeline costing Euro 25 bn
and ensuring the throughput of 63 bn cu m of gas annually - must be
phased in in 2013 and finalized by 2015. Now it transpired that the
pipeline is going to be constructed in Turkey's exclusive marine
zone, while Russia has paid for the decision by consenting to the
construction of the Samsun-Ceyhan oil pipeline across Turkey.
The new oil pipeline will run from Samsun at the Black Sea to Ceyhan
at the Mediterranean Sea, have the target capacity of 60-70 mln tons
of oil annually, and serve as an alternative to both the transit via
the Bosporus and the Burgas-Alexandroupoli pipeline via Greece and
Bulgaria, concerning which the Bulgarian government remains undecided.
Russia's Rosneft, Transneft, and Sovkomflot, Turkey's Calik, and
Italy's Eni (which is also Gazprom's key partner in the South Stream
project) will cooperate in constructing the Samsun-Ceyhan pipeline.
Russia's Lukoil also expressed interest in joining the project,
and Kazakhstan said it would be one of pipeline's suppliers.
The pipeline situation in South Europe is taking one more turn
favorable to Russia. The increasingly likely recovery in the relations
between Armenia and Turkey is paralleled by emerging tensions between
Turkey and Azerbaijan. On October 16, Azerbaijani President I. Aliyev
said at a government meeting that Turkey impedes the export of natural
gas from Azerbaijan to Europe. He said Turkey's transit fees are 70%
higher than the regional average, while Azerbaijan is selling gas
to Turkey at $120 per 1,000 cu m which is only a third of the normal
international market price. Azerbaijani President said that over the
past two years Baku has been trying to address the problem gently
and to have all disagreements settled via negotiations but everything
Turkey offered in response was unacceptable.
Currently Azerbaijan supplies to Turkey some 6 bn cu m of natural
gas via the Baku-Tbilisi-Erzerum pipeline phased in in 2006. The
disagreements over transit fees affect the implementation of a much
bigger project - the construction of the Nabucco pipeline with the
31 bn cu m annual throughput, which is to link the Caspian region and
Europe via Turkey. The plan of the project consortium is to initially
feed only half of the amount to the pipeline, with Northern Iraq and
Azerbaijan contributing 8 bn cu m of natural gas each. Commenting on
the position of Azerbaijan, Radio Free Europe - Radio Liberty said
"Aliyev's move has heightened fears that Azerbaijan may be moving
quickly into Moscow's orbit, some observers say he could be bluffing
in an attempt to influence Turkey's parliament".
Azerbaijan is actively relying on Russia as a counterforce to Turkey.
Practically at the time when Russia and Turkey were holding talks over
South Stream, Gazprom and State Oil Company of Azerbaijan Republic
signed a deal to start supplying gas from Azerbaijan to Russia
starting January 1, 2010. Initially the amount to be supplied - 0.5
bn cu m annually - is relatively modest, but it is to reach 3 bn cu m
annually in the future. Russia already stated that it would gladly buy
all the gas produced at the second phase of the Shah Deniz field. The
Azerbaijani expert community seems keenly interested in opportunities
to broaden the country's oil and gas export to Russia. Once the
relations between Turkey and Armenia started reverting to normalcy,
Baku was prompt to realize that the throughput of its currently idle
northern export outlet is about 7.7 bn cu m of gas annually, and
transit via the Baku-Novorossiysk pipeline is much cheaper that across
Georgia. Azerbaijan could act as the supplier for South Stream upon
the completion of the construction in the framework of the project.
The position of Turkmenistan, supposedly the main supplier for Nabucco,
contributes to the dire outlook for the project. Turkmen ambassador
to Russia Khalnagar Agakhanov said in an interview to Nezavisimaya
Gazeta that despite Ashgabat's strategy of diversifying the country's
export routes at present the disputes between it and Azerbaijan over a
number of Caspian offshore oil and gas fields inhibit the construction
of a gas pipeline across the Caspian seabed.
Western commentators say that due to the lack of precedents the
chances that the international arbitration invited by Turkmenistan
will help to resolve the disputes are fairly slim. At the same time,
Khalnagar Agakhanov, for example, sees no serious obstacles in the
way of constructing the Caspian pipeline along the Caspian shore,
stretching to Russia via Kazakhstan.
On the whole, there is an impression that, given the momentum gathered
by the Russian leadership's pipeline initiatives in the south, South
Stream is likely to be constructed ahead of not only Nord Stream,
but also Nabucco which is supposed to become operational in 2014.