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February 22, 2012, 8:45 AM
EU Loses Clout Over Caspian Gas
By Jan Hromadko and Alessandro Torello
After years of competitionamong pipeline projects that want to carry
gas from the Caspian region to consumers in Europe, therace for
access to the region's huge natural gas reserves is finally under way.
But it isn't necessarily moving in the direction the European Union
would desire.
Getting Caspian gas has been a top priority of the European Union's
energy strategy, because it would mean diversifying supplies away from
Russia,the bloc's single largest supplier.
A pipeline connection with Central Asia could open a `corridor' for
gas imports from one of the world's most energy affluent regions with
potent producers like Azerbaijan, Turkmenistan, Iraq, and, in the
long-term, possibly Iran.
But the most recent developments suggest the EU-which has spent the
best part of the past decade in support of opening the Caspian gas
market-is losing control over events. In consequence, Europe could be
left without control of the pipeline infrastructure that ships the gas
to European customers. Its supply security would instead depend on the
companies selling the gas.
A few recent developments are shaping the picture.
First, the Nabucco gas pipeline-long considered the EU's preferred
project-has been shrunk considerably. The European Commission-the EU
executive body-has put great effort in promoting Nabucco. This project
was initially supposed to be almost 4,000 kilometers long, stretching
from Turkey's eastern borders with Georgia and Iraq to Austria.
Nabucco would cost more than8 billion, and have a capacity of 31
billion cubic meters of gas-roughlytwice as much as competitors.
The commission supported Nabucco precisely because of its size, which
became its curse.
The idea was that Nabucco would be the only project able to
accommodate more gas than any of its competitor projects. However,
export-bound gas from the Caspian region and the Middle East remains
scarce for now.
The giant Shah Deniz 2 gas field is the expected initial supplier of
gas from the region. But the field will make available only 10 BCM per
year for export to Europe, while other potential exporters like
Turkmenistan and Iraq are not yet ready to provide any gas for Europe.
The lack of available gas prompted the Nabucco consortium, which
includes Germany's RWE AG and Austria's OMV AG, to propose a downsized
project: the new version would only finish in Bulgaria and would have
half of the original capacity.
Then, Azerbaijan's gas and oil company SOCAR andBotas of Turkey
proposed in late December their own pipeline to carry the gas across
Turkey, dubbed TANAP.
For the EU, this development could be more than just a blow to years
of political lobbying for Nabucco, because it also-more subtly-mean
that the EU would lose control over the import route. With the TANAP
proposal on the table, control of gas transit could shift from EU gas
buyers to sellers from non-EU countries.
With TANAP, SOCAR and Botas would also hold control of future supplies
to the EU from the other countries in the region, like Iraq for
example.
Thirdly, BP, the U.K. energy giant, said Monday that the Shah Deniz 2
consortium-in which it has a major role-decided to enter exclusive
negotiations with a project called Trans Adriatic Pipeline to
potentially bring its gas to Italy, excluding a competing pipeline
plan called Interconnector Turkey-Greece-Italy.
TAP and ITGI-as the projects are known-are very similar, but there is
one major difference: ITGI is backed by Edison SpA and DEPA, an
Italian and a Greek company, both likely EU buyers of gas, while TAP
is backed two non-EU companies: Norwegian giant Statoil ASA and
Elektrizitats-Gesellschaft Laufenburg AG, a Swiss energy-trading
company. Germany's E.ON AG only holds a relatively small stake in TAP.
Statoil is also the other big partner in Shah Deniz 2, so the
construction of TAP would mean yet again that control over the
infrastructure would remain in the hands of (non-EU) gas sellers.
http://blogs.wsj.com/brussels/2012/02/22/eu-loses-clout-over-caspian-gas/
EU Loses Clout Over Caspian Gas
By Jan Hromadko and Alessandro Torello
After years of competitionamong pipeline projects that want to carry
gas from the Caspian region to consumers in Europe, therace for
access to the region's huge natural gas reserves is finally under way.
But it isn't necessarily moving in the direction the European Union
would desire.
Getting Caspian gas has been a top priority of the European Union's
energy strategy, because it would mean diversifying supplies away from
Russia,the bloc's single largest supplier.
A pipeline connection with Central Asia could open a `corridor' for
gas imports from one of the world's most energy affluent regions with
potent producers like Azerbaijan, Turkmenistan, Iraq, and, in the
long-term, possibly Iran.
But the most recent developments suggest the EU-which has spent the
best part of the past decade in support of opening the Caspian gas
market-is losing control over events. In consequence, Europe could be
left without control of the pipeline infrastructure that ships the gas
to European customers. Its supply security would instead depend on the
companies selling the gas.
A few recent developments are shaping the picture.
First, the Nabucco gas pipeline-long considered the EU's preferred
project-has been shrunk considerably. The European Commission-the EU
executive body-has put great effort in promoting Nabucco. This project
was initially supposed to be almost 4,000 kilometers long, stretching
from Turkey's eastern borders with Georgia and Iraq to Austria.
Nabucco would cost more than8 billion, and have a capacity of 31
billion cubic meters of gas-roughlytwice as much as competitors.
The commission supported Nabucco precisely because of its size, which
became its curse.
The idea was that Nabucco would be the only project able to
accommodate more gas than any of its competitor projects. However,
export-bound gas from the Caspian region and the Middle East remains
scarce for now.
The giant Shah Deniz 2 gas field is the expected initial supplier of
gas from the region. But the field will make available only 10 BCM per
year for export to Europe, while other potential exporters like
Turkmenistan and Iraq are not yet ready to provide any gas for Europe.
The lack of available gas prompted the Nabucco consortium, which
includes Germany's RWE AG and Austria's OMV AG, to propose a downsized
project: the new version would only finish in Bulgaria and would have
half of the original capacity.
Then, Azerbaijan's gas and oil company SOCAR andBotas of Turkey
proposed in late December their own pipeline to carry the gas across
Turkey, dubbed TANAP.
For the EU, this development could be more than just a blow to years
of political lobbying for Nabucco, because it also-more subtly-mean
that the EU would lose control over the import route. With the TANAP
proposal on the table, control of gas transit could shift from EU gas
buyers to sellers from non-EU countries.
With TANAP, SOCAR and Botas would also hold control of future supplies
to the EU from the other countries in the region, like Iraq for
example.
Thirdly, BP, the U.K. energy giant, said Monday that the Shah Deniz 2
consortium-in which it has a major role-decided to enter exclusive
negotiations with a project called Trans Adriatic Pipeline to
potentially bring its gas to Italy, excluding a competing pipeline
plan called Interconnector Turkey-Greece-Italy.
TAP and ITGI-as the projects are known-are very similar, but there is
one major difference: ITGI is backed by Edison SpA and DEPA, an
Italian and a Greek company, both likely EU buyers of gas, while TAP
is backed two non-EU companies: Norwegian giant Statoil ASA and
Elektrizitats-Gesellschaft Laufenburg AG, a Swiss energy-trading
company. Germany's E.ON AG only holds a relatively small stake in TAP.
Statoil is also the other big partner in Shah Deniz 2, so the
construction of TAP would mean yet again that control over the
infrastructure would remain in the hands of (non-EU) gas sellers.
http://blogs.wsj.com/brussels/2012/02/22/eu-loses-clout-over-caspian-gas/