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Azeri gas could save Nabucco, hurt Ukraine

Jan. 14, 2011 at 1:51 PM   |   Comments

BAKU, Azerbaijan, Jan. 14 (UPI) -- Azerbaijan has pledged to supply "substantial volumes" of natural gas to Europe, in a deal that could be a lifesaver for the EU-backed Nabucco pipeline.

The Central Asian nation is ready to deliver 10 billion cubic meters of gas per year to Europe, Euractiv.com reports.European Commission President Jose Manuel Barroso and Azerbaijan's President Ilham Aliyev signed the gas commitment, the first in writing from Azerbaijan, Thursday in Baku. Brussels in return for the gas promised to make it easier for Azeri nationals to obtain visas for the European Union.

Barroso, who had traveled to Central Asia with Energy Commissioner Guenther Oettinger, hailed the deal a "major breakthrough."

"This agreement confirms Europe's direct access to gas from the Caspian basin, thus enabling the realization of the Southern Corridor," he said in a statement. "This new supply route will enhance the energy security of European consumers and businesses."

Azerbaijan has signed gas contracts with Russia and Iran but vows that it has enough reserves to also supply one or several of the proposed pipelines opening up the so-called southern corridor, aimed at bringing Central Asian and Middle Eastern gas to Western Europe.

Backed by the United States, the EU has pushed the Nabucco pipeline to diversify its energy import structure away from Russia but the pipeline is expected to be more expensive than some of the smaller alternatives.

And Nabucco not only competes for resources with smaller projects such as the Trans-Adriatic Pipeline, the Turkey-Greece-Italy Interconnector or the Azerbaijan-Georgia-Romania Interconnector, but also with the giant Russian-led South Stream project.

South Stream would move around 60 billion cubic meters of gas per year to Europe (roughly double the amount of Nabucco), bypassing traditional transit country Ukraine. While it's intended to be fed with Russian gas, South Stream could technically also deliver gas from Azerbaijan.

Experts have questioned t whether there is supply and demand for both projects, an analysis that has resulted in what the media has termed the "pipeline war."

The latest deal lends a lifeline to Nabucco, which has been wooing potential supplier nations for years.

Russian Prime Minister Vladimir Putin has in the past questioned whether Nabucco, backed by Germany's RWE and OMV from Austria, could be realized in an economically viable manner; people close to Nabucco have also said Russia that is pressuring potential Nabucco suppliers in Central Asia -- Russia's traditional sphere of influence -- into committing to South Stream.

While it's not yet sure whether Baku will commit its gas to Nabucco, the situation is looking much more optimistic than a few weeks back.

There's only one real loser in all of this: Ukraine. The traditional energy transit country has unsuccessfully tried to raise Western money for the modernization of its run-down gas grid. With Nabucco potentially getting a go-ahead, it may know have even less chances of keeping its role as a major transit hub.

Several gas price rows with Russia have decreased Europe's trust in Ukraine as a reliable transit country. The Europeans have since pushed the diversification pipelines Nord Stream and Nabucco and are investing in an LNG infrastructure.

© 2011 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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