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Nabucco, TAP near finish, but lots of room in EU

By DANIEL J. GRAEBER, UPI Correspondent   |   May 30, 2013 at 6:16 AM   |   Comments

VIENNA, May 30 (UPI) -- A BP-led consortium working offshore Azerbaijan is expected to pick between the Nabucco West and Trans-Adriatic natural gas pipelines next month, though there may be enough room for more than one pipeline in the long term.

The 10-year race over which pipeline will first carry natural gas from the Shah Deniz II field offshore Azerbaijan will be over in a couple of weeks. Both Nabucco West and TAP fall under the umbrella of the Southern Gas Corridor, a network of transit projects meant to add diversify to a eurozone dependent on Russia for natural gas.

Russian energy company Gazprom sends much of its natural gas to Europe through the Soviet-era transit network in Ukraine. Contractual disputes between Gazprom and the Ukrainian government have left the European energy sector vulnerable to Russian wishes. Europe's Southern Gas Corridor would loosen that grip by shifting the focus to non-Russian natural gas suppliers.

Officials from Nabucco West and TAP say their project will be the best and the first to get the nod from Azerbaijan. Managing Director of Nabucco Gas Pipeline International GmbH Reinhard Mitschek said his project would provide the "biggest market access without hidden costs." TAP External Affairs Director Michael Hoffmann said his pipeline is "the most commercially viable gas transportation solution for shipping Caspian gas to Europe."

The International Energy Agency reported in April that natural gas consumption in Europe rebounded in 2010, erasing the decline that coincided with the global economic crises. Those gains were inflated, however, because of colder weather. When adjusted seasonally, the IEA said gas consumption in some countries is at 10-year lows.

Hoffmann said natural gas demand would increase as the European economy emerges from recession. TAP would run through Italian territory, where he said gas demand should increase at a rate of 1.8 percent through 2020.

Mitschek was no less optimistic about future demand.

"While gas demand in Europe will rise by 43 percent by 2030, according to Eurogas domestic production will decrease," he said. "Consequently this gas has to be filled with increased imports."

Europe could start to get some of its own gas from shale, however. European Commissioner for Environment Janez Potocnik said in May that shale natural gas could spark a revival in domestic production. The "jury is still out" because of uncertainties about recoverable reserves and the complexity of shale gas extraction in Europe, he said.

Prices have come down for natural gas, however, and markets could see that trend continue if the United States starts to export natural gas from shale by the end of the decade.

The IEA in April reported that coal was still a major component of the European energy mix when compared with natural gas, however. That could change as leaders from the European Union debate climate and cleaner energy goals for 2030. Poland, Ukraine and Lithuania are among the Eastern European countries considering shale exploration. Potocnik said production from some members is expected by next year.

Mitschek said the shale natural gas conversation in Europe was still in its infancy, however.

If the United States starts exporting liquefied natural gas to EU markets, that could diminish the appetite for major pipeline projects.

Nabucco is a landlocked project but a project like TAP, which would cross the Adriatic Sea, could face port competition from LNG imports from the United States, he said.

Hoffmann conceded that diversity was needed in a European energy market that will start to grow eventually.

Beyond 2020, renewable energy sources like wind and solar might not be enough for a European Union looking for ways to cut greenhouse gas emissions. For natural gas, Hoffmann said there's likely more in the way of Azeri developments that would quench Europe's eventual thirst.

"Today the question is which pipeline will be the first to open the Southern Gas Corridor," he said. "We believe TAP remains the best option, but we do not discount other pipelines from being built which will ensure a win-win for Europe."

© 2013 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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