EU: South Stream, Nabucco are competitors

Nov. 22, 2010 at 4:32 PM
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BRUSSELS, Nov. 22 (UPI) -- European Energy Commissioner Guenther Oettinger Monday identified the Russia-launched South Stream gas pipeline as a potential competitor to the EU-backed Nabucco project.

"South Stream is likely to compete with Nabucco in the long term," RIA Novosti quoted Oettinger as saying Monday during a conference marking the 10th anniversary of the EU-Russia Energy Dialog in Brussels. It would be the first time an EU official openly identified South Stream as a serious contender to Nabucco.

Europe imports roughly one-quarter of its gas needs from Russia, around 80 percent of which flows through Ukrainian transit pipelines.

In a response to several gas price rows between Ukraine and Russia that temporarily halted supplies to Europe, Brussels identified the Nabucco pipeline as key project to diversify Europe's energy imports.

Backed by Germany's RWE and OMV from Austria, Nabucco would transport up to 31 billion cubic meters of gas per year from Caspian and Middle Eastern suppliers to Western Europe, bypassing Russia. Consortium members are currently in talks to secure gas from northern Iraq, Azerbaijan and Turkmenistan.

The Kremlin as a response launched South Stream, which is now vying for similar supplies and customers than Nabucco and could be finished by 2015. It is aimed at moving 60 billion cubic of gas per year from Russia under the Black Sea to Bulgaria and then to Western Europe. The project would reroute much of the gas sent through Ukraine, potentially pushing the country's weak economy into collapse.

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

Ever since a row over gas prices with Ukraine in 2006, the Kremlin has been accused of using its energy reserves as a political pressure tool. The lack of trust has resulted in conflicts over Europe's diversification strategy, with Russia threatening to supply Asia's emerging economies instead.

The problems have intensified as Europe is pushing for renewable energy and in the wake of the financial crisis, which has seen demand and prices for gas tumble. Companies in Europe and Russia suffered revenue losses, with the lacking demand creating a large oversupply that holds back the market.

The International Energy Agency says global gas supply will outlast demand for the next decade. However, it also forecasts a "golden age" of gas after that, saying that demand will surge by 44 percent over the next 25 years.

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