MONTREAL - Statements by Azerbaijani and Turkish diplomats indicate that the
two sides have reached an agreement in principle concerning the price that
Turkey will pay for gas from the offshore Shah Deniz deposit for its own
domestic consumption.
With these signals, the two countries are on the road to settling issues
related to conditions for Shah Deniz gas to transit Turkey to Europe through
the Nabucco pipeline.
Turkey's Grand National Assembly, the country's parliament, has approved
legislation representing the ratification of the Nabucco project's multilateral
intergovernmental agreement. This legislation spells out crucial details
concerning taxation and transit, necessary preconditions for establishing the
stable and
predictable business environment required for parties involved to seek
international financing.
These had been up in the air since last May, when Russian Prime Minister
Vladimir Putin appeared to convince his Turkish counterpart Recep Tayyip
Erdogan to backtrack on agreements that Erdogan had reached with the European
Union at the Prague Summit a week beforehand. This legislation resolved exactly
these questions. The European Bank for Reconstruction and Development and the
European Investment Bank have already begun talks with the Nabucco consortium,
and the World Bank's International Finance Corporation looks like being not far
behind.
As reported in Zaman, Turkey's energy and natural resources minister, Taner
Yildiz, told the country's parliament that a transportation fee will be imposed
although no "entrance fee" would be charged for gas to come into Turkey. Ankara
will impose a transit tax of 61%, contrasting this with what he said was the
16.6% transit fee that other countries (members of the European Energy
Community) will impose together and divide among themselves. In addition, he
said, the state-owned Turkish Pipeline Corporation BOTAS will charge a separate
operating fee.
Given that Turkey will pay between US$260 and $300 per thousand cubic feet
(tcm) for gas for domestic consumption from Azerbaijan's Shah Deniz Two field,
it seems clear that all the major actors concerned will be relying on gas from
Turkmenistan as well as from Azerbaijan for Nabucco.
Even so, corporate members of the Nabucco consortium are now openly naming gas
deposits in Azerbaijan's offshore sector of the Caspian Sea, other than Shah
Deniz, where further proven gas reserves may be developed for transport to
Europe. Azerbaijan's president, Ilham Aliev, announced nearly two years ago an
estimate of 5 trillion cubic meters of reserves (including strikes in the
Apsheron, Babek, Nakhichevan, Umit and Zafar-Mashal blocks.)
On the Turkmenistan front, significant movement has occurred. A bilateral
business forum will be held next month in Ashgabat between Turkmen authorities
and representatives of the government of Austria, whose "national champion",
OMV, is operator of the Nabucco project. The issues of how to get gas from
Turkmenistan into Nabucco and the conditions for this are likely to be central
issues under discussion.
Concrete negotiations have already started between German gas company RWE and
the Turkmen authorities in this respect. RWE is now driving discussions between
Turkmenistan and Azerbaijan on coming to terms over bilateral gas contracts.
The amount publicly cited of 10 billion cubic meters per year (bcm/y) for the
amount of Turkmen gas supplying Nabucco in the first instance follows through
to the letter on a Memorandum of Understanding signed in Ashgabat in early 2008
by Turkmenistan's president Gurbanguly Berdymukhamedov and the EU's external
relations commissioner at the time, Benita Ferrero-Waldner.
When this amount is added to the 8 bcm/y already definitely committed by
Azerbaijan from Shah Deniz Two plus the 8 bcm/y contracted last year by Turkey
from Iraq, the 31 bcm/y design capacity of the Nabucco pipeline looks like
being filled sooner rather than later.
This fast track reveals the declarations by various representatives of rival
pipelines that Nabucco's requirements could not be satisfied without gas from
Iran as smoke, mirrors and misdirection.
How provision of Turkmen gas to Europe will be accelerated in the first place
was indicated during a November 2007 visit to Brussels by Berdymukhamedov -
that is, interconnection of gas rigs in Turkmenistan's sector of the Caspian
Sea to rigs in Azerbaijan's sector, which are already part of the developing
Caspian-to-Europe pipeline networks.
This way of proceeding does not require immediate resolution of the question of
delimiting the Turkmenistani and Azerbaijani sectors of Caspian Sea subsoil
resources: nor is that an absolutely necessary condition for the two countries
to cooperate, even on joint development of the resources.
Perhaps the clearest signal that Nabucco is fast becoming a reality is the
statement two days ago in Houston by Paolo Scaroni, chief executive officer of
Eni, the Italian company that is an equal partner with Russian gas monopoly
Gazprom in South Stream, a proposed pipeline running from Russia under the
Black Sea to Bulgaria and on into Europe.
Nabucco and South Stream should combine in order to cut costs, Scaroni said.
This wholly new idea comes on the heels of, and contradicts, a month-long
Russian initiative in public diplomacy in the region which seeks to portray the
Nabucco and South Stream projects as both being capable of realization but does
not even hint at their combination into a single mega-project.
Even their routes do not by and large coincide. The South Stream pipeline would
bifurcate in Bulgaria, one fork heading through Serbia to Austria and the other
to Italy via Greece. The Nabucco pipeline runs through Turkey to Austria
through Bulgaria, Romania, and Hungary.
The South Stream project as now planned would cost twice as much to build as
the Nabucco pipeline; it also broadly lacks the legal and business framework
for proceeding in the manner that the Turkish parliament's ratification of the
Nabucco intergovernmental agreement now provides for Nabucco. Perhaps most
telling, however, the South Stream project has not yet even completed a
feasibility study.
What is much more likely is that the European Commission will continue to
implement its Southern Corridor energy strategy, decided at the May 2009 Prague
Summit, to include not only the Nabucco but also the White Stream project. This
would take gas from the Caspian Sea basin through Azerbaijan and Georgia, under
the Black Sea to Romania (crossing the existing Blue Stream pipeline from
Russian to Turkey) and onward to the south and/or west.
The White Stream project has moved ahead of South Stream due to the completion
of a series of EU-funded feasibility studies.
In one variant, White Stream gas would enter the Hungarian network for transit
across Slovakia to be consumed in Poland and Lithuania. This route would calm
disquiet in these new EU members over the possibility that the Russo-German
Nord Stream project under the Baltic Sea (instead of through Ukraine and
Belarus) would leave them without provisions.
White Stream is projected to open with an initial capacity of 8 bcm/y, which
Azerbaijan can supply by itself, rising to 24-32 bcm/y when connected to
Central Asian sources (see
Reconfiguring Nabucco, Asia Times Online, January 28, 2010). Even
larger quantities can be provided later.
Dr Robert M Cutler (http://www.robertcutler.org),
educated at the Massachusetts Institute of Technology and The University of
Michigan, has researched and taught at universities in the United States,
Canada, France, Switzerland, and Russia. Now senior research fellow in the
Institute of European, Russian and Eurasian Studies, Carleton University,
Canada, he also consults privately in a variety of fields.
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