The Nabucco project, under discussion for almost 7 years since 2002 and with an expected completion date sometime in 2014, recently passed a milestone. Following years of studies, meetings, negotiations, an intergovernmental agreement on the natural gas pipeline was finally signed in Ankara on July 13, 2009, in the presence of 7 heads of government and many officials of the countries which are members of the consortium, Turkey, Bulgaria, Romania, Hungary and Austria. The German utility company located in Essen, RWE AG, also signed the agreement.
The 3,300 km steel conduit with 2,000 km in Turkey is expected to cost around 8.0 billion Euros (11.0 billion US dollars.)
Location and Competing gas pipelines
The pipeline will commence at the Turkish border with Iran and is expected to pump around 31 billion cubic meters of gas from the Caspian sea region to Austria via Turkey and the Balkans (Figure 1). Officials estimated that pipeline will provide earnings to Turkey of up to 450 million Euros annually and, according to the new Minister of Energy Taner Yildiz, 4.5 billion Euro in tax revenues over its life and employment to over 15,000 during the construction period.
The Turkish and the world media has been covering the Nabucco project since its inception to the signing of the Agreement, emphasizing the fact that Turkey is located between the countries having 70% of the gas and oil reserves and Europe, the world’s second-largest consumption countries which presently gets its gas supply mainly from Russia. Many newspapers have indicated that Nabucco is in direct competition with Russia’s South Stream project, which will carry Russian gas under the Black Sea and through Bulgaria to Western Europe although some Russian authorities have indicated that Russia is not expected to hinder directly or indirectly the Nabucco project, which time will show.
Supply of Natural Gas
So far, only Azerbaijan has committed to supply 15 billion cubic meters of gas while promising to provide gas to Russia as well from its Shah Deniz gas fields. Iran, Turkmenistan, Egypt, Syria and Iraq are also possible suppliers, although the US has indicated its doubt for Iran’s and Iraq’s participation. An Iranian official has stated that the project without the long term Iran gas would not be economically viable. Representatives from the U.S. also attended the signing ceremonies but did not make any public statements on the U.S. intentions. However, many experts suggested that the ceremony does not mean that all problems with regard to the project have been solved.
Turkey wants 15% of gas for its own use
Turkey does not want to be a passive transit country and intends to buy 15 per cent of the Nabucco natural gas, the status of which is not clear yet. Turkey would also like to have the pipeline to operate both ways, giving Turkey access to European gas in times of need, with an ultimate aim of using the pipeline to boost its EU membership bid. There have been contradictory statements on this issue in the media which have not been yet clarified.
United States’ Involvement and Support for the Project
The United States Eurasia Special Representative Amb. Richard Morningstar and the head of the Republican Group of the Senate Foreign Relations Committee Senator Richard G. Lugar attended the signing ceremony in Ankara. The Prime Minister of Iraq also attended but there were no participants from Russia or Iran. Reporters from many countries, over 330 with 100 foreign newsmen attended the ceremonies.
Ongoing Activities and Project Documents
All countries involved with the project have established their own Country companies ad started working on the project documents. BOTAS has been handling the activities but the Turkish company that will be involved directly has not been established yet. Just a few days ago, it was announced that BOTAS was split into two separate companies, one for the exploration and the other for commercial activities. The main document, “The Energy Charter” has been prepared and the “Transit Protocol” has also been drafted. One of the issues is the security of the pipeline which is planned to be handled by an international security force, which has created a debate.
Concerns on the Pipeline and also on its name
Evidently, the name of the project was picked following the attendance of the representatives to an opera by Giuseppe Verdi in Vienna on the life of the Babylon King Nebuchadnezzar which is all about love, hatred, conspiracy and war during the siege of Jerusalem and the expulsion of Jews. Perhaps when the first earth is shovelled for the project, the name of the pipeline and the Nabucco International Company will have been changed to something that reflects peace and prosperity in the region and for all mankind.
There are many pipelines in operation and in planning stages that will crisscross Turkey and the region, including the Transcaspian pipeline between Azerbaijan and Turkmenistan to bring the latter’s gas to the Nabucco pipeline. The Blue Stream already brings additional Russian gas under the Black Sea and Russia is planning to build the South Stream pipeline as well. It is a bit confusing but also exciting.
Turkey uses natural gas for heating and also the generation of electricity which has reached 60 % of the total generation (close to 200 billion kWh per year.) When Russia cuts the flow of gas, gas-fired power plants in turkey switch to a liquid fluid which is costly and creates problems.
Many believe that the Nabucco project is not only for the transportation of gas. It has political implications which may eventually solve the Nagorno – Karabagh issue by keeping this region within Azerbaijani territory. It may also bring the countries together and also help for Turkey’s bid for the EU membership.
Financing of the Project
On the financing of the project, the European Development Bank has already commented that it will be ready when the construction starts next year if all goes well. Evidently, the coup risk has not been included in the country risk and the security of the pipeline will be assigned to an international force.
Big projects are exciting to watch which brought thousands to the shores of Bosphorous when the giant pipeline installation rig passed through on its way to the Black Sea for the installation of the Blue Stream Pipeline that brings gas from Russia to Turkey.
Then there are those who believe that Turkey and the World should be paying more attention to renewable energy sources, such as the wind and solar, and try to lessen the dependency on natural gas and oil. Time will show.
26 July 2009
Washington, New Jersey