It’s time to write Nabucco’s obituary

It’s time to write Nabucco’s obituary

The maestro Giuseppe Verdi wouldn’t have liked it, and the politicians and the corporate headmasters in Vienna do not want to admit it, but the Nabucco project, aimed at shipping Caspian and Middle East gas to Turkey and the European Union while bypassing Russia, is dead.

Well, at least unofficially. The project has long been championed both by Turkey and the EU, and it attracted much media publicity.

Nabucco, at a capacity of 31 billion cubic meters (bcm)/year, was designed to start at the eastern end of Turkey and terminate in Baumgarten in Austria. Nearly 3,900 km of new pipeline would be laid down along its route. ITGI and TAP, both extending to Italy, were Nabucco’s main competitors.
Unlike its rivals, Nabucco envisioned the transport of Azerbaijani as well as non-Azerbaijani gas, in particular Turkmen gas. 

All three projects vied for the same Shah Deniz-II gas for transport to the EU at a rate of 10 bcm/year starting in 2017. For Nabucco, this figure was the start-up rate. It was a winner-take-all contest, and the Shah Deniz consortium would pick a winner.

What triggered Nabucco’s downfall was a surprise move by BP in late September. BP proposed to use BOTAŞ’s existing grid, with upgrades, in Turkey and build a new pipeline from the Turkey-Bulgaria border to Austria. The new infrastructure, called SEEP, would be 1,300 km and have a capacity of 10 bcm/year. The cost would be much lower than Nabucco’s.

SEEP spoiled the game for Nabucco. When Turkey and Azerbaijan signed an agreement on energy in İzmir on Oct. 25, 2011, SEEP was embraced for the transport of Shah Deniz-II gas. The press release, however, made no mention of SEEP.

Then came the shock announcement by SOCAR’s chief, Rovnag Abdullayev, at an energy conference in Istanbul on Nov. 17, 2011. Abdullayev revealed that, under SOCAR’s leadership, Azerbaijan and Turkey would build a new pipeline in Turkey, which he named “Trans Anatolia” (TANAP). The new pipeline would transport Shah Deniz-II gas to the Turkey-Bulgaria border and cost $5 billion.

The politicians played down the significance of the announcement; but it was clear that TANAP, if implemented, would finish off Nabucco. After all, a major portion of Nabucco’s planned infrastructure, across Turkey, would be taken up by TANAP, making the former effectively redundant.

And without synergy from Azeri gas, a Nabucco solely targeting Turkmen gas, was operationally unfeasible and economically questionable.

The Turkish-Azeri gas protocol signed in Ankara on Dec. 26, 2011, gave the official blessing to TANAP and sealed the fate of Nabucco. To make it sweeter for Baku, TANAP will have 80 percent Azeri ownership and 20 percent Turkish.

Looking ahead

While Nabucco, as it currently stands, is effectively finished, a scaled-down “New Nabucco” may well emerge. The reborn project could aim to ship gas from the Turkey-Bulgaria border to Austria. It may also target Iraqi gas at a later date.

Nabucco’s demise also gave a big boost to Russia’s ambitious South Stream project, another rival. The permission Turkey recently gave to Moscow for the construction of South Stream in its exclusive economic zone in the Black Sea is a major step forward for Russia.

To Russia’s delight, Turkmen gas imports will now be a distant prospect for Turkey and the EU. From the energy security point of view, this is a strategic setback for Turkey and the EU. TANAP was proposed for and will only carry Azeri gas.

In this respect, it is hard to understand why, over the past year when the EU delegates approached Ashgabat on Turkmen gas, Turkey preferred to stay on the sidelines. In 1999 Turkey signed a 16 bcm/year gas purchase agreement – dormant since then – with Turkmenistan, and it was a good opportunity to revisit this issue. 

In all, in this high-stakes pipeline race, there is little doubt that Azerbaijan and Russia came out as winners. While not ideal for its needs, Nabucco deserved better treatment from Turkey. May Nabucco rest in peace.

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