Turkey brokers key gas supply deals for Nabucco

Azerbaijan and Turkey yesterday (7 June) signed a deal to ship 11 billion cubic metres of Azeri gas per year to Turkey. Shipments would start in 2017 and some of the gas may be pumped into the EU's planned Nabucco pipeline. Meanwhile, Northern Iraq declared in Turkey that it stands ready to provide gas supplies "to make Nabucco work".

The agreement was signed in Istanbul by Azerbaijan's minister of industry and energy, Natig Aliyev, and Turkey's minister of energy and natural resources, Taner Yildiz, EURACTIV Turkey reported.

The ceremony took place in the framework of a visit to Turkey by Azeri President Ilham Aliyev.

The agreement covers gas supplies from Azerbaijan's Shah Deniz 1 and Shah Deniz 2 developments in the south-west Caspian Sea.

Turkey currently buys about 6.6 billion cubic metres of Azeri gas per year but does not always use it in full.

Aliyev said in mid-May that if it were to receive attractive offers, Azerbaijan might join new gas projects, including Nabucco, according to news channel CNN Turk.

The Nabucco consortium hailed the agreement. "This is a step ahead in the right direction," Nabucco Managing Director Reinhard Mitschek is quoted by Bloomberg as saying.

Russia is also interested in buying Azeri gas. Gazprom officials say it costs less to provide Russia's southern regions with gas from Azerbaijan than it does to provide it from Western Siberia.

Northern Iraq wants to export gas

In the meantime, a minister from the semi-autonomous region of Northern Iraq said the area could provide natural gas to make the Nabucco pipeline feasible.

"We can provide 14 or 15 billion cubic metres to make the project work," said Northern Iraqi Energy Minister Ashti Hawrami, quoted by Turkish daily Hurriyet.

Northern Iraq is estimated to possess 6-8 trillion cubic metres of natural gas reserves, according to Hawrami, who accompanied the head of the Kurdistan Regional Administration to Turkey last week.

Iraqi gas can be exported to Europe via Turkey. However, no pipeline exists that can do this at the present time.

Despite tensions between Northern Iraq and the country's central government over who should shoulder the cost of extracting the gas, the minister said he was optimistic that the issue would be resolved quickly.

The Northern Iraqi administration is often criticised by Turkey for providing a safe haven for the outlawed Kurdistan People's Party, or PKK, which is believed to be using bases in the territory to launch deadly attacks against Turkish forces.

Russia, Greece agree on South Stream

Meanwhile, Russia signed a deal in Athens on 7 June to found a joint company for building a section of Gazprom's planned South Stream gas pipeline on Greek territory.

South Stream is the Gazprom-favoured rival of Nabucco.

The new company, called South Stream Greece S.A., will be headquartered in Athens, with each side holding an equal 50% stake in the joint venture.

Russia had already secured intergovernmental agreements to build South Stream with Hungary, Austria, Bulgaria, Greece and Croatia.


South Stream is a Russia-sponsored planned natural gas pipeline. Once completed, the pipeline will run under the Black Sea to Bulgaria, with one branch going to Greece and Italy, and another to Romania, Serbia, Hungary, Slovenia and Austria. Russia recently announced that it would more than double its planned capacity from 31 billion cubic metres per year (bcm/y) to 63 bcm/y (EURACTIV 18/05/09 and EURACTIV 25/05/09).

The key partner for Russia’s Gazprom in the South Stream project is Italy's largest energy company, ENI (EURACTIV 18/05/09).

Another pipeline in the project phase, Nabucco, does not enjoy the favours of Russian state monopoly Gazprom. It widely resembles South Stream, but is intended to diversify the EU's pool of supplier countries, bringing gas to Europe from the Caucasus and the Middle East to a gas hub in Austria, via Turkey, Bulgaria and Romania. The pipeline is expected to be operational by 2015 and it will carry 31 billion cubic metres of gas per year.

The Nabucco consortium comprises leading European energy companies: OMV of Austria, MOL of Hungary, RWE of Germany, Bulgargaz of Bulgaria, Transgaz of Romania and Botas of Turkey. But three consortium members - OMV, MOL and Bulgargaz - have already signed up to Gazprom's South Stream pipeline, raising questions about potential conflicts of interest and indeed their commitment to Nabucco.

Nabucco and South Stream are seen as competing projects and have similar timeframes for beginning and completing construction.

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