EU aims to solve ‘Southern Gas Corridor’ puzzle

pipeline_00.jpg

An extraordinary EU meeting in Prague on 8 May will try to break the deadlock over a proposed ‘Southern Corridor’ for natural gas, as the Czech Presidency tries to drum up support for the Nabucco pipeline project, EURACTIV has learned.

EU member states and Turkey will be urged to speed up an intergovernmental agreement over the Nabucco gas pipeline in order for it to be signed “by June 2009,” according to draft conclusions of the meeting obtained by EURACTIV.

The Prague meeting, organised by the Czech EU Presidency, will bring together representatives of Azerbaijan, Turkey, Georgia, Turkmenistan and Kazakhstan, alongside the EU institutions. No EU heads of state will be present, despite the meeting being billed as a “summit” by the organisers.

In Prague, the Czech Presidency will be pushing for an intergovernmental agreement “by the end of 2009” over the planned ITGI gas pipeline, which would link Greece to Italy. The project is still in planning phase, but crucially received backing from Greece, Italy and Turkey in July 2007.

The meeting will also seek to promote a pipeline aimed at bringing natural gas supplies under the Caspian from Turkmenistan to Baku, the Azeri capital, according to the draft declaration. This so-called ‘Trans-Caspian Link’ is seen as an important building block for Nabucco, as it could help fill the pipeline with the gas needed to make the project commercially viable.

‘Southern Gas Corridor’ concept yet to be defined

However, it appears that EU countries have yet to agree on which projects should actually constitute the ‘Southern Gas Corridor’.

In November last year, the European Commission tabled its Second Strategic Energy Review, calling for the EU’s gas supplies in the Caspian region to be extended when “political conditions permit.” The review mentioned the Nabucco, Turkey-Greece-Italy and South Stream pipelines as possible alternatives to Russian gas in the aftermath of the January supply crisis between Moscow and Kiev.

But it shied away from precisely defining the Southern Gas Corridor concept. “It is not yet clear what is meant by the expression,” admitted a senior diplomat from one of the EU’s largest member states.

The Czech meeting will attempt to clarify the issue, and the draft summit declaration suggests that the main idea will be to define the concept in the broadest possible terms. 

“The concept for the Southern Corridor is complementary to other existing energy partnerships and projects of the EU, and is open for the participation and contribution of third parties on a case-by-case basis,” the draft reads.

It defines the Southern Corridor vision “as a modern Silk Road interconnecting countries and people” in the region, which is expected to “act as a catalyst for further co-operation in other areas,” including transport.

Competing projects

Meanwhile, competing projects in the region are stepping up their campaigns to receive political backing from the EU. While Nabucco is the most widely cited, others are striving to make themselves heard. 

In February 2008, StatoilHydro, the Norwegian state-owned energy company, joined the Trans-Adriatic Pipeline (TAP) project, a joint venture with Swiss group EGL which would see the construction of a 520-kilometre pipeline linking Albania to Italy.

The pipeline would transport gas via Greece and Albania across the Adriatic Sea to Italy’s southern Puglia region and further into Western Europe. A link with Turkey’s existing pipeline network would allow it to branch with potential suppliers in the Caspian region, including Iran and Azerbaijan.

“The gas transport capacity of the TAP pipeline will be around 10 billion cubic metres annually, with the option to expand to 20 billion cubic metres,” TAP said in a statement released last year after StatoilHydro had joined. The pipeline is expected to be operational “at the earliest from 2011, depending on the gas shipment needs,” it said.

The presence of the Norwegian gas giant in the joint venture could raise EU countries’ interest in the TAP project. StatoilHydro is already a reliable supplier of natural gas to Europe and is the Union’s second largest after Russia.

Perhaps more importantly, the group holds a 25.5% stake in Shah Deniz, a major gas field in the Azeri part of the Caspian Sea, making TAP a serious bidder for infrastructure projects in the region.

“Our joining of the TAP project should be viewed as a move to offer an attractive market outlet for the Shah Deniz gas to the European market,” said Rune Bjørnson, executive vice-president for natural gas at StatoilHydro. British oil giant BP also holds a 25.5% stake in Shah Deniz and is the sole operator of the field.

Production at the Shah Deniz field began in 2006. Additional reserves were found to support the development of a second stage of the field, TAP said in a February 2008 statement. This means development could begin quickly once all the conditions are met, according to industry sources.

Robert Klein, project director at TAP, said the project could establish the “missing link” for the Southern Gas Corridor at a reasonable cost of around 1.5 billion euros, within a reasonable timeframe. He said the only remaining obstacle was a decision by Turkey to upgrade its existing pipeline network and sign up to terms and conditions for its use by third parties.

Background

In March, European Union leaders approved a plan to allocate €3.75 billion euros to energy projects aimed at increasing Europe's security of supply (EURACTIV 20/03/09).

The March agreement ended weeks of squabbling between EU member states over which projects should receive funding, to be made available as part of a wider EU recovery plan to kick-start the economy.

Germany was initially opposed to any mention of the Nabucco gas pipeline project, but finally gave in to pressure from Central and Eastern European countries, which consider it crucial to their energy security.

The Prague meeting on 8 May was initially planned as a high-profile event gathering EU heads of state and government. But it was later downgraded to an 'EU Troika' meeting, bringing together the Czech EU Presidency, the European Commission and the General Secretariat of the Council.

Countries invited to participate in the Prague 'Southern Corridor' meeting include Azerbaijan, Turkey, Georgia, Turkmenistan and Kazakhstan.

Timeline

  • 8 May: 'Southern Corridor - New Silk Road' summit in Prague.
  • June: Intergovernmental agreement expected on Nabucco.

Further Reading

Subscribe to our newsletters

Subscribe