EU pushes pipeline merger in Southern gas corridor

pipeline_pic_isp_Peter_Ingvorsen.jpg

EU officials are pushing for a merger of two strategic pipeline projects – Nabucco and its smaller Italian rival ITGI – to help secure gas supplies from Azerbaijan to Europe, according to news wire reports yesterday (17 February). The European Commission later confirmed it was encouraging projects in the 'Southern Gas Corridor' to cooperate.

Officials at the European Commission are urging ITGI and Nabucco to enter into talks about merging their operations, EU industry and political sources said.

One option is to start off with the low-cost ITGI pipeline plan, estimated to cost €2.5 billion compared to Nabucco's €7.9 billion price tag, and then expand at a later date, one industry source told the Reuters news agency on condition of anonymity.

That implies downscaling the project – with only a low level of gas imports at the beginning – but the parties are also mulling ways to increase the size of a planned pipeline across Turkey and then share it, to keep costs down.

The project might be launched in two phases: 'Southern Corridor Phase I' would carry gas to Greece and onwards to Italy; then later, 'Southern Corridor Phase II' would create a spur from the main pipeline and follow Nabucco's original planned route northwards to Austria, an industry source said.

A senior executive at ITGI shareholder Edison suggested on Tuesday that his project might be able to work together with Nabucco, but did not give precise details.

The Trans-Adriatic Pipeline (TAP), the lowest cost option at 1.5 billion euros, is not currently involved in any possible Nabucco merger scenarios, industry sources quoted by Reuters said.

On the record

Asked by EURACTIV to comment, a European Commission spokesperson admitted that the EU executive had advised the different players competing under the brand name 'Southern Gas Corridor' to "explore options for beneficial cooperation".

"The Commission would welcome any cooperation which contributes to the achievement of the objectives of the Southern Gas Corridor […] Energy Commissioner [Günther] Oettinger has been encouraging existing Southern Gas Corridor projects for stronger cooperation," the spokesperson said.

But Nabucco spokesperson Chistian Dolezal denied that any discussions between Nabucco and ITGI about any potential cooperation had ever taken place within the consortium (see Positions).

"Nabucco is being developed as a stand-alone pipeline and will be a crucial link between the Caspian region and Middle East region and Europe," Dolezal said.

EURACTIV spoke to representatives of ITGI, but they declined to comment publicly.

A spokeswoman for the Trans-Adriatic Pipeline (TAP), a 10-20bcm project in the Southern Gas Corridor that somewhat resembles ITGI, said that the project had always been open to cooperation and it would welcome additional shareholders. Any cooperation would have to be commercially realistic, she added.

Moreover, any decision on selling an initial 10 billion cubic metres of Azeri gas to European companies would ultimately be taken by the Shah Deniz consortium, which owns the gas, she insisted.

Statoil and BP operate the Shah Deniz gas field in Azerbaijan and are the largest shareholders in the Shah Deniz consortium, each holding 25.5%. TAP's shareholders are Statoil of Norway, EGL of Switzerland and E.ON Ruhrgas of Germany.

The consortium’s decision will primarily be based on tariffs and the technical viability of the project, and this is where the TAP project would appear to be stronger than its competitors when viewed on a level playing field, the TAP spokeswoman added.

Nabucco spokesperson Chistian Dolezal said: "We shall only compare apples with apples. Nabucco is the future backbone of the Southern Corridor and cannot be compared to ITGI. Nabucco offers a secured transit regime (with intergovernmental agreement) through Turkey and established over 3,900 kilometres a new pipeline and a new corridor. This gives comfort to the gas traders and for the suppliers with their huge investment to make in Shah Deniz II."

"Seeing the way the press reports, in fact it's the other way round: the full implementation of Nabucco as a big gas highway is the precondition that smaller projects can also be realised and will be bankable," Dolezal said.

The 'Southern Gas Corridor' is seen as part of a 'New Silk Road' of transport and energy links between Europe and the Caspian region.

The best-known pipeline project is Nabucco. But other smaller projects, such as the Trans-Adriatic Pipeline (TAP), the Turkey-Greece-Italy Interconnector (ITGI) or the Azerbaijan-Georgia-Romania Interconnector (AGRI), all have the potential to become important elements of the Southern Gas Corridor and even call into question the future of Nabucco.














Some, like Russia's South Stream, even have the potential to become Nabucco 'killers' by making the flagship EU project irrelevant (more).

 

 

 

 

Subscribe to our newsletters

Subscribe

Want to know what's going on in the EU Capitals daily? Subscribe now to our new 9am newsletter.