Sunday, July 01, 2007

Putin continues to play the Americans and Europeans for fools in the grand chessboard

EU pipeline project loses momentum

BERLIN: The consortium attempting to build a natural gas pipeline that would reduce the European Union's dependence on Russian natural gas has failed to agree on financing or finding another partner to make the project viable.

Interviews with members of the Nabucco consortium Tuesday disclosed that the pipeline - proposed in 2002 by the European Commission as the bloc's first attempt at forging a common energy security policy - may be threatened by another project with similar intent.

On Saturday, Gazprom, Russia's state-owned giant natural gas monopoly, and Eni, the Italian natural gas company, announced an agreement to build a competing pipeline to the EU, a move that exposed the lack of unity inside the 27-member bloc over forging a long-term energy security policy.

The Nabucco project seems to be losing momentum, as it runs behind schedule and over budget, members of the consortium said.

"We still have no agreement over financing," said Thomas Huemer, a spokesman for OMV, the Austrian energy company that is leading the Nabucco consortium. The four other energy groups in the consortium are Botas of Turkey, Mol of Hungary, Transgaz of Romania and Bulgargaz of Bulgaria.

"If the financing is worked out by the end of this year, we could build it by 2009 or early 2010 and begin operating it by 2012," Huemer said. He said costs would exceed the initial estimate of €4.6 billion, or $6.2 billion, because of an increase in steel prices.

The proposed 3,300-kilometer, or 2,050-mile, pipeline aims to bring natural gas from Azerbaijan and other Central Asian countries to Western Europe, through Austria, Hungary, Romania, Bulgaria and Turkey. Turkmenistan and Kazakhstan may also participate, and the pipeline could at a later stage bring natural gas from Iran and Egypt.

The consortium, however, is still looking for another partner to share the costs even as the members fail to agree on how much of the financing should be covered by loans, which could come in part from the European Investment Bank or the European Bank for Reconstruction and Development.

Gaz de France and Gasunie of the Netherlands have expressed interest in joining the group, but Turkey is unwilling to make any decision over a sixth partner until after its parliamentary elections in July.

Also, Gaz de France could well be excluded as a political rebuff. Turkish government officials have said they are furious with the decision by the French president, Nicolas Sarkozy, for having blocked on Monday the opening of economic and monetary policy discussions that are important for Turkey to start negotiations to join the EU.

Last weekend, Gazprom and the Italian energy group Eni agreed to a major deal in which both companies would build the so-called South Stream pipeline starting from the Black Sea coast of Russia, running under the Black Sea to Bulgaria and from there deeper into Eastern Europe and Italy.

Alexander Medvedev, a deputy chairman of Gazprom, said the agreement was "a concrete action aimed at developing a long-term strategic partnership with both Eni and Gazprom." It was, he added, a further step toward the execution of Gazprom's strategy "to diversify Russian natural gas supply routes toward European countries and significantly contribute to Europe's energy security."

Neither partner would comment on the costs, but analysts said they could exceed €11 billion.

Some members of the Nabucco consortium and the European Commission tried to play down the competitive importance of the Gazprom-Eni deal. "Europe needs gas," said Emre Engur, a spokesman for Botas, the Turkish energy company.

Russia already supplies a quarter of the bloc's natural gas. But the EU's demand for gas is expected to rise to 720 billion cubic meters, or 25.4 trillion cubic feet, in 2015 from around 500 billion cubic meters in 2005, and Nabucco was supposed to meet part of this demand.

"You have to remember that Turkey depends on Gazprom," Engur said. "We have to have good relations with Gazprom. In any case, Turkey, as a member of Nabucco, wants to open up the gates for gas from Azerbaijan and Iran so that there can be diversification." Once Nabucco is running at full capacity, probably by 2025, Engur said, 15 percent of Europe's natural gas supply could come from Central Asia.

Analysts said the delays and divisions inside the consortium were being exploited by Gazprom, which they said appeared determined to capture as much of the market as soon as possible in southeastern Europe, part of the route mapped out for Nabucco.

Gazprom, tightening its grip on the market in Europe even before the construction of the Nabucco project has started, recently forged separate deals with OMV and Mol, even though these two companies are part of Nabucco.

When President Vladimir Putin of Russia was on a state visit to Austria last month, Gazprom and OMV agreed to a large natural gas storage facility that would turn Austria into a hub and a transit country for Russian gas. Gazprom also agreed to increase its deliveries of natural gas to Austria, from 6.8 billion cubic meters in 2007 to 9 billion cubic meters by 2009. Russia already delivers 70 percent of Austria's natural gas needs.

Putin also reached a deal with Prime Minister Ferenc Gyurcsany of Hungary to extend a Russian natural gas pipeline from Turkey to Hungary, directly competing with Nabucco. After criticism from the EU, Gyurcsany said he might reconsider the deal.

Original article posted here.

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