European Southern Gas Corridor Shifts Focus

Azerbaijan has to decide whether to exploit the Nabucco route or deliver to the countries of southeastern Europe.

The purpose of Europe’s Southern Gas Corridor was previously clear — to get Azerbaijani, Iraqi and Turkmen gas to Western Europe where demand is soaring and countries want to decrease their dependence on Russian gas imports. But increasingly, the energy security of southeastern Europe is a factor to be reckoned with.

European energy commissioner Günther Oettinger, addressing a gas forum in Brussels last week, hailed the prospective Trans Adriatic Pipeline which is supposed to deliver gas from the Greek-Turkish border to Italy. “TAP’s plan, in order to work, will however require that someone else proves trustworthy in delivering the Azerbaijani gas to the Greek-Turkish border,” he pointed out.

There are different contenders. The Nabucco pipeline, financed by a consortium of Central European and Turkish energy companies, is perhaps the most viable option for transporting gas from Turkey to Austria, across Bulgaria, Romania and Hungary.

The Trans Caspian Pipeline is supposed to circumvent Iran and Russia in delivering gas from Turkmenistan to Azerbaijan, enabling Europe to buy gas cheaply from the Caspian region where Total, in September, made a huge gas discovery. The state oil company of Azerbaijan reported at the time that the newly discovered field could contain up to 350 billion cubic meters of natural gas and 45 million metric tons of gas condensate.

The Shah Deniz gasfield, still the largest natural gasfield off the coast of Azerbaijan, produces some seven billion cubic meters of natural gas per day and is estimated to contain the equivalent of 3,000 million barrels of oil.

Nabucco would traverse southeastern Europe but the commission is worried that the region could still be left in the cold. “Without a leader developing new infrastructure in the region, I’m afraid southeast Europe will not benefit from new gas coming to the region,” said Oettinger. He reminded his listeners of the infamous Russian-Ukrainian gas disputes of 2009. “Diversified gas supplies also will make gas a more attractive source of energy,” added Oettinger, encouraging countries to move away “from old and dirty installations for electricity generation or domestic heating.”

The commissioner promised that Brussels will help energy providers if they agreed to invest in southeastern European energy security. “We will do this through our continued focus on strict application of EU Internal Energy Market legislation in these countries and generous regulatory support.”

Existing intergovernmental agreements allow Azerbaijani gas to be delivered to Turkey’s borders with the European Union — i.e., Bulgaria and Greece. Azerbaijan now has to decide whether to go for the Nabucco route and focus on the core European market or do business with companies that deliver gas to southeastern Europe — which seems to be the preference of the European Commission — from whence it could be transported to other European countries through the internal market.