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27 Jun, 2013 11:23

Nabucco loses key Azerbaijan gas supplier to TAP

Nabucco loses key Azerbaijan gas supplier to TAP

Azerbaijan – supposed to be a key backer of the Nabucco West project – will deliver its gas through the alternative TAP route - running through Greece and Albania. Experts say this could mean the end for the EU-backed gas pipeline project.

Azerbaijani gas from its huge Shah Deniz field in the Caspian Sea will be transported to Western Europe via the Trans-Adriatic Pipeline (TAP), Gordon Birrell, BP’s regional president for Azerbaijan, Georgia and Turkey, the main developer of the gas field, officially announced on Friday in Baku. TAP is led by the consortium of Norway's Statoil, Axpo of Switzerland and the German firm E.ON. The pipeline will run nearly 800km across Turkey, northern Greece and into southern Albania before traveling under the sea to Italy.

That’s instead of the initially-planned Nabucco West venture - a truncated version of the Nabucco pipeline system, which would run across Bulgaria, Romania and Hungary to Western Europe.

The Trans - Adriatic Pipeline (Image from wikipedia.org)

“The Nabucco West project was not selected by the consortium. While OMV accepts the decision of the consortium, OMV is of the opinion that the offer ... met all the selection criteria and was highly competitive,” Austrian power utility OMV, which is backing Nabucco, said in a company statement.

Azerbaijan’s withdrawal could in fact mean the end of Nabucco, as BFM.ru quotes Vyacheslav Mishchenko, development director at Argus Media. It’ll be almost impossible to find another gas supplier within the next couple of years.

“The Trans-Adriatic Pipeline is more attractive. Its length is just a bit above 500 km and Azerbaijan already has work experience in the South European market. After SOCAR [State Oil Company of Azerbaijan Republic] won the bid to buy Greek Depa, it may be seeing synergy between the two projects,” he said.

The Nabucco project has been facing problems almost from its very start in 2002. Under the initial plan, construction was set to get started in 2011 and be completed in 2014. However, the deadline has been extended several times, as the project has been struggling to secure gas suppliers.

In May, German RWE energy concern – one of Nabucco’s main ideologists and investors – withdrew from the project after Hungary’s largest oil and gas company, MOL, said it was stepping away from Nabucco.

Nabucco - West(Image from wikipedia.org)

The key aim behind the Nabucco project was to move away from dependence on Russia’s Gazprom for deliveries of Caspian gas to Europe. Under the initial game plan the pipeline was to cross Azerbaijan, Georgia, Turkey, Bulgaria, Hungary and Romania and end in Austria. However, after it became clear that the pipeline wouldn’t secure enough gas, it was cut almost by half to a Nabucco West version, running from the Turkish-Bulgarian border to Baumgarten, Austria.

Greece gains

A new TAP pipeline was most welcomed by Greece. Antonis Samaras, Greek prime minister hailed the decision as the most significant boost for his country's economy in the past decade, adding that it was also a vote of confidence in his financially-troubled country.

Greece has been struggling through more than three years of deep financial crisis, and has been desperate for foreign investment to inject cash into the economy and generate jobs at a time when unemployment is above 27 percent.

Under the TAP project, Greece alone will receive investment of above 1.5 billion euro ($2 billion), Samaras said in a statement.

“The creation of such an important project puts Greece steadily on the map of pipelines and of the energy supply of the whole of Europe,” the PM said. “This constitutes a significant vote of confidence' in Greece and our country's prospects in Europe. After the TAP announcement, the `disaster scenarios' for Greece and its exit from the euro definitively stop.”

The project will generate 2,000 direct jobs and 10,000 more in companies that will be supporting the project, he said.

Samaras noted that the pipeline will also generate tax revenue and pave the way for a cheaper supply of energy as well as turning Greece into “an energy hub, in other words a source of attraction for new investments and new businesses.”

The entire EU and the United States were enthusiastic about building connections to Azerbaijan's gas, considering it to be  a way to reduce Europe's dependence on Russian gas.

EU Commission President Jose Manuel Barroso called Friday's deal “a milestone in strengthening the energy security of our union.” He said Europe's links to the Caspian Sea gas fields should be strengthened.

SOCAR's president, Rovnaq Abdullayev, said at Friday's ceremony that Azerbaijan and the European Commission, the EU's executive branch, are still discussing other possible routes for an additional pipeline to carry Azerbaijan's considerable gas supplies to Europe. The Shah Deniz reserves are estimated at 1.2 trillion cubic meters.