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13 Jul, 2009 16:24

Nabucco go ahead brings rival for South Stream

Turkey and four European Union countries have signed a deal to diversify Europe's gas supplies. The Nabucco pipeline is billed as bypassing Russia, but Gazprom has its own projects on the table.

The prime minister of Turkey – along with those of Austria, Bulgaria, Romania and Hungary – signed a deal to route the Nabucco pipeline across their countries.

Nabucco would deliver gas from the Caspian Sea across Turkey to Austria – with an investment of 8 billion euro and a capacity of 31 billion cubic meters.

The deal signed in Ankara on Monday coincides with the arrival of a new Bulgarian prime minister – who said he plans to reverse an earlier decision to take part in the Russian-backed South Stream pipeline. Mikhail Krutikhin, Editor in Chief of ‘Russian Energy Weekly” believes the agreement may pressure Gazprom into new agreements with Belarus and Ukraine.

“I believe this is not a competition. Gazprom can theoretically supply as much gas as it can to Europe using its existing pipelines through Ukraine and Belarus if it does not build South Stream. Maybe Russia will have to come up with a reasonable agreement with transit nations – Ukraine, Belarus – to remain in the market.”

Vyacheslav Mishchenko, Director, Russia and the CIS, at PACE Global Energy Services points out that its not a ‘one or the other’ choice for potential transit countries, and that both their energy security and those of their western neighbors can benefit from the choice.

“Each party benefits to diversify routes and participate in as many projects as possible. I don't think they should choose. They can sign the documents, and then we will see the realization of the projects.”

Neither Nabucco nor South Stream has yet to begin construction. This weekend, Turkey's Energy Minister said Russia could be asked to supply gas to Nabucco. But that's not something analysts think is likely, as Gazprom has its own projects – namely, South Stream.