Pipelines: "Political " versus "Commercial"

Russia says Nabucco and South Stream are not "competitors"

Senior Russian officials have defied a challenge from a proposed rival natural gas pipeline, rebuffing a possible competition between a European Union backed Nabucco venture and Russia's South Stream project.

Russia’s state-run monopoly Gazprom plans to diversify gas supplies to Europe. The current supply routes have been disrupted several times in pricing disputes with Ukraine. Russia also aims to retain control over gas exports to the continent with the South Stream pipeline project, which will have a projected annual capacity of 63 billion cubic meters.

Seeking more competition in its energy markets and less dependence on Russian gas imports, the European Union has been backing the Nabucco project, which plans to bring 30 billion cubic meters of gas from the Caspian Sea region and the Middle East.

"Mainly, Russia has the gas, the market, the technical knowledge and good partners. Who could beat the Russian gas price?" asked Alexander Medvedev, deputy president of Gazprom and the head of the Russian gas giant's export arm.

The targets of Nabucco and the South Stream are entirely different, he told a group of journalist at the headquarters of Gazprom in Moscow late last week. "The South Stream is designated to diversify transit routes for delivering Russian gas to the European market. Nabucco's purpose is to diversify the sources and supplies for Europe."

However, he said, the Nabucco project has failed even on paper due to the high gas demand in Europe and deficient gas supplies in the Caspian Sea region since Russia already has preliminary agreements with one of the main regional suppliers, Azerbaijan.

Calling the possibility of purchasing gas from energy-rich Iran for the Nabucco project "quite difficult" under the current impasse between the Islamic republic and the West, Medvedev said different transportation routes, destinations and investments complicate Nabucco's main task even more.

"We do not consider the Nabucco project as a competitor to the South Stream."

Turkey’s permission awaited

As an energy transit hub, Turkey has been involved both Nabucco and the South Stream. Last year, Turkey and four EU countries – Austria, Hungary, Romania and Bulgaria – agreed to allow the Nabucco pipeline to transit their countries. Russia also secured Turkey's support to construct part of the South Stream pipeline through Turkish waters in the Black Sea. Moscow has recently secured an agreement with Sofia to speed up the Bulgarian stretch of the South Stream pipeline.

Gazprom already started feasibility studies in the Black Sea region, said Leonid Chugunov, the head of Gazprom's project management department, adding that the company has contacted the Turkish Prime Ministry to allow Gazprom to carry out feasibility studies in Turkish territorial waters.

Echoing the remarks of the deputy head of Gazprom, Yuri Lipatov, the chairman of the State Duma committee on energy, said the European consumers will need both the Nabucco and South Stream projects since Europe’s energy demand increases day by day.

Dismissing concerns over Turkey’s role in both projects, Lipatov said he has no doubts on the Turkish government’s support of the South Stream at a meeting with journalists at the Duma, the Russian parliament’s lower house.

Lipatov said he sees no reason for Turkey not to take part in the South Stream. “I do not see any rivalry between Nabucco and the South Stream considering Europe’s increasing demand for energy. The EU member states will not give up on gas via the South Stream and Turkey will not take any decision that will harm Russia’s interest.”

Describing the Nabucco as a “political” and the South Stream as a “commercial” project, Leonid Grigoriev, the president of the Institute for Energy and Finance, said the media and political handling of Nabucco project is “disproportional.”

Delivering natural gas from the Caspian region is commercially unreasonable, and the Nabucco project is politically motivated, he said, adding that it will not make any price difference for European consumers if Azerbaijan sells gas to the EU with Russian prices.

“This [Nabucco] is one of the world’s most important projects, but it has not been identified on the map. In order to implement the Nabucco project, someone must give a few billion dollars as a gift.”

Source: Hurriyet