GAS PIPELINE COMPETITORS: TRUMP CARD FOR AZERBAIJAN – TREND CAPITAL COMMENTATOR

Trend News Agency
Feb 13 2009
Azerbaijan

All possible versions of the export of Azerbaijan’s gas to Europe,
including three pipelines – Nabucco, Trans Adriatic Pipeline (TAP)
and Poseidon (Turkey-Greece- Italy), are excellent tool for Baku
to obtain great economic benefit. Each of these projects has their
advantages and disadvantages and each is considered as possible
version for the export of Azerbaijani gas.

The result of negotiations depends exclusively on the conditions of the
proposed commercial deal and position of Turkey as a transit-country
for three gas pipelines.

The present visit of the President of Turkey Abdullah Gul to Moscow
became the last, but not the only reason for the concerns of Europe
over the future delivery of gas.

Future diversification of the gas supplies to Europe through the
three above-mentioned gas pipelines finally depends on Ankara,
which recently does not demonstrate special friendliness towards the
European Union not accepting it. The last incident with the Prime
Minister of Turkey Erdogan at the Davos forum vividly illustrated
the attitude of the country towards constant refusals for membership
to the European Union and talks of the new American administration
regarding recognition of Armenian "genocide".

But besides the problems with Turkey, there are other important issues
with the gas pipelines.

When in 2002 Europe spoke of the diversification of gas supplies,
Nabucco project remained unrealizable dream of the EU for one simple
reason. The oil prices, on which depends the gas price, were too low,
and design cost of Nabucco was not justified by fuel price. The entire
beginning changes, when the price of "the black gold" fell to $40
per barrel. Nabucco became possible and even necessary, but another
question arose in this stage: where to take gas for the pipeline with
the maximum capacity of 31 billion cubic meters per year.

The initial idea of Nabucco – supply of gas from Central Asia and
Azerbaijan to Europe through Turkey, Balkan countries to the Austrian
city of Baumgarten. And still no one can promise sufficient volumes
of "blue fuel" for Nabucco. The tariffs on the gas transport, which
will pay the supplier, directly depend on the original cost of the
pipeline. Even taking into account the use, at the initial stage
of project, the part of the ready infrastructure in Turkey, Nabucco
does not pretend to the title of cheap gas pipeline, and therefore,
its tariffs will be high. Taking this into account, it becomes clear
that the construction of the pipeline with 31 billion cubic meters
per year, via which only 10-15 billion will go, can be unprofitable.

However, idea of using the possibilities of competitory ways of gas
supplies already brought huge benefits to some countries, for example
Turkmenistan – main hope for Nabucco as the supplier of fuel from
Central Asia.

During mentioning of Russia, buying gas for the small price many
years, about the possibility of selling gas to China or joining
Nabucco, Ashkhabad obtained acceptable price for itself and left the
possibility to competently mention the competitors in the future gas
deals with Russia.

Now Moscow will do everything in order not to give the Central Asian
countries the ground to think of diversification of their deliveries,
proposing more advantageous conditions of sale-purchase, without
special damage for itself. Russia has a sufficiently developed
infrastructure of accepting and pumping Central Asian gas, which
covers many years of use, while the same Nabucco – new pipeline with
still unclear tariff schedule and the need for justifying expenditure
on its construction.

A similar method for obtaining the most advantageous conditions of
the commercial deal can be used by Azerbaijan as well. Theoretically,
this is not necessarily that Azerbaijan’s gas will be pumped through
Nabucco, and also this is not necessarily that Nabucco will pump
Azerbaijan’s gas. Especifically, the presence of competitory gas
pipelines creates comfortable conditions for Azerbaijan.

Poseidon can be alternative gas pipeline for Azerbaijan’s gas. 8-10
billion cubic meters of gas, which are already generated by only
Azerbaijan, is sufficient for it. Moreover, Poseidon already has
not-developed, but really existing infrastructure – the pipeline,
which connects Turkey and Greece. For the completion of the pipeline,
it is sufficient to finish construction of the part of pipeline,
which connects Greece with Italy.

Technically the capacity of Poseidon can be increased to 13 billion
cubic meters of gas per year. It is necessary to understand that the
really existing gas pipeline is smaller expenditures for investors
and smaller tariffs for the transportation of gas. In addition, in
the destination – Italy – there is a branched network of pipelines
and excellent infrastructure.

Another gas pipeline, which passes through Turkey to Europe – TAP,
possesses almost analogous characteristics.

All three pipelines are considered by official Baku as possible for
gas supplies to Europe and they are convenient versions for obtaining
more advantageous proposals.

Is not worth to lose the possibility to sell Azerbaijan’s gas to
Russia, which attempts to solve problem with the transit through
Ukraine, constructing a new pipeline system – South Stream, which
will connect Russia and European Union via Black Sea. With this one
project, Russia will cover almost entire Europe, passing through the
Balkan countries, Greece, Italy and Austria.

If there is gas, the buyer will be found. The more pretenders on fuel,
there are more chances to obtain not only more advantageous proposal
from the buyer, but also additional geopolitical bonus.

From: Emil Lazarian | Ararat NewsPress