Azernews.Az

The Nabucco pipeline seeking to pump Caspian and Central Asian gas to European markets, easing energy reliance on Russia, is stalling over Turkey’s policy on Armenia and a dispute between Turkey and Azerbaijan over the gas price, Britain’s Center for European Reform claims.
"Nabucco is stuck again. The reason is a dispute between Turkey and Azerbaijan," writes Katinka Barysch, the Center’s deputy director.
The report says the 8 billion cubic meters of gas for the first phase of Nabucco was always expected to come from Azerbaijan’s new Shahdaniz II gas development. "But Baku and Ankara cannot agree on how much Azerbaijani gas should go to Turkey, at what price and under what conditions. While the dispute continues, the companies involved in Shahdaniz II have stopped drilling."
Barysch wrote fruther that Turkey already buys around 6 bcm of gas from the Shahdaniz I field, for a very good price. It sells half of that gas on to Greece at a much higher price. Baku insists that the old pricing formula needs to be revised, while Turkey disagrees.
"As long as this issue is not resolved, an agreement on the Shahdaniz II gas looks unlikely. Without that gas, it is hard to see how Nabucco could get under way. Meanwhile, Azerbaijan has started shipping gas to Russia instead and promised to sell some to Iran and even China."
The report noted that although both Turkey and Azerbaijan insist that they rarely quarrel about energy, the fact that the two countries get on badly these days does not help. Azerbaijan became less forthcoming in the negotiations after Turkey announced a courageous plan to normalise its relationship with Armenia last year.
"Azerbaijan is furious about the idea that Turkey could open its border with Armenia before a solution has been found for the ‘frozen’ conflict in Upper Garabagh, an area that has been occupied by Armenian troops since the early 1990s," the report said. The center claimed Turkish leaders are ambiguous about that, with Prime Minister Erdogan saying that the two issues are linked. The Turkish parliament has not yet ratified the documents needed for the normalisation of relations with Armenia, and "some now say it never will."
The center said, however, that although the prospects for a Garabagh settlement are "not great", it is likely that Turkey and Azerbaijan will eventually reach a deal on energy that could restore momentum to Nabucco.
"Baku has a strategic interest in getting access to the European gas market. Turkey’s interest in becoming a European energy hub is just as strong. Both countries know that once gas starts flowing through Nabucco (or another pipeline that connects the EU market directly with the huge gas reserves of the Caspian), oil majors will be much more willing to explore other projects in the region."
The center also said the EU should stand ready to give the 8 billion euros Nabucco project a bit of a political push once the Turkey-Azerbaijan dispute is resolved. Europeans have been too ready to dismiss Nabucco as a ‘pipe dream’. Russia, on the other hand, is taking it extremely seriously. Moscow fears that Nabucco will further erode its lucrative and politically expedient gas transport monopoly on the Eurasian landmass. It is pushing the rival South Stream pipeline and has signed agreements with a number of potential transit countries, including Turkey. It is also trying to buy up gas that could potentially feed Nabucco in Azerbaijan and Turkmenistan.
South Stream looks expensive, technologically complicated and unnecessary. Nabucco appears relatively realistic and it is further advanced in the planning process, the analysts said.
The 3,300-kilometer Nabucco pipeline, which will run from eastern Turkey to the Austrian capital Vienna, is expected to come online in 2014. Azerbaijan, Iraq and Egypt will become the main suppliers for Nabucco, which will carry 31 billion cubic meters of gas annually, when fully operational.*