However, ever since its conception, there has been delay after delay. There has been more talk than action, insufficient investment, a lack of political will and serious question marks over gas sources and questions over infrastructure. While Europe is trying to implement its project as a way of emancipation from Russian gas, Moscow is fighting to undermine the position of its rival, driving forward its own Nord Stream and South Stream projects, while at the same time endeavor to maintain control over Caspian gas.
Prospects received a big boost in late April when Azerbaijan and Turkey finally reached an agreement, in principle, on transit fees and gas prices after months of difficulties. The agreement opens the door to the negotiations for the sale of gas from the second stage of Azerbaijan’s Shah Deniz II field. However, the fact that there are three EU pipelines (Nabucco; the Interconnector between Turkey, Greece and Italy; and the Trans-Adriatic Pipeline) wanting gas from Azerbaijan means that there is EU inter-competition for this gas and that there is an even greater need for other gas sources for projects such a Nabucco.
While there remain serious questions over infrastructure both in Turkey and Azerbaijan, a more serious worry is where the rest of the gas will come from in order to fill the pipe given that the gas expected from Azerbaijan will only be of a “start-up” volume and insufficient to fill Nabucco. Making the project financially viable will be crucial for its success. Nobody wants another Odessa-Brody. The 419-mile, $500 million Odessa-Brody oil pipeline, completed in 2001, provides a sobering example. The Ukrainian government rashly built the self-financed line from its Black Sea port to the Polish border to provide Central Europe with oil despite not having firm commitments from a single oil-producing nation for export throughputs. After the pipeline remained unused for three years, Kiev was forced to agree to transport Russian oil southwards in the opposite direction, for export from Odessa rather than northwards to Central European markets as originally envisaged.
Turkmenistan seems to be the answer, given that its proven gas reserves as of 2009 amounted to 7.94 trillion cubic meters, accounting for 4.3 percent of total world proven gas reserves. Turkmenistan, which has a motto -- “happiness is multiple pipelines” -- has always seemed keen to sell gas to the EU -- a reliable, stable market for a good price. However, there remain a number of stumbling blocks. First, Ashgabat is getting bored of waiting around. They want quick sales, not “promises” of a virtual pipeline. Second, Turkmenistan wants to sell gas from its border and does not want to be involved in the construction of a trans-Caspian pipeline. Without the construction of this long-talked-about pipeline, it will be difficult to get any substantial amounts of Central Asian gas to the EU markets. The other methods (LNG/boat) are very expensive. Furthermore, Azerbaijan’s relationship with Turkmenistan is very turbulent, which does not help. It is also unclear which gas would go through this still “nonexistent” pipeline. So far Turkmenistan promised the EU peanuts in terms of gas volume, and there is no timeframe for this gas or where it would come from. A further blow came earlier this year as a result of the mega Central Asia–China gas pipeline connecting Turkmenistan’s Caspian shore natural gas fields to Xinjiang. This year 13 bcm is scheduled to transit the new pipeline, rising to over 40 bcm by 2013, effectively soaking up much of Turkmenistan’s projected natural gas.
However, all is not lost, the Turkmens are now working on the construction of an East-West gas pipeline which will further increase their energy independence and at the same time may increase the chances of implementation of the trans-Caspian pipeline, and likely supply for Nabucco. The first deliveries are scheduled for June 2015.
Can a trans-Caspian pipeline be built? There is no real legal issue because to do something across the sea does not require an agreement among all littoral states. If the two states directly concerned agree to do something, they can do whatever they please (Azerbaijan and Kazakhstan cooperate on oil shipping). As far as the bilateral border delimitation between Azerbaijan and Turkmenistan is concerned, it is not an issue, either. A possible trans-Caspian Pipeline would cross the boundary line, anyway, so in this context it does not really matter where exactly the boundary will be and where exactly the pipe will cross it. There are many international precedents of this kind -- UK-Norway, etc. Of course, Iran and Russia will kick up a fuss because this pipeline is not in their alternative avenue, but if Turkmenistan and Azerbaijan want to do it and the EU can muster up the political will to drive it, this can be achieved. If this cannot be done, Nabucco -- unless Iran is ever allowed on board -- may remain a virtual project for quite some time.
