Is Nabucco dead, and no one dares to say it?

The realization of an energy pipeline project is like a marathon. It takes years for the first shovel to hit the ground for constructing the pipeline. But this metaphor is only partially valid. In the last laps of a marathon you can more or less guess who will be the winner.

In the pipeline business, the days leading to the final decision is like a sprint in a 100-meter dash. You may not know the winner until the very last moment.

Until recently we were supposed to be completing the last laps as Azerbaijan is expected to choose the project that will carry gas from Shah Deniz. The decision between the three major projects that are competing – the ITGI (Interconnector Turkey-Greece-Italy), TAP (Trans Adriatic Pipeline) and Nabucco – is scheduled to be made by the end of the year.

Just as we thought these three competitors had entered the final laps, something unexpected happened. New sprinters appeared in the track field. First, BP, which is a major player in the Shah Deniz Consortium alongside Azerbaijan’s SOCAR, came last September with a new proposal called South East Europe Pipeline. Second, last October during the signing of transit agreements between Azerbaijan and Turkey we learned the two, together with BP, have agreed to use spare capacities in Turkey’s pipelines for delivering Azerbaijani gas to Europe. The fifth competitor is named the trans-Anatolian gas pipeline project, or TANAP.

It is striking that the old competitors are mainly companies from the demand side whereas the new competitors are companies from the supply side, which are also the decision makers.
For opponents of Nabucco, these developments complicate the outlook of the EU-backed southern corridor. For the proponents of Nabucco, the new proposals are just last-minute steps for horse trading.
With an annual capacity of 31 bcm, the challenge for Nabucco remains to secure the supply, as Azeri gas alone is not sufficient to fill the pipeline. EU officials are saying they have been receiving strong signals from Turkmenistan to sell its gas to Europe, while the European Commission is tasked with negotiating between Baku and Ashkhabad to reach an agreement on the status of the Caspian Sea.
But critics are saying Turkmenistan has no gas to sell to Europe as it is earmarked for Russia, and it could take years for the two countries to reconcile over rights to the Caspian, not to mention the difficulties Russians could raise about the issue.

In view of present problems securing gas supply, scalability seems to have become the buzz word. In other words, use or upgrade a little bit the existing infrastructures and increase the capacity later. All projects except Nabucco seem to fit to the “scalability option.”

Where does Turkey stand? Is Nabucco dead, and no one dares to say it? “Not so fast,” say Turkish officials. There is nothing very concrete about TANAP, they say.

After having spent so much energy in putting together an intergovernmental agreement, as well as a project support agreement, it will be difficult for Turkey to abandon Nabucco. Still, it is natural to guess Turkey does not want to be left with all its eggs in one basket in case Azerbaijan opts for scalability.