EU’s Southern Corridor Summit Endorses Nabucco Project

Following the formal launch of the Eastern Partnership Initiative on Thursday, May 7, the Czech government, which currently holds the EU’s rotating presidency, hosted another high-profile event – the Southern Corridor-New Silk Road Summit – on Friday, May 8. Attended by the heads of states of Azerbaijan, Georgia and Turkey, this summit registered a significant headway towards the formalization of the Southern Corridor concept, which envisions the creation of multiple pipelines supplying natural gas from the Caspian Sea and the Middle East to the European markets. In particular, in a sign of the EU’s increased aspiration to reduce its energy dependence on Russia, the energy summit in Prague marked considerable advancement in the direction of the realization of the Nabucco pipeline project, which is depicted in the map below.
As initially envisioned, the Nabucco pipeline will annually bring up to 31 billion cubic meters of natural gas from the Caspian Sea to Europe following the Azerbaijan-Georgia-Turkey-Bulgaria-Romania-Hungary-Austria route. The declaration adopted at the summit formalizes the commitments of the consumer (EU), transit (Turkey, Georgia) and producer (Azerbaijan, Egypt) countries to the Nabucco project. Even though the representatives of Kazakhstan, Turkmenistan and Uzbekistan – the Central Asian producer states – refused to sign the summit declaration at this juncture, as the managing director of Nabucco gas pipeline consortium* Reinhard Mitschek explains, the consortium members still have time to sign respective gas supply agreements by the end of this year. In this regard the agreement concluded between the German energy company RWE AG and Turkmenistan in April is a major achievement because it paves the way for resolving the problem of filling the Nabucco pipeline with enough gas (currently only fifth of the gas needed has been secured from Azerbaijan), which is a vital consideration for the commercial viability of the entire venture. Furthermore, the Turkmen Foreign Ministry delegation is to pay an official visit to Brussels in early June and the energy issues are expected to top the agenda of the meetings.

Slated to be completed by 2013, the Nabucco pipeline will become operational only in 2015, according to the most recent update provided by the EU Energy Commissioner Andris Piebalgs in January. Even when operating at its full capacity, however, it will be able to supply about 5% of EU’s gas needs. Similarly, if two other pipelines envisioned under the Southern Corridor concept – the White Stream (connecting Georgia and Romania via the Black Sea) and the Iterconnector between Turkey, Greece and Italy (ITGY) – also become operational, the combined supply of three pipelines will satisfy only 10% of EU’s total gas needs by 2020.

Thus, considering that Russia currently provides about a quarter of EU’s natural gas, Moscow’s importance as Europe’s primary energy partner does not appear to be in jeopardy anytime soon. Nonetheless, the signature of the Egyptian Minister of Petroleum Sameh Fahmy on the summit declaration indicates the EU’s willingness to explore the possibility of extending the Southern Corridor to encompass the vast natural gas reserves in the Middle East. The declaration makes mention of the urgency of signing a memorandum of understanding on energy with Iraq (conspicuously Baghdad failed to send a representative to the summit in Prague). If such overtures are successful and they are coupled with corresponding pipeline capacity upgrades, then the Southern Corridor may one day be on a par with Russian gas deliveries. Meanwhile, the preparatory engineering work for the construction of the Nabucco pipeline commenced in April. The European Investment Bank is providing €200 million ($240 million) for this purpose, as part of the EU Recovery Plan.

* NOTE: Founded in 2004 and based in Vienna, Austria, the Nabucco gas pipeline consortium consists of the following energy companies: OMV AG (Austria), Mol (Hungary), RWE AG (Germany), Bulgargaz EAD (Bulgaria), Transgaz SA (Romania) and Botas (Turkey).