Monday, 23 May 2011

Nabucco agreement to be signed, again

Call it déjà vu or excessive optimism. The Turkish government has announced that on June 6, stakeholders in the Nabucco project to bring Caspian and Middle Eastern gas to Europe via Turkey will sign a new agreement - one of many, many declarations of good intentions made over the past few years.

This is despite the fact that the pipeline is widely considered to be moribund. In early May even the Nabucco company bowed to the inevitable and declared that the project's timeline was being revised - delayed, in other words, due to a total lack of guaranteed supply commitments.

There appears to be no sign that this lack of suppliers is changing anytime soon. In announcing the June 6 meeting, Turkish Energy Minister Taner Yildiz said that the consortium will try and secure Azeri gas for the pipeline, but that if Baku turns down the request, it will look to Turkmenistan, Iraq and Iran. As Caspian-watchers will be aware, all of these present their own obstacles, whether political or commercial. The fact that Azerbaijan's commitment is still up in the air, despite so many promises of participation by Baku, really underlines how tenuous the whole project remains.

Exactly what the June 6 agreement will contain is not yet clear. It's likely to be an attempt to reaffirm the consortium members' commitment to Nabucco, reassuring potential investors and European governments. Nabucco chief executive Reinhard Mitschek has been similarly bullish, denying speculation that the partners were planning to downgrade the project. He attributed the setback to delays over purchasing agreements for the Shah Deniz II field in Azerbaijan. 

Maybe so. But negotiations over Shah Deniz II have dragged on exactly because Baku is unwilling to put all its eggs in the Nabucco basket whilst nobody else commits gas and the EU scrabbles around for financing. Baku's hedging is understandable when Russia and Iran are interested in buying Shah Deniz gas, and have a track record of actually putting their money where their mouths are.

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