The Nabucco pipeline originally supposed to emerge as a rival to Russia's South Stream and as the first ever direct energy link between Europe and the resourceful Central Asia is about to face a major downscaling. The news immediately grabbed the headlines, but it would be naive to expect that Brussels will altogether abandon its ambitious plan for a southern energy corridor with a gas pipeline traversing the Caspian Sea as the key part.
An impending revision of the Nabucco project which, in its initial shape, included the construction of a 3,900-km pipeline stretching from the Caspian Sea basin to the Austrian border, was announced early in 2012. In January, Turkey which was to host the longest section of the pipeline made it clear that it would no longer undividedly uphold Nabucco and would, instead, ascribe top priority to the Trans Anadolu (TANAP) pipeline construction. The latter project relies heavily on Turkey's existing transit infrastructures, with new routes to reach out only to the border between Turkey and Bulgaria. For Ankara, the relatively modest TANAP price tag appears to be the biggest advantage of the project over Nabucco.
The Financial Times wrote in mid-March that the slimmer Nabucco project, under the title of Nabucco West, had been approved by the majority of the companies behind the energy initiative. The list of the signatories owning equal 16.67% stakes in the project comprises Austria's OMV Gas & Power GmbH, Hungary's MOL, Bulgaria's Bulgargaz, Romania's Transgaz, Turkey's Botas, and Germany's RWE Supply & Trading GmbH. Notably, BP, the British energy giant which is not a Nabucco partner but is keenly interested in opening an avenue to supply natural gas from Azerbaijan's Shah Deniz gas field, was this time invited to the negotiating table.
The fundamental reason behind the downscaling of Nabucco is that, due to the lack of available gas reserves, its target throughput had to be reduced from 31 to 16 bcm annually. It transpired that Azerbaijan would contribute only half of the amount pledged, a problem which caused the project partners to switch to Iran and Turkmenistan. Iran, however, is permanently at the brink of war, and pumping gas out of Turkmenistan would take the construction of a pipeline underneath the Caspian Sea. It factors into the situation that the Caspian Sea is landlocked and, therefore, not subject to standard maritime regulations, while the Caspian countries are locked in a bitter dispute over the sea's status. As a result, the legal outlook for this part of the Nabucco project will stay dim for the foreseeable future.
Turkmenistan does continue to negotiate with the EU over Nabucco, seizing every opportunity to demonstrate confidence that the project is viable. The Nabucco partners have been studying the legal, technical, and political prospects for the trans-Caspian segment of the Nabucco pipeline for several years, and it did not evade watchers that recently Brussels' activity in the area got a boost. On September 12, 2011 the EU ministerial council endorsed of the European Commission's mandate to represent the entire Nabucco consortium vis-a-vis Turkmenistan and Azerbaijan. Prior to the step, EU countries used to deal with the potential natural gas suppliers on a bilateral basis. As noted by Deutsche Welle, the above was the first case in history when the EU volunteered a formal treaty to back an infrastructural project. There was hope in Brussels that deals with Turkmenistan and Azerbaijan would be penned by the end of 2011 and that energy supplies from the Central Asian republics would start to flow in by 2017.
Germany's diplomacy chief Guido Westerwelle visited Turkmenistan in November, 2011 to discuss the situation in Afghanistan and the options for Nabucco with Turkmen president Berdimuhamedow. He stated shortly thereafter that the Nabucco talks were making progress and that Turkmenistan and Azerbaijan would soon join the project. A trilateral work group of representatives of the EU, Azerbaijan, and Turkmenistan convened last march in Brussels to draft a framework agreement concerning the trans-Caspian pipeline. According to Turkmenistan's official media outlet, the natural gas reserves owned by the republic were regarded as a promising source for the energy export to European countries.
The Turkmenistan Oil and Gas Roadshow 2012 conference on the southern energy corridor, at which the republic enjoyed being represented as a key global energy supplier with the world's fourth biggest proven reserves, was held in Berlin on March 14-15. Turkmenistan claims that the recently discovered Galkynysh gas field holds around 26 trillion cubic meters of natural gas, which is three times the amount contained in Russia's renown Urengoy. Turkmenistan's minister of oil and gas industry and mineral resources Bairamgeldy Nedirov says the Galkynysh output should climb to 230 bcm annually by 2030, with 180 bcm earmarked for export. At the moment, the lion's share of the Turkmen gas export is absorbed by Russia, China, and Iran, but plans exist to build pipelines from Turkmenistan to supply gas to Europe and to India (via Afghanistan and Pakistan). According to Turkmen sources, the former route is currently at the phase of “absolutely practical” discussion and the latter - of last-minute preparations for construction.
One occasionally gets an impression that the cut of the Nabucco target capacity by a factor of two and the plan to construct the trans-Caspian pipeline belong to completely uncorrelated realities. At the conference, the German and the Turkmen delegations similarly stressed that both sides stand to benefit enormously from the opening of the energy transit corridor. Jean-Arnold Vinois, head of the unit responsible for Energy Policy, Security of Supply and Networks of the EU Directorate General for Energy, quoted European Commissioner for Energy Günther Hermann Oettinger as saying that "Turkmenistan can play an important role in the diversification of EU energy supply routes" and advised the republic "to hurry up with the decision, since other players in the energy market - Iraq, Russia, and possibly Iran - will not tarry”. RWE supplies director Wolfgang Peters also expressed support for the trans-Caspian pipeline project, adding that it would both help Europe shake off Gazprom's energy grip and put to work the Czech transit infrastructures which, at the moment, operate below target.
Importantly, Peters suggests that Turkmenistan, Azerbaijan, and the EU invigorate the project by signing an intergovernmental agreement defining the Turkmen supply quota. He maintained in an interview to Deutsche Welle that the accord would serve internationally as a legal foundation for unobstructed transit of fuel to Europe. Considering that the proposal agreement ascribes to the EU the main buyer's "patronizing" role, the wrestling between Baku and Ashgabat over the amounts to be dished out seems to be an unfinished story. Input-related disputes are known to have caused Turkmenistan to opt out of the trans-Caspian pipeline project, and Brussels' present-day assurances that the positions of Baku and Ashgabat are harmonized may prove to be a serious overstatement.
The EU push for the trans-Caspian pipeline construction regardless of the fact that the Nabucco project as a whole saw its capacity halved signals a deep EU commitment to the new energy corridor plan. Chances are that the downscaling of Nabucco reflects a fleetingly adopted tactic, and the project's target throughput will be reset to a far more impressive mark if the plan to construct the trans-Caspian pipeline materializes, with Russia and Iran eventually being sidelined in the energy game.