Nabucco Seeks to Rise Again

The Nabucco West pipeline would appear to be dead. Rejected in favour of the Trans-Adriatic Pipeline by the Shah Deniz consortium back in June, with the consortium’s website down and with consortium shareholders reading the last rites, the once-mighty project is surely buried forever. 

But Nabucco shows signs of rising, Lazarus-like, from the grave. On 2 September Turkish Energy Minister Taner Yildiz said that the pipeline from the Turkish-Bulgarian border to Austria is “still on the table” and could be realised in the future. He cited new supplies of gas due to come from northern Iraq and growing demand within Europe as signs that TAP would not, ultimately, be sufficient.

Yildiz is not the only one trying to revive Nabucco at the moment. His Azerbaijani counterpart Natig Aliyev, speaking the day after Yildiz, said that the projects “have different goals and the choice of TAP does not exclude implementation of Nabucco”. He said that if Azerbaijani gas production increases as anticipated, there will be a clear opportunity to build Nabucco in the future. Bulgarian President Rosen Plevneliev also said in July that Sofia would continue working for the project’s implementation.

Given that Turkey has just expressed its intention to buy into TAP, how to explain this support for a rival pipeline which was supposedly finished? To be sure, this line isn’t new. Even before the Shah Deniz consortium made its choice, a chorus of voices pointed out that the decision did not mean that the losing project would not be built in the future.

But the interest expressed by Yildiz and Aliyev suggests that there is a genuine effort to ensure that Nabucco does not disappear entirely. For Turkey, the requirement to expand the Trans-Anatolian Pipeline would provide a proportionately bigger opportunity to take gas supplies for domestic consumption (it will only receive 6bcm/year in the first phase), as well as enhancing its position as a gas corridor to Europe. 

For Azerbaijan, Nabucco would help to fulfil its long-stated desire of making inroads into the Balkan market. Although TAP will deliver this through the planned Ionian-Adriatic Pipeline, an additional route would enable more widespread and reliable Azerbaijani gas supplies across southeastern Europe.

Although the Shah Deniz consortium undoubtedly chose the most commercially viable route, there were certainly aspects of Nabucco which some of the stakeholders preferred. Azerbaijan’s SOCAR, in particular, is less constrained by the bottom line than the Western consortium members, and remains determined to pursue its Balkan ambitions: Aliyev, for instance, said that "If demand in Europe increases, direct access to south-eastern European countries would be good”.

And for Bulgaria, Nabucco would give it more direct access to Caspian gas, more than it would get through Balkan interconnectors or the reversal of Greek gas pipelines. The 1-2bcm/year which Bulgaria expects to get from TAP will not, realistically, allow it to diversify away from Russian gas, through current routes or South Stream. Serious questions remain about aligning the latter with the EU regulations and, facing serious domestic unrest, Sofia is keen to avoid politically or financially expensive options.

The level of continued support for Nabucco illustrates that the original rationales for the project remain intact. This does not presuppose that anyone is changing their mind on TAP. As a financially astute, flexible pipeline TAP is the leader, and was chosen for very good reasons. But in the old formula of Heydar Aliyev, “happiness is multiple pipelines”: in the long run TAP will not fully satisfy either Azerbaijan’s rising gas output, Turkey’s energy hub ambitions, or Bulgaria’s diversification efforts.

The obvious question is – will it get built? After the long saga which culminated in the TAP decision in June, nobody has much appetite for new investment in Caspian gas pipeline projects. However, the Southern Corridor was always intended to be sequential in nature, with new infrastructure expected as gas output in the Caspian and elsewhere increases over the coming 10-15 years. 

Azerbaijan’s gas output alone is expected to rise to 54bcm by 2020, according to the government, up from what BP estimated was 15bcm in 2012 (less optimistic forecasts expect production of 34.8bcm in 2020). Minister Aliyev has been bullish, suggesting that forecasts for Shah Deniz Phase 2 production of 16bcm are “very pessimistic” and that up to 20bcm could be expected. 

Even accounting for a significant rise in domestic consumption from the current 8.5bcm, and small exports to Iran and Russia, the more optimistic scenario will leave anywhere between 15 and 35bcm available for export from Azerbaijan; with northern Iraqi gas also expected to enter the equation, and TAP only able to carry 20bcm at maximum, there is very likely to be scope for new infrastructure.

So it might seem unlikely now, but Nabucco might just live to see another day – perhaps when memories of recent events aren’t quite so fresh.

Alex Jackson is an analyst of political, energy and security issues in the Caspian region. He is based in London and can be contacted at ajackson320@gmail.com.