It is no longer knotty to imagine Egyptian gas flowing into Europe by 2013

Last month, Budapest hosted a significant summit bringing together presidents and heads of governments who represent the potential partners for a gigantic 3,300-km gas pipeline, Nabucco. Worth $12 billion, this pipeline is to transport gas from the Caspian Basin and Central Asia via Georgia and Turkey to Bulgaria, Hungary, Romania, and Austria, circumventing Russia, central to the EU’s energy diversification strategy.

Government officials from Austria, Azerbaijan, Bulgaria, the Czech Republic, Egypt, Georgia, Iraq, Romania, Turkey, Kazakhstan, Turkmenistan and the United States, as well as representatives of the European Commission (EC), the European Investment Bank and the European Bank for Reconstruction and Development took part in the summit.
This follows a series of reports that emerged from the conference claiming that the partners may be capitalizing on the political goodwill that has arisen as a result of the recent Russia-Ukraine gas dispute, which saw gas supplies to Europe shut off for several days, to finally make progress in the politically sensitive project.

The Summit’s Final Declaration stated that its participants support energy conferences in Turkmenistan and Bulgaria in 2009, a “Southern Corridor Summit” to be organized by the Czech Presidency of the Council of the European Union on 7 May 2009, and the signing of an intergovernmental agreement at a Nabucco Conference in the first half of 2009 in Turkey.

 “We tried to sign a preliminary agreement with those countries from which we expect gas and agreed to do our best to make it possible for the interested parties to sign the Nabucco intergovernmental agreement until mid-June,” Hungarian Prime Minister Ferenc Gyurcsany concluded.

The Egyptian Minister of Petroleum Eng. Sameh Fahmy, who headed the Egyptian delegation to the Hungarian capital Budapest, stated that the mere presence of Egypt at the summit proves the strategic role the country plays in the region. “Egypt has a long history in the gas industry. Moreover, the event verifies the significance of the Arab gas pipeline which will not only secure clean energy supplies to Europe, but it is also deemed to play a key role in the Egyptian- European ties,” Fahmy highlighted.

In his statement, Fahmy said the convocation of the summit comes at an important timing when the EU is adopting a strategy to diversify energy resources through implementing a number of gas transport projects including the Nabucco pipeline that can be linked with the Arab Gas Pipeline.

Fahmy added that this summit provided an opportunity for the participants to exchange views and reach the best solutions for pending issues.
He said the success in carrying out the Arab Gas Pipeline among participating countries; namely Egypt, Jordon, Syria and Lebanon in a short time underlines Egypt’s ability along with the aforementioned countries to plan for the future of gas industry in the Arab region, especially that its implementation coincides with carrying out the Nabucco gas pipeline project.
The ministers of petroleum and energy of the four countries participating in the Arab natural gas pipeline reached a preliminary agreement to develop and expand the Arab Pipeline for an eventual linkage with the European gas distribution network through Turkey. In addition, Iraq will join the Arab Pipeline that will also carry Iraqi natural gas from Western Iraq.

Meanwhile, Azerbaijan and Turkmenistan alone have not sufficient capacities, as they can ensure no more than three billion cubic meters a year, while at least 15 billion is needed for project launching. Iran could have been a gas supplier, however the U.S. sanctions hinder this option.

Moreover, the Europeans are also considering Turkey as an obstacle, which intends to obtain 15 per cent of estimated 30 billion cubic meters of annual volume of Nabucco pumped gas for its domestic needs. Such percentage has raised concerns of other participants concerning the volume of their shares of gas and required funds from each partner.

This has led the EU to look to the Middle East for gas supplies, which are more plentiful and cheaper to produce. Any Arab gas would only come online in later stages, with the first due to become operational in 2013-2014. Accordingly, discussions have been held with Egypt, Jordan, Syria and Lebanon to connect a proposed Arab Gas Pipeline, to which Iraqi gas may also be added once its reserves are tapped.

Within the EU, the Nabucco Project faced opposition from Germany due to its commitment to the Nord Stream Underwater Pipeline that would connect Russia directly with Western Europe, bypassing Poland and the Baltic states that have caused political headaches with the Russians in the past.

Poland is one of the few new EU states opposing Nabucco because it would lose valuable income from the transportation of Russian gas across its lands; an issue that holds no sway in heavily dependent final-destination countries such as Hungary and the Czech Republic.

Georgia, still bitter after its crushing loss to Russia in their conflict last August, has argued strongly in favour of Nabucco, and another Caspian state to show strong support has been Azerbaijan. Nevertheless, they alone cannot produce enough gas to supply the pipeline, which leads many experts to highlight the importance of the participation of Turkmenistan and Kazakhstan, two of the biggest producers in the Central Asia region.

However, being politically friendly with Moscow and seeing China as a closer and potentially more lucrative export destination, Western diplomats have their work cut out in wooing these make-or-break states, Vladimer Papava, a former Georgian economic minister, told Georgian Business Week.

Politics aside, the economic viability of the project has been the biggest single obstacle to progress. Its original $4.4-billion budget has already been doubled, and final costs hover around $12 billion. Funding for the European section has also been an issue.

Six private sector companies have been involved in the creation of the parent company, Nabucco Gas Pipeline International GmbH.
So it is all the more surprising that Russia was flagged by a French official as potential supplier to Nabucco; an idea that was quickly shot down by a Russian envoy the following day. Knowing full well the political motives behind Nabucco, the Russians are happy to play up the cost of the project and its difficulties in sourcing gas, but in the face of renewed European interest and EU support, there is little else they can do to destabilize it, even if they wanted to.

By Ahmed Morsy

Download