Expanding the Pipelines

The Nabucco pipeline, Europe's leading competitor, is now trying to expand their connections to other parts. Backed by the European Union, Nabucco won on $5 billion in loans from the World Bank, the European Investment Bank and the European Bank for Reconstruction and Development. Although granted the money, this new project by Nabucco is not set in stone. They still wait on RWE of Germany and OMV of Austria'a decision on whether or not they plan to invest. RWE would like to build the Turkish part of the project. But Turkey is considering a public tender in which local firms would get a share of the profit. Another problem is the source of gas. Nabucco needs 8 billion cubic meters per year from Azerbaijan, but it wants a lot more. Nabucco is also competing with Russia for Azeri gas; their goal is to bring Azeri gas to southern Italy via Turkey and Greece. Although Russia is not so popular in the energy spector, they continue to gain supportors, from Germany for instance. The Nord Stream pipeline on the Baltic seabed is being built which will bring gas from Russia directly to Germany. It will reduce dependence on transit countries such as Belarus and Ukraine. Russia’s new gas contract with Poland could tie that country to supplies from the east until 2037.

There is also a new plan to create the Azerbaijan-Georgia-Romania Interconnector (AGRI), which aims to use an existing trans-Caucasus pipeline, and then tankers across the Black Sea. This might use liquefied natural gas (LNG), or cheaper (but untried) compression technology. From the Romanian port of Constanta, it would then go through an existing pipeline to Hungary. AGRI will not carry as much gas as Nabucco’s planned annual target but it's cheaper to build, costing around $1 billion and will save on Turkish transit fees. The expansion of interconnecting pipelines will continue to bring energy throughout Europe while also decreasing dependence on Russia's pipeline. With the new technology used for this project, the market should be able to improve.

-Kelsey Tomlinson
http://www.economist.com/node/17260657?story_id=17260657