By John Helmer in Moscow
The President of Turkmenistan, Gurbanguly Berdimuhamedov, said Friday his country is interested in diversifying gas export routes, and will participate in the Nabucco project. His statement came ahead of the signing on Monday of an intergovernmental agreement between Austria, Turkey, Hungary, and Romania to build the 3,300-km pipeline across their territories. It’s one thing to agree to sign up in favour of studying the construction and economics of the pipeline; but none of the signatories is rich or anti-Russian enough to bid up the price of the gas to make piping the Nabucco way profitable.
Several sources of gas supply for the 31 billion cubic metre-capacity gas route are available — Azerbaijan, Turkmenistan, Iran, Kazakhstan, and Uzbekistan. However, Gazprom has been negotiating first-refusal gas purchase agreements with Azerbaijan and Turkmenistan in order to lower the gas volume available to make Nabucco economically feasible to operate. The suppliers understand that if Gazprom takes this pricing risk up front, Nabucco won’t be built, and Gazprom’s alternative pipeline to the same countries — South Stream, under the Black Sea — will put a handy safety net under the suppliers’ long-term revenue projections. They also understand that the only way to persuade Gazprom to do something as costly as this is to make the Nabucco option look even more costly.
The arithmetic can be done on one hand; the strategizing with two fingers and a thumb.
Turkmenistan’s projected gas output to the year 2015 is between 100 billion cubic metres per annum to 120 bcmpa. It is the largest of Central Asia’s producers, with the smallest domestic demand. Internal consumption is 16 bcmpa; gas export obligations to Russia and China are 50 bcmpa (with the possibility to increase supplies to 70 bcmpa) and 40 bcmpa, respectively. If Turkmenistan reaches peak capacity and meets its obligations, there would be no gas left for export through Nabucco.
By contrast, Gazprom’s South Stream pipeline will be shorter at 902-km, and bigger in capacity at 63 bcmpa. It will run to Bulgaria, and then divide into a 1,300-km branch to Austria and Hungary, and a 990-km branch to Greece. The consuming countries can count on the extra deliveries, whichever pipeline is built to deliver it. All they must do in the meantime is to pay as little as possible for construction, and hope the price will stay down. For this, they too need to stir the appearance of competition among suppliers.
In Moscow, the latest Turkmen attempt to demonstrate a future free hand to cut Russian supplies in favour of Nabucco is interpreted as a ploy to keep artificially high the price Gazprom will pay for the gas in the meantime.