[A-List] Caspian Geopolitics: Nabucco most expensive pipeline ever built

[Tony B.]

http://www.globalresearch.ca/index.php?context=va&aid=16783



January 5, 2010   A Message for Peace from Global Research





Caspian Sea Geopolitics: Nabucco will be the most expensive pipeline ever 
built


by Dr. John C.K. Daly



Global Research, January 5, 2010
Oilprice.com


Inside Beltwayistan, a number of Bushevik oil patch zombies still roam the 
recession-blasted landscape mindlessly chanting their Caspian mantra, 
“Happiness is multiple pipelines” - with the caveat that they flow westwards 
and bypass both Russia and Iran . They’ve now added a new word to their 
vocabulary, “Nabucco,” and worse, have bitten a number of Obama 
administration officials and visiting European politicians, who have joined 
their shuffling ranks.

Their thinking remains somewhat clouded by primordial memories of Bush’s 
“fuzzy math,” as the statistics about Nabucco are contradictory, to say the 
least. State Oil Company of the Azerbaijani Republic (SOCAR) vice president 
Elshad Nasirov is now threatening to start selling Azerbaijan ’s natural 
gas, currently Nabucco’s sole projected provider of throughput, to Asian 
countries if Europe further postpones Nabucco’s construction.

Construction of the 56-inch, 2,050-mile pipeline, first proposed in 2002, is 
tentatively slated to begin next year and scheduled for completion by 2014. 
At a cost initially estimated at $11.4 billion and rising, Nabucco will be 
the most expensive pipeline ever built, more than three times the cost of 
the 1,092-mile Baku-Tbilisi-Ceyhan (BTC) oil pipeline. Raising such a 
significant sum in a time of global recession would be an article of faith 
at best.

Even assuming that Nabucco’s boosters manage to assemble a coterie of 
deep-pocketed suckers – er, investors, the only promised current volume for 
Nabucco's proposed 31 billion cubic meters (bcm) annual throughput is 
Azerbaijan's future offshore Caspian Shah Deniz production, estimated at 8 
bcm. Even if Shah Deniz does end up supplying Nabucco, its currently 
promised throughput leaves a deficit of 23 bcm, leading to the question of 
exactly whose natural gas will Nabucco carry if SOCAR drops out, a worst 
case scenario requiring the Nabucco consortium to scrounge not 23 bcm, but 
all 31 bcm per annum, especially as Washington’s geopolitics invalidate the 
participation of either Russia or Iran?

For those with knowledge of energy history in the post-Soviet space, the 
419-mile, $500 million Odessa-Brody oil pipeline, completed in 2001, 
provides a cautionary tale to building pipelines without throughput 
guarantees. The Ukrainian government rashly built the self-financed line 
without foreign investment, stretching from its Black Sea port to the Polish 
border to provide Central Europe with oil despite not having firm 
commitments from a single oil producing nation for export throughputs. After 
the pipeline remained unused for three years, a reluctant Kiev was forced in 
2004 to agree to transport Russian oil southwards in the opposite direction, 
for export from Odessa rather than northwards to Central European markets as 
originally envisaged.

Further complicating the picture are the differing proposed transit and 
pricing policies of the countries that Nabucco will pass through. The 
biggest geographical hurdle impacting the bottom line is the fact that, if 
as some Nabucco boosters aver, Turkmenistan can be persuaded to contribute 
natural gas, the seabed of the Caspian has yet to definitively be delineated 
amongst the sea’s five riparian states. The question remains unresolved 18 
years after the implosion of the USSR dashed the 1920 and 1941 
Soviet-Iranian bilateral treaties covering the issue of offshore waters. 
Building a pipeline across seabed whose ownership is in dispute will enrich 
maritime lawyers, but few others.

The issue of competing claims over Caspian national waters and seabed is 
hardly a pedantic exercise. In July 2001 Iran dispatched military aircraft 
and a warship to intimidate two Azerbaijani survey vessels contracted by BP 
to leave the Alov-Araz-Sharg field, a site that Azerbaijan claimed was well 
within its national sector, but disputed by Iran . It seems unlikely Russia 
and Iran would stand idly by as trans-Caspian sub-sea pipelines, which 
exclude them, are constructed.

Hopes of Turkmen gas filling Nabucco’s gas deficits are yet more wishful 
thinking. Last month the Central Asia–China gas pipeline connecting 
Turkmenistan ’s Caspian shore natural gas fields to Xinjiang was inaugurated 
in the presence Chinese President Hu Jintao, Turkmenistan ’s Gurbanguly 
Berdymukhamedov , Kazakhstan ’s Nursultan Nazarbayev and Uzbekistan ’s Islam 
Karimov. This year 13 bcm are scheduled to transit the new pipeline, rising 
to 30 bcm by the end of 2011 and over 40 bcm by 2013, effectively soaking up 
Turkmenistan ’s projected natural gas increases for the foreseeable future. 
Any further gas from Kazakhstan , an even more distant proposition, would 
face the same geographical constraints as regards the Caspian, while Gazprom 
also soaks up its surplus natural gas production.

Which leaves any but the most deluded Eurocrats and Beltwayistan 
apparatchiks with an uncomfortable “fuzzy math” question – which of the five 
Caspian riparian states of Azerbaijan , Iran , Kazakhstan , Russia and 
Turkmenistan are going to provide Nabucco’s projected 31 bcm annual 
throughput?

But never mind – driving Nabucco is a complex skein of greed, European 
foreign policy agendas and the ongoing belief, a delusional legacy of the 
Bush administration, that somehow Caspian energy “belongs” to the West, and 
furthermore, that both Russia and Iran will complacently stand back while 
Western capitalism pulls off another energy initiative dwarfing BTC.

European interest in Nabucco is underpinned by the unpleasant realization 
that since 1991 it has become more and more dependent upon Russia for 
natural gas imports, with Russia ’s state monopoly Gazprom now supplying 40% 
of Europe ’s imports. As Moscow still largely relies on its Eastern European 
Soviet-era pipeline network, the annual winter spats between Moscow and Kiev 
over payment rates and transit have deeply traumatized Brussels to conduct a 
frantic search for alternatives in a desperate attempt to achieve energy 
security. Nabucco is designed to carry Caspian and Central Asian natural gas 
via Turkey and the Balkan states to Austria while bypassing both Russia and 
Ukraine .

A situation that can only worsen with time, as the EU’s European Commission 
projects that the EU’s gas consumption will increase by as much as 61 
percent from its current level of 502 bcm to 815 bcm by 2030.

The hard sell has now begun over Nabucco thus represents the answer to 
Eurocrats’ prayers. Nabucco’s consortium shareholders are Austria ’s OMV, 
Hungary ’s MOL, Bulgaria ’s Bulgargaz , Romania ’s Transgaz , Turkey ’s 
Botas and Germany ’s RWE with 16.7 percent apiece. Notably, none of the 
countries involved has any significant natural gas production of their own.

If Nabucco is to succeed, there is one potential supplier that could step 
into the supply void, but for Washington , it is a country too far – Iran . 
Iran contains 16 percent of the world's natural gas reserves, second only to 
Russia . Washington has clearly and repeatedly stated its opposition to 
including Iran in Nabucco, as last month U.S. Special Envoy for Eurasian 
Energy Richard Morningstar stated, "We have been constantly saying that, in 
our opinion, Iran is not in a position to become a part of any new projects 
in the Southern Corridor."

In response, speaking after a Dec. 8 Iran-UAE joint economic commission 
meeting in Tehran , Iran ’s Foreign Minister Manouchehr Mottaki bitingly 
observed, "We have never heard that Europeans have entrusted the Americans 
with their authority to decide on the pipeline." Motakki then added a blunt 
dose of reality, stating, "Speaking about the Nabucco pipeline without Iran 
's participation would amount to nothing but a pipeline void of gas." 
Mottaki’s comments echoed those of Russian Prime Minister Vladimir Putin, 
who said in March that Nabucco was not feasible without Iranian 
participation.

Nabucco also has its local critics. Azeri political scientist Ilgar Velizade 
has noted that Nabucco's high cost, now estimated at $11.8-13.1 billion, is 
simply untenable in the context of the current global financial crisis. 
Velizade consequently believes that the less expensive Poseidon pipeline 
option, which would deliver natural gas to Italy from Shah Deniz, could be 
as important for Europe, Azerbaijan and Turkey as Nabucco.

Are the Azeris serious, or are they just bluffing, hoping to stampede a 
tidal wave of investment cash into Nabucco? Hedging its bets, Baku is 
already exploring alternative markets for its gas. On Dec. 26 SOCAR 
President Rovnag Abdullayev said that while under the terms of an Oct. 14 
contract under whose terms Azerbaijan was to supply 500 million cubic meters 
(mcm) of gas to Russia beginning Jan. 1, his company would now double the 
amount to 1 bcm. While this represents a fraction of that promised to 
Nabucco, Gazprom has already indicated that it will happily purchase any 
increases in Azeri natural gas production at world prices.

Nabucco remains stoked by the increasingly passé ideological concerns of a 
Bush-era administrative legacy promoting pipelines bypassing both Russia and 
Iran further fuelled by Brussels’ fears of ongoing Ukrainian-Russian pricing 
spats disrupting deliveries as in years past. In the meantime, Moscow 
undoubtedly will press forward with its Nord Stream and South Stream gas 
pipelines alternatives in an attempt to reassure Europe that Russian 
pipelines bypassing Ukraine will alleviate future concerns about energy 
security.

The zombies have gotten their wish – Caspian energy now indeed does flow 
through new multiple pipelines. The only problem for the wizards of Wall 
Street and the City is that they now flow mostly eastwards, to China . As 
for Nabucco, what is Azeri for “expensive white elephant, son of 
Odessa-Brody?”

Dr. John C.K. Daly wrote this article for OilPrice.com who focus on Fossil 
Fuels, Alternative Energy, Metals, Oil Prices and <a 
href="http://www.oilprice.com/articles-geopolitics.php" 
target="new">Geopolitics</a>. To find out more visit their website at: 
http://www.oilprice.com

 Global Research Articles by John C.K. Daly