Summit urges diversification to secure Europe's gas

By AFP

July 15, 2010 Updated Apr 25, 2009 at 2:01 PM CDT

Seeking to secure Europe's energy supplies, gas producer, consumer and transit countries Saturday urged greater cooperation and diversification of gas sources, at the end of a two-day summit in Sofia.

The leaders from 28 European, Caspian and Central Asian countries failed however to iron out difficulties over the supply of two major new pipeline projects -- the EU's Nabucco and the Russia-backed South Stream.

In a common declaration, they called for the "rapid development of international gas infrastructure, pipelines, liquefied natural gas terminals and strategic storages to guarantee diversification of gas supplies to Europe in a sustainable and viable way."

To achieve this, "a working and lasting bond of co-operation between producer, transit and consumer countries" had to be developed, they added.

But officials recognised on the sidelines that clashing opinions were far from being reconciled.

The summit followed a Russia-Ukraine price row in January that cut off gas supplies across Europe.

Noting that Europe's demand for imported natural gas would increase over the next 20 years, the summit steered away from specifically endorsing the two projects already under way.

But the rival EU-backed Nabucco and Moscow-backed South Stream pipelines nevertheless took centre stage in all discussions at the summit.

The 3,300-kilometre (2,000 mile) Nabucco pipeline aims to wean Europe off its dependence on Russian supplies by channeling natural gas from the Caspian region and Central Asia via Turkey and Austria to Western Europe.

The six Nabucco countries -- Austria, Hungary, Romania, Bulgaria, Turkey and Germany -- are expected to sign an intergovernmental agreement on the project by June, officials said Friday.

The rival South Stream project of Russian gas giant Gazprom and Italy's Eni is meanwhile seen as strengthening Russia's grip on Europe, allowing Moscow to bypass contentious Ukraine and pump gas directly to Europe via an alternative route under the Black Sea.

But while most Balkan states at the summit supported both projects in an attempt to diversify their supplies and pocket hefty transit fees, analyst Jacques Percebois of France's Montpellier University said "the current context of scanty cash" made it highly improbable to have both.

The summit had noted that huge amounts of funding would have to be poured into new pipelines to serve Europe's soaring demand.

Moreover, with both projects relying on gas supplies from the Caspian region and the Middle East, competition has grown fierce between producers as Brussels and Moscow also intensified efforts to woo potential suppliers to their side.

"There will not be enough gas to feed both pipelines," Colette Lewiner, another analyst from French agency Capgemini added.

"They talk about Iranian gas for Nabucco but this is highly unlikely to happen," she added, noting the current political situation in Iran.

However, Richard Morningstar, US special envoy for Eurasian energy, the first official in President Barack Obama's administration to confirm Washington's backing for Nabucco, said that he did not exclude Iran from the list of potential suppliers for the project.

"Obviously right now gas from Iran creates some difficulties with the United States as well as with other countries," he told journalists Saturday.

"We reached out to Iran, we want to engage with Iran, but it also takes two to go to the dance and we're hoping there will be positive responses from Iran," he added.

Lewiner also said that the EU project -- which Nabucco opponents call "an empty pipe" -- "lacks clear agreements with its potential suppliers of gas."

Russia's Energy Minister Sergei Shmatko assured Friday that Russia could find the gas to feed South Stream and also offer better gas prices than Nabucco.

But he failed to ease the United States' concern on the Moscow-back project.

"We have doubts about South Stream.... We do have serious questions," Morningstar said.

Analysts meanwhile added that apart from political wrangling, lack of clear financial commitments to the costly and technically complex projects also severely stalled progress on both South Stream and Nabucco.

And this would most probably push their opening beyond the 2014 deadlines, they said.

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