The great pipeline game across the Eurasian landmass continues. The latest moves put the Russians ahead with their South Stream pipeline project gaining more traction, while Europe's hopes to build the Nabucco pipeline seem stuck in the mud.
Russia scored a minor coup on Jan. 29 when Russian gas giant, Gazprom, and the state-owned Hungarian Development Bank signed a deal to create a company to build the Hungarian section of the South Stream pipeline.
Hungary joined the Russian-led project (Italy's Eni is involved as well) in February 2008.
They aren't alone in teaming up with the Russians in the project.
Greece, Bulgaria, Serbia and Slovenia are also on board, and reports say Austria is expected to join soon, too.
Crucially, Turkey is in too, playing Moscow off Brussels beautifully.
At the same time, an executive at Austria's OMV has made an eye-opening statement, saying the Nabucco gas pipeline will not be built if an open season bidding process for capacity this year shows demand is too low.
Werner Auli, OMV's head of oil and gas, was talking the type of turkey you don't hear at Nabucco consortium headquarters in Vienna.
"We will start the open season process this year, then we will get enough demand or not," Auli told an Energy Exchange gas conference in Vienna.
"If not, Nabucco will not be built, this is very simple. We are a commercial company, we are not an institution. If the demand is not there, we will not build the pipeline," he said.
A Nabucco survey of potential customers in 2008 showed demand is more than enough.
But analysts have questioned whether future gas demand will be high enough to make the 7.9 billion euro ($11 billion) project worthwhile.
The International Energy Agency said in November that the global gas market is likely to remain oversupplied until 2015 and rise by an average of 1.5 percent per year in the period to 2030.
If Russia is feeling smug, maybe they shouldn't.
The Russian daily, Kommersant, has reported Gazprom is chewing its cuticles, worrying it could lose markets due to an unexpected surge in U.S. gas production.
This, according to Kommersant, is due to a U.S. "revolution" in shale gas extraction.
The Russian daily cites a Gazprom document as saying:
"If several years ago not a single organisation known to us was forecasting the rapid growth of gas extraction in the United States, today practically all companies are discussing the prospects of shale gas extraction, which could fundamentally reshape the whole world gas market."
The Americans apparently are already creeping up on the Russians.
AFP quotes a U.S. Department of Energy as saying Russian gas production declined in 2009, while U.S. production grew 3.7 percent.
A source close to Gazprom's board told Kommersant the company may reconsider plans to invest heavily in the Shtokman field, a project originally aimed at serving the United States and Canada, due to the rise in US production.
Russia may be ahead now, but the gas race is far from over.
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