Saturday, March 20, 2010

Pipeline Puzzle: Italians Proving Dubious Kremlin Partners

So much for cooperation. Russia has been chided for using its energy riches to hold a trembling Europe hostage with a gas nozzle at its head.  Bent on proving its friendly intentions, however, Russia has reached out to European partners to share in the hoped for riches of two ambitious pipeline projects.  Now, one of them, Italy's Eni, is giving the Russians headaches, by proposing the rival Nabucco project and Russian-led South Stream pipeline could somehow be fused.  The Russians are apopletic over the Italians crooning for Nabucco meant to cut the Russians down in the energy sweepstakes.  "We are not discussing such things at all," Energy Minister Sergei Shmatko said in comments carried by Russian news agencies. "For European consumers, the more gas the better."
Paolo Scaroni, chief executive of Eni, made his intriguing remarks to an appreciative audience at an energy conference in Houston, Texas. 

"These pipelines are not alternatives, they are complementary.... What we have here is what investment bankers would call a strategic fit," Scaroni said, according to the text of the March 9 speech published on the Eni website.

"Should all partners decide to merge the two pipelines for part of the route, we would reduce investments, operational costs and increase overall returns," he said.

Hm, isn't that the same Nabucco pipeline sent to slay the Russian energy dragon.  Yes, it is. 

This Economist video quite clearly lays out the logic. 

So, for Europe, Nabucco is nice insurance.  For the Russians, it is a threat, meant to cut down their market share. 

Therefore, it's not suprising the Russians weren't elated with Scaroni's stream of thought. 

Shmatko insisted that South Stream remained the most competitive project as it had already signed the appropriate agreements and did not have to worry about where the gas for the pipeline would come from.

Shmatko's comments were tame compared to what an anonymous source at Gazprom told the Russian edition of the weekly, Newsweek, describing them as a "betrayal." 

"Until now Eni was Gazprom's partner in South Stream and the only true ally in its fight against Nabucco," the weekly said.

As the Informant has noted, Eni has been Russia's forgotten partner on South Stream. 

And it's not alone. 

In December, France's power group EDF agreed with Russia to take a stake in the project.

But, you argue, Gazprom still calls the shots with its majority stake?

Well, Gazprom deputy CEO Alexander Medvedev said Tuesday in an interview to Bloomberg that his company could reduce its stake below 50 percent to allow EDF in.

But after Scaroni's remarks, the Russians may rethink that idea.

However, Scaroni may not be singing out of tune. 

A top EU commissioner said on March 2, that the EU could back both Nabucco and South Stream.

"South Stream could be backed by the European Commission on condition that it meets the technical requirements for security," Commissioner Gunther Oettinger said on the sidelines of an energy forum in Bulgaria.

"South Stream will increase the capacity for gas imports (to Europe) and set up a new infrastructure supply network," Oettinger told the AFP news agency.

The "security" issue, could make Oettinger's statement nothing more than a throw-away remark.  Hard to image the EU's 27 nations -- especially its Russophobe eastern European members -- going along with that.

Meanwhile, Nabucco says it is lining up the gas it will need to make that project viable.

Werner Auli, the head of Austria's oil and gas concern OMV, leading the Nabucco project, says Azerbaijan, Turkmenistan and Iraq intend to supply gas to the Washington-backed pipeline. 

He was speaking on March 18 at an energy conference in Ankara, Turkey.

On the same day, Teodor Baconschi, the foreign minister of Romania one of those pesky nations from Russia's standpoint, was in Azerbaijan to discuss energy politics with his Azeri counterpart, Elmar Mammadyarov. 

Baconschi said his country backed Nabucco - not surprising - and the Azerbaijan-Georgia-Romania energy corridor -- more interesting.

The two ministers confirmed this project had been discussed.

What is this project you say?

It would take natural gas from Azerbaijan to Romania. 

Along the way, the fuel would be liquefied at LNG stations on Georgia's Black Sea coast. 

In that form, it would be shipped by special tankers across the Black Sea to the port of Constance, in Romania. 

Whether this idea will remain just that or join the scrap heap of the dozens of other proposals remains to be seen. 

All the energy put into talks and proposals, however, could probably power Europe for decades. 

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