Central Asian Gas Not a Panacea for Europe

Sourcing more natural gas from the ‘Stans’ looks like a way for Europe to lessen its reliance on Russia, but there are plenty of roadblocks

For several reasons, not the least of which is strident competition from Russia, a meaningful EU-Central Asia energy partnership is unlikely.
Today, nearly all the gas that leaves the Stans goes through Russia. The EU’s best near-term hope for securing direct Central Asian imports in the coming decades is the Nabucco pipeline. Unfortunately, though, it looks more like a pipe dream than a reality.

One of Europe’s most expensive and complicated energy proposals, Nabucco aims to bring in gas from Azerbaijan and Central Asia (primarily from Turkmenistan) via Turkey, bypassing Russia. The project has progressed glacially since its inception in 2002, but this year’s gas crisis has reinvigorated political will to realize Nabucco by 2013. The EU held a Nabucco summit 27 January in Budapest, where Czech Prime Minister Mirek Topolanek called the pipeline “of paramount importance to the freedom of the continent.”

But not a single section of the pipeline has been built, several rival, Moscow-backed projects seem to undermine the economics of Nabucco – the projected cost of which has skyrocketed to $10 billion or more – and neither Azerbaijan nor Turkmenistan has explicitly committed to supply the gas, although Azeri President Ilham Aliev said in Budapest he supports the project.

Furthermore, even if the Stans sign on, these governments have already inked separate, large-scale transit and supply deals with Russia and China that have committed much of their harvestable gas to these two countries through the next decade.

There’s concern that “there’s not enough gas available in Central Asia to support Nabucco,” the EU official said. “Central Asian countries have already sold much of their gas to Gazprom, so it’s unclear how much they could contribute.”

Business Week