Last week I discussed Turkey's role as oil and gas transit country and its aspiration to increase this role in the future. While this role will indeed increase with the completion of the projects under construction such as the Turkey-Greece gas pipeline and its extension to Italy, the Russian South Stream Pipeline and the Samsun- Ceyhan crude oil pipeline, while the Nabucco gas pipeline is still some time away from being firm.

The project has been in consideration since 2002 and the agreement between Turkey, Romania, Bulgaria, Hungary and Austria was signed in Ankara on July 13 last year to deliver gas from the Caspian and Middle East regions to Austria and feeding countries of the European Union. The European Union has sponsored this project with the support of the US to improve energy security for Europe by reducing its Russian gas dependence.

The final investment decision is not yet made and the proposed 2015 deadline for project completion is now slipping. The main source of Nabucco's supply will be the second stage of the Shah Deniz gas field development in Azerbaijan, now believed to be coming on-stream in 2017. However, this source can only supply 8 billion cubic metres (bcm) of natural gas per year and Turkmenistan would provide for 10 bcm of gas per year. But there seems to be a problem with supplies from Turkmenistan as the problems of delineation of the Caspian Sea are far from resolved between the coastal states in addition to problems between Azerbaijan and Turkmenistan.

Technical problems

There are some technical problems of how to deliver Turkmenistan gas across the sea. At some stage it was thought the gas could be transported through Iran but this option is now unacceptable just like Iranian gas.

Egypt could provide 3-5 bcm of natural gas through the Arab Gas Pipeline, which is now connected to Turkey north of Aleppo. To make up for the 31 bcm a year, the Austrian OMV Group and Hungarian MOL Plc signed an agreement with the local government in the north of Iraq without consulting the government in Baghdad. The two companies are now blacklisted by Baghdad. But Iraqi gas could be imported through an existing agreement for Iraq to connect to the Arab Gas Pipeline.

Turkey has many times backed supplies from Iran, but the European Union and the United States have objected. Of course the Nabucco partners do not mind Russian gas supplies but the Russians insist that their South Stream line is more competitive. They are unlikely to cooperate because they believe Nabucco is intended to undermine their position in Europe.

All these raise questions if supplies are sufficient to make the project viable. At the same time Turkmenistan could become more interested eastwards. It has recently concluded a deal to export about 30 bcm of gas a year to Russia thus enabling it to free up more Russian gas for export. Turkmenistan also exports gas to Iran and has committed supplies to China. Unless it dramatically increases production, Turkmenistan does not need the westward pipelines. The gas demand in the East is growing fast and the success of the recent pipelines in that direction such as the opening of the central Asia to China gas pipeline might encourage more gas pipelines which may become easier to implement than Nabucco.

Transit country

Of course Turkey is very keen on the project especially if it can tap some supplies for its territory on the pipeline route where there is no gas supply yet. Turkey is reported to have asked for up to 15 per cent of the gas to be carried by the Nabucco pipeline. At the same time the project would strengthen its position as a transit country or as a future hub in addition to the transit revenue it would generate.

Europe's gas demand is projected to increase from 502 bcm in 2005 to 815 bcm in 2030 and therefore it should not consider Nabucco as an alternative to Russian supplies but a complementary source. Therefore it should allay Russian fears by not politicising the Nabucco too much. It would be wise not to rule out future supplies from any country and also to try and bring in Qatar supplies through Iraq to the project.

Given the above, I believe that Nabucco may be further delayed until some time when some of the above problems are resolved.

The writer is former head of Energy Studies Department at the Opec Secretariat in Vienna.