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EU must avoid TAP versus Nabucco squabble-energy chief

Thu, 18th Apr 2013 13:32

* Shah Deniz consortium to decide in June in Azeri gaspipeline

* EU foreign ministers to debate energy security

* Oettinger says EU must show 'solidarity'

By Barbara Lewis and Justyna Pawlak

BRUSSELS, April 18 (Reuters) - EU ministers must avoidfruitless debate over which of two rival pipeline projects isthe way to cut reliance on Russian gas and both pipelines couldbe built one day, EU Energy Commissioner Guenther Oettinger saidin a letter seen by Reuters.

The EU executive is anxious to present a united front, whiledominant supplier Russia attempts a divide-and-rule strategy bynegotiating gas supplies with individual EU member states withconflicting interests.

The bloc has been seeking to bring in non-Russian gas toimprove energy security after pricing spats between Russia andthe Ukraine disrupted some exports to the European Union.

It is looking to the giant Shah Deniz gas field inAzerbaijan as a near-term solution and in June, the Shah Denizconsortium is expected to choose one of the two pipelines vyingto ship its gas -- Nabucco West or the Trans Adriatic Pipeline(TAP).

"What we most need to avoid is a discussion on the relativemerits of Nabucco West and TAP," Oettinger wrote in a letter toEU foreign affairs chief Catherine Ashton, warning that couldlead to "a needless split in European solidarity".

"Current independent forecasts suggest that additionalimport capacities will be needed, so that both projects couldeventually be realised."

The European Commission, the EU executive, was long regardedas pro-Nabucco, but its official stance is that it favoursneither project and aims only to diversify supplies to improveenergy security.

EU foreign ministers will debate the issue along with otheraspects of energy security at a meeting in Luxembourg on Monday.

A briefing note to ministers points, for example, to theneed to use energy cooperation to forge closer political ties inthe volatile areas of the Caucasus, central Asia and the MiddleEast.

SHAH DENIZ DECISION

Russia, angry over Europe's efforts to diversify, suppliesaround 30 percent of all EU gas imports, including nearly 100percent in some EU states.

Relations have been further soured by EU efforts to enforcea law that obliges Russia to sell off infrastructure and an EUcompetition case against Russia's gas export monopoly Gazprom.

The briefing note for Monday's meeting, also seen byReuters, says it is up to the "commercial actors" in the ShahDeniz consortium to decide.

But, it says, "one of the criteria for that decision is theextent to which a pipeline contributes to European Union policyobjectives".

The Nabucco West project slices through the mostRussian-reliant regions of central and Eastern Europe.

It would ship gas from Turkey's western border via Bulgaria,Romania, Hungary and into the Baumgarten hub in Austria.

Analysts say the advantages of TAP, which would run throughAlbania and Greece into Italy, include a less state-dominatedshareholder structure and it has appeal in debt-ridden Greece asa private sector injection of capital and jobs.

TAP's shareholders are Swiss energy company Axpo,Norway's Statoil and Germany's E.ON Ruhrgas. Its rival Nabucco West includes Austria's OMV, Hungary's MOL, Turkey's Botas and Romania'sTransgaz. RWE sold its stake to OMV.

Shareholders in Nabucco West are in talks to add at leastone other European company to the project.

The Shah Deniz consortium, which comprises BP,Statoil, Azeri energy company SOCAR and Total, has a50-percent equity option in both TAP and Nabucco.

Production from the second phase of the giant Shah Deniz gasfield is expected to begin in 2018 or 2019 and rise to 16billion cubic metres (bcm) per year, with 10 bcm earmarked forEurope and 6 bcm for Turkey.

Russia's response to Nabucco and TAP is the massive SouthStream project to bypass Ukraine and carry around 60 bcm.

The note to EU foreign ministers says that should thisproject eventually go ahead, the aim would be for it to be "infull compliance with European Union law."

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