US-Russia race for Balkan pipeline access?

Azerbaijan’s Foreign Minister Elmar Mamediarov and US Secretary of State Condoleezza Rice signed a memorandum of understanding on energy cooperation in Washington March 22. Azerbaijan announced it is seeking political support from the US to build new gas export pipelines, amid rising competition with Russia. Azeri news agency APA quoted US Deputy Assistant Secretary of State Matthew Bryza as saying the memorandum will express support for “new generation” pipelines to carry gas from the Caspian Sea to European markets.

“In order for Azerbaijan to become a major alternative source of gas supplies to Europe, the pipelines that would connect it with Greece and Italy should be commissioned soon,” the agency quoted Bryza as saying.

US firms such as ExxonMobil and Chevron have already invested billions of dollars in oil and gas fields and new export routes for Azerbaijan and fellow Caspian Sea state Kazakhstan. The US-backed Baku-Ceyhan oil pipeline, the first link on the territory of the former Soviet Union to bypass Russia, will soon reach full capacity, pumping one million barrels per day of Azeri crude to the Turkish Mediterranean port of Ceyhan.

But Azerbaijan’s other top project, the Shakh Deniz gas field and a pipeline has faced delays due to technical challenges and political obstacles. The field missed its start-up target of end-2006, forcing Turkey and Georgia to secure alternative gas supplies.

The Shakh Deniz project, led by BP and Norway’s Statoil, is slated to deliver gas via a planned pipeline running through Turkey, Bulgaria and Greece. The plan, part of the so-called Nabucco project, is key to Europe’s energy diversification plans away from the continent’s growing reliance on Russia.

Russian gas monopoly Gazprom has said it wants to increase its European market share and will expand its Blue Stream pipeline to Turkey to ship more gas to Europe along the same Nabucco route.

The US has suggested Kazakhstan link up to the Nabucco project by building a new pipeline under the Caspian Sea, but Russia can block the plan at any moment as international law gives such a right to any of the five Caspian littoral states.

Analysts say piping Russian gas to Europe via Turkey would be less immediately profitable then traditional routes via Ukraine or Belarus but would have strategic logic because it could block the advance of Central Asian gas to Europe. (Reuters via Turkish Daily News, March 22)

Russia is also seeking a trans-Balkan pipeline to deliver Black Sea oil, the head of Russia’s state pipeline operator announced March 22. “All players on the Black Sea oil market will use the Burgas-Alexandrupolis pipeline,” Transneft CEO Semyon Vainshtok told a press conference following the signing between Russia, Greece and Bulgaria of an agreement on the construction and operation of a trans-Balkan pipeline. He said that drafting a feasibility study and lining up international investors would take “much less than a year or two.”

Vainshtok refused to disclose the exact cost of the project, but sai “it will be cheaper than the construction of the Baku-Ceyhan pipeline,” which project operator BP said cost about $4 billion. (RIA Novosti, March 15)

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