Turkey needs suppliers to fuel energy hub role
Can Turkey live up to its own rhetoric of being an energy hub? According to Joschka Fischer, the former German foreign minister now advising the Nabucco consortium, it all hinges on the pipeline planned to bring Caspian gas to Europe.
“The only project with the capability of opening the southern corridor [from Europe to the Caspian] is Nabucco,” Mr Fischer told a conference in Istanbul on Thursday, arguing Turkey’s future “as a hub, with political power” depended on its completion.
But three projects are on the drawing board. Nabucco, an ambitious scheme to pipe up to 30bn cubic metres of gas to central Europe, is competing for supplies with two simpler schemes using Turkey’s existing infrastructure: the ITGI project to connect Azerbaijan to Greece and Italy, and the TAP project linking Albania to Italy.
Although Nabucco aims eventually to bring gas from Turkmenistan, Iraq and even Iran, none of the three projects will get off the ground without supplies from Azerbaijan’s Shah Deniz II fields, set to come online in 2016 and produce up to 16bcm a year.
“Only one [pipeline project] will receive them,” notes Ana Jelenkovic, analyst at the Eurasia Group political risk consultancy.
Agreements between Baku and Ankara pencilled on Monday may determine which of the projects wins out. The neighbours signed MoUs which, once details are finalised, will set transit tariffs for gas shipped across Turkey, and decide if Shah Deniz II gas sold to Greece will be marketed by Azerbaijan, or sold on by Turkey.
“The impact on Nabucco of the final terms reached… is indirect, but crucial, as it will enable Azerbaijan to define the economics of using ITGI and TAP and compare them with the economics of transiting gas through Nabucco,” Ms Jelenkovic writes.
But Europe’s willingness to back Nabucco may be wavering as the urgency of tapping new supplies lessens. Gas consumption could take years to match pre-crisis levels; North African supplies will rise; and the EU may opt for gradual improvements over grand schemes: increased storage, reverse flow capabilities, small interconnectors.
Katinka Barysch at the Centre for European Reform notes that US exploitation of shale gas has changed the global market. Europe, unlikely to match the US shale gas boom, is now the only big buyer of liquefied natural gas.
“LNG imports mean more competition in a market hitherto dominated by 30-year contracts with fixed volumes and prices linked to the international oil price… Gazprom and other suppliers will have to make a bigger effort to be cheap and reliable,” she writes.
Where does this leave Turkey, which has always relied on its geostrategic position between western markets and their suppliers: Russia, the Caspian, Iran and Iraq?
Ankara is certainly juggling plenty of projects. Besides Nabucco, ITGI and TAP, Russia is looking at routing its South Stream gas pipeline – a rival to Nabucco – through Turkish territory. Moscow is also backing a pipeline intended to cut traffic through the Bosphorus, and preparing to build Turkey’s first nuclear power plant.
But being an energy hub “is not having pipelines criss-crossing your territory,” said Mehmet Ogutcu, an energy analyst who tangled with Mr Fischer at Thursday’s conference. Turkey’s first priority must be to secure its own supply, he said. The key to finding gas to fill Nabucco lay in Turkmenistan, but “East of Baku, the EU and the US are small powers. There Russia and China speak, and they speak loud,” he added.