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EU set to act on Caspian pipeline plan

European governments are attempting to revive a stalled effort to beat Russia’s effort to bring Central Asia’s vast natural gas reserves to Europe.

A move to give Brussels the power to negotiate a pipeline deal with Azerbaijan and Turkmenistan is expected to be agreed at a meeting of European Union ministers on Monday.

If approved, it will be the first time the bloc’s 27 member states have given the European Commission the power to agree an external energy treaty on their behalf.

The unprecedented ceding of power is the latest sign of how concerned the EU has become over its reliance on Russia, which supplies about a quarter of its gas.

The scheme is the cornerstone of the EU’s strategy to break that dependence and has long been one of the highest priorities of José Manuel Barroso, the Commission president.

The Commission has been holding informal talks with Turkmenistan for two years in the hope of convincing the country to commit some of its gas reserves to the west.

Doing so would require the construction of a pipeline under the Caspian Sea to Azerbaijan, which has already pledged to send gas to Europe.

Previous efforts to develop a trans-Caspian link have been frustrated by territorial disputes between the two central Asian countries as well as Russian objections.

The EU’s members, who have traditionally cut their own deals with the Kremlin and other energy exporters, have long been wary of ceding authority to Brussels on energy policy. Yet they appear willing to do so now in order to demonstrate to Turkmenistan, which is also being courted by Russia and China, that Europe is committed to a closer partnership.

Günther Oettinger, the EU’s energy commissioner, called the member states’ decision a “milestone”, adding: “After all, it is Europe and not only one single country that will benefit from Caspian gas.”

If the project advances, then it could provide a much-needed boost to Nabucco, a 3,900-kilometre pipeline that aims to carry gas from Azerbaijan to Austria via Turkey, intentionally skirting Russian territory. Gazprom, Russia’s state-controlled gas export monopoly, has been charging ahead with a rival pipeline, called South Stream.

In spite of the Commission’s backing, Nabucco has been plagued by doubts about whether its backers will be able to win access to enough gas to make it commercially viable – particularly in its early years. It boasts an annual capacity of 31bn cubic metres.

Two smaller and less-expensive projects – the Trans-Adriatic Pipeline and the Interconnector-Turkey-Greece-Italy – are also vying for a share of roughly 20bcm that Azerbaijan has pledged to direct to a southern corridor of European pipelines.

That contest is intensifying as an October 1 deadline draws near for the parties to submit tariff proposals to the consortium developing the second phase of Azerbaijan’s Shah Deniz field. The group, which includes Britain’s BP, Norway’s Statoil, France’s Total and the Azeri-owned Socar, could make its decision before the end of the year. .

Nabucco’s backers believe that an additional 10bcm per year from Turkmenistan would brighten the project’s outlook. That is a fraction of the central Asian country’s 8,000bcm in proved reserves, according to BP estimates.

Commission officials believe that the trans-Caspian link could eventually carry supplies from other parts of the region.

Source: The Financial Times

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