EU bid to wean itself off Russian gas: Nabucco pipeline

After two consecutive winters that saw Russia briefly disrupt energy supplies to Europe, the European Union has intensified plans to tap directly into Central Asia's natural gas, bypassing Russian involvement.

But Russia last weekend appeared to deal a significant blow to the EU's proposed Nabucco gas pipeline when President Vladimir Putin secured a deal in Turkmenistan for a pipeline that would run north from the Caspian Sea through Russia. Moscow, which buys Turkmen gas at below-market rates, is likely to sell the Caspian gas to Europe at a substantial markup.

"I think the EU's political people will try to play it down, but ... for Nabucco, this definitely is a huge loss," says Zeyno Baran, a Central Asia expert at the conservative Hudson Institute in Washington.

The deal follows renewed attempts in recent months from EU leaders – who will meet with Mr. Putin Friday in the southern Russian city of Samara for a two-day summit – to define a unified energy-security policy. That policy, some analysts say, hinges on Nabucco and on becoming less dependent on Russia, the world's largest exporter of natural gas, which annually supplies 25 to 40 percent of Europe's natural gas.

Russia is countering the EU's efforts with moves of its own. Gazprom, the state-run energy giant that produces more than 90 percent of Russia's gas and owns most of the country's pipelines, has spent this year securing new long-term supply contracts with European energy distributors and buying into European pipeline networks.

Putin is reaching out to EU countries along the Nabucco line, trying to turn their support to a Russian alternative, an extension of Gazprom's so-called Blue Stream pipeline that would run essentially parallel to Nabucco from Turkey to Hungary. The Hungarian government in late March broke with Brussels and said it would consider supporting Blue Stream.

Nabucco 'neither dead nor delayed,' say project overseers

But despite Russian efforts to undermine the $6 billion Nabucco pipeline, which enters its engineering phase next month, the project has not been derailed, says the five-member consortium behind it.

"It is neither dead nor is it delayed. Our main activities are on schedule," says Reinhard Mitschek, Nabucco's managing director. "Due to the variety of potential gas sources, single events and done deals between other market players will not jeopardize the project."

Nabucco, which is overseen by a consortium of five European energy companies – one from each of the five countries the pipeline would cross – is scheduled to break ground in 2009 and involves several construction phases. The pipeline is expected to be on line by 2012, pumping gas in an initial phase between Turkey's borders with Georgia and Iran along a 2,050-mile route through Turkey, Bulgaria, Romania, and Hungary before ending in Austria, which would then distribute the gas across other European networks.

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