May 26, 2011 / 11:08 AM / 7 years ago

Turkmenistan urged to commit gas for Nabucco

* Window for Nabucco supplies closing - source

* Turkmen gas needed to supplement Azeri supplies

* Turkmenistan, Azerbaijan mull trans-Caspian link

By Dmitry Solovyov

TURKMENBASHI, Turkmenistan, May 26 (Reuters) - Turkmenistan must commit this year to building a trans-Caspian gas pipeline in order to join a supply network designed to cut Europe’s dependency on Russian fuel, an industry source said on Thursday. An undersea pipeline to deliver gas to Azerbaijan and onward would allow Turkmenistan, holder of the world’s fourth-largest natural gas reserves, to become a major supplier to European markets via the planned Nabucco pipeline. A senior industry source familiar with the Nabucco project, speaking on condition of anonymity, said Turkmenistan should offer a firm proposal to supply gas before partners in the project ink a deal with the Shah Deniz consortium in Azerbaijan.

“The message is that the window of opportunity for defining the size of Nabucco will close at the end of this year,” the source said. “This is a message which is more or less aligned with the Shah Deniz project.”

The European Union-backed Nabucco project intends to cut the continent’s reliance on Russian gas supplies by delivering up to 31 billion cubic metres (bcm) annually from the Caspian region to an Austrian hub. Supplies are scheduled to begin in 2017.

The project, which its backers said this month would overshoot its target 7.9 billion-euro construction cost, aims to secure up to 10 bcm in annual supplies from the lucrative second phase of the Shah Deniz field in the Azeri part of the Caspian. But Nabucco would also need Turkmen gas to reach its full potential. Turkmen President Kurbanguly Berdymukhamedov last year indicated his willingness to build a pipeline to Azerbaijan but a final agreement has yet to be concluded.

“We need political alignment between Turkmenistan and Azerbaijan as the basis for all further steps,” the source said.

Shah Deniz is being developed by BP (BP.L), Statoil (STL.OL) and Azeri state energy company SOCAR, whose president said in March that he hoped to conclude a transit deal with Turkey and partners before the end of 2011. [ID:nANT656584]

    Azerbaijan has been in talks with more than 20 firms and consortiums looking to buy gas from Shah Deniz II. Russia, keen to preserve its dominance in European gas markets and seeking to develop its rival South Stream project, is a potential buyer.

    DIVERSIFYING ROUTES

    Turkmenistan, a reclusive Central Asian republic where the president’s word is final, plans to more than treble gas output to 230 bcm annually by 2030, of which 180 bcm will be exported.

    Much of this additional gas will come from South Iolotan, a field in the country’s east that its British auditors expect soon to confirm as the world’s second-largest. [ID:nLDE74O23A]

    The desert nation, which has moved out of the shadow of Soviet-era master Russia by building new supply routes to China and Iran, has said it could potentially supply up to 40 bcm of gas annually to Europe.

    This would, however, require a firm commitment with Azerbaijan to build a 300-km (190-mile) pipeline between the two countries. The source said it could take just a year to bulid such a pipeline.

    “It’s up to Turkmenistan to decide how much they would like to deliver,” the source said.

    Partners in Nabucco include Austria’s OMV (OMVV.VI), Germany’s RWE (RWEG.DE), Hungarian MOL (MOLB.BU), Romania’s Transgaz TGNM.BX, Bulgaria’s BEH and Turkish state pipeline company Botas.

    The United States, which this month appointed its first ambassador to Turkmenistan in five years, said it would continue helping Caspian and Central Asian nations to find alternative export routes for their oil and gas.

    “We recognise that the United States plays a supporting, not leading, role in Europe’s energy security and in development of Caspian oil and gas,” Daniel Stein, senior advisor to the U.S. State Department’s Special Envoy for Eurasian Energy, told a conference. (Writing by Robin Paxton)

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