EU Backs AGRI, but Nabucco Priority

The European Commission level has confirmed its support for Romania, Azerbaijan and Georgia’s proposed liquefied natural gas (LNG) interconnector (AGRI), but the public launch of the project may be premature.

The AGRI plan is a rival element to a unified EU energy policy which is trying to hasten the development of the Nabucco pipeline - an eight billion Euro link between central Asia via Turkey to the EU which reduces the EU’s dependence on Russian gas.

In addition, financing for studies into AGRI are not yet able to be granted by the European Commission.

Now there is a multitude of “proposed projects” to transport gas from central Asia to Europe, but they lack a clear deal with a gas supplier - although all are pitching for a stake in Azerbaijan’s resources.

In addition to AGRI and Nabucco, the region also includes a rival project by Bulgaria which aims to transport Compressed Natural Gas (CNG) between Georgia and the port of Varna and EU-backed pipeline White Stream, which links Georgia to Romania along more or less the same route as AGRI.

Currently the EU states that Nabucco is the top priority. Financing is key and this project is the only plan to have the backing of the triumvirate of international financial institutions - the European Bank for Reconstruction and Development, the European Investment Bank and the World Bank’s investment arm – the IFC, as well as private energy players such as Germany’s RWE, Hungary’s Mol and Austria’s OMV.

Meanwhile energy analyst at the Jamestown Foundation, Vladimir Socor said the European Commission has “serious reservations” about AGRI.

The problem may not be that the EU does not want AGRI or the Bulgarian CNG proposal, but the timing of their launch has been premature, as it has come at a time when the EU is trying to gain firm support for Nabucco - including backing from both central Asian countries and its own member states.

“AGRI has added to the competition for Azeri gas and potentially undermines the visibility of Nabucco,” Socor said at a recent event in Bucharest. organised by Romanian NGO the Centre for Conflict Prevention and Early Warning.

However the European Commission spokesperson for energy Marlene Holzner confirmed to The Diplomat that the EU is backing AGRI.

“The European Commission thinks that White Stream - as well as AGRI - could fulfill this role in diversifying gas supply routes to Europe,” says Holzner, European Commission spokesperson for energy. “The EU is supportive of both projects.”

Deadlines for the construction of multilateral energy projects are rarely met and while shareholding states and project companies may announce dates for the completion of Nabucco or AGRI, analysts view them with some scepticism.

But there is concern that the EU should get serious about constructing one major project and, once this is in play, it will help complementary projects develop.

“Nabucco is the top priority, but not the only element,” said Socor. “It makes no sense if there is only Nabucco.”

With a surfeit of suitors for Azeri gas, the energy analyst also argued there will be room for all the projects once Turkmenistan begins to tap into its gas reserves. “The challenge for the EU and leading energy companies is to come up with a pipeline solution for Turkmenistan,” he said.

Ministry: AGRI most efficient choice

Meanwhile Romania’s New Minister of economy, commerce and business affairs Ion Ariton calls the AGRI project the “fastest and most efficient” project of the proposed gas route between central Asia and central Europe, among those under development.

The partner companies in AGRI are Romania’s gas producer Romgaz, Azerbaijan’s Socar and Georgia’s GOGC, while Hungary is also on board. The next stage will be registering the AGRI LNG Project Company in Bucharest, which will draw up a feasibility study for AGRI.

“If the conclusions of the study will be favourable, then the company could start the stage of attracting foreign investors in view of implementing this project,” Ariton told The Diplomat.

However under current European Commission rules, it is not possible for AGRI to gain EU financing for feasibility or scientific studies - this is also the case for Bulgaria’s CNG project.

“The European Commission is obliged to stick to the existing European Programme for Trans-European Energy Networks (TEN-E) Guidelines - AGRI is not included,” says the EC’s Marlene Holzner.

Only White Stream is a project of European interest, which the EC has so far provided with 0.65 million Euro in co-financing for feasibility studies under TEN-E.

But the TEN-E Regulations will come under review in 2011. “We cannot preempt at this stage which projects will then be eligible for funding,” says Holzner.

Source: The Diplomat