EC Welcomes Nabucco Natural Gas Pipeline Agreement
July 10, 2009 // Published as a news service by IHS
The NIA is between Turkey and four EU member states (Bulgaria, Romania, Hungary and Austria) and concerns the Nabucco natural gas pipeline, which will run between eastern and southern Turkey and Baumgarten in Austria.
The Nabucco project can potentially supply up to 10% of European natural gas demand. Moreover, in countries that are currently 100% reliant on one external supply route, it will provide immediate tangible security of supply benefits.
The NIA is fully compatible with international law, European law and the Turkish law. The agreement is the first of its kind; no other pipeline project into the EU has its development underpinned by such a comprehensive agreement.
The agreement applies EU law up until the border of the EU and then within Turkey applies a specific regime, consistent with Turkey's domestic legal situation.
Within the EU, a pipeline must be open to third-party access unless it has derogation from the rules. An interconnector between member states can obtain such derogation. A pipeline connection to a third country requires a process to ensure the compatibility of the regime that applies within the EU with the regime applying outside.
With regard to Nabucco, the EC has ensured the compatibility of the regimes in Turkey and in the EU. The consequence is that a company that wants to use the pipeline only has to deal with one interlocutor - Nabucco International Company - in order to bring gas from eastern Turkey to the heart of the EU (or vice versa). This is the one stop-shop principle that simplifies the shipping of natural gas across multiple jurisdictions. The NIA ensures the regulatory coherence of this project and makes it compatible with the legal requirements that apply within the EU's internal natural gas market.
The next stage, to begin in the second half of 2009, is to conclude capacity contracts. These are commitments to put natural gas into the pipeline for a fixed period. Either buyers of gas or sellers of gas can make these commitments, which underpin the financing of the pipeline.
Nabucco is a third-party access pipeline; at least 50% of its capacity will be sold on the open market so that any shipper may buy capacity in order to ship gas. The remaining 50% is given by a first option to the pipeline's owners or their affiliates; if these companies do not make use of this option, the capacity is offered on the open market.
There is strong interest from companies in Azerbaijan and Iraq to make commitments immediately. Further natural gas can come from Central Asia and the Caspian region. There is no shortage of potential gas sources available to the pipeline, as the Caspian/Middle East region contains the largest natural gas reserves in the world.
In the medium term, the EU and Turkey will jointly look at how to construct a Caspian Development Corporation to provide an assurance to Turkmenistan and other potential suppliers that EU and Turkish companies are able to make commitments to purchase and pay for gas.
The NIA took six months of intense negotiations, with the European Commission (EC) acting as facilitator in the negotiations, after having been invited to take this role by the EU member states concerned.
EC President José Manuel Barroso welcomed the signing of the agreement, saying, "The Nabucco project is of crucial importance for Europe's energy security and its policy of diversification of gas supplies and transport routes. The signature will show that we are determined to make this pipeline a reality as quickly as possible."
"I'm proud of the role that the Commission has played and extremely pleased that Turkey and the Member States of the European Union have reached an agreement based on the principles of mutual solidarity, mutual equality and interdependence."
EC Energy Commissioner Andris Piebalgs said, "Turkey and the European Union have found the right balance in the Nabucco intergovernmental agreement - let us hope that this is a starting point for further fruitful cooperation in our bilateral relationship, between supplier and consumer countries and to give all players the freedom to pursue their own interests, within a secure legal framework."
Source: European Commission (EC).