US restates support for Southern Gas Corridor to Europe

Mon 06 June 2011 14:50 GMT | 19:50 Local Time

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Richard Morningstar

The US secretary of state's special envoy for Eurasian energy, Richard Morningstar, has repeated US support for gas exports to Europe via Turkey.

He started off a press conference in Baku on Monday by praising the high level of cooperation between the USA and Azerbaijan.

"The energy relationship with Azerbaijan and the United States continues to be very strong and we work together closely," the envoy said.

He said that the Project Support Agreements for the Nabucco pipeline to be signed by the Nabucco companies and the responsible ministries of the five transit countries (Austria, Bulgaria, Hungary, Romania and Turkey) in Turkey on 8 June showed the importance attached to the project by all sides.

Asked about the significance of the support agreements in the absence of gas supply agreements from Azerbaijan and Turkmenistan, "It's certainly helpful. I think that it shows that the governments involved are still very strongly in favour of a Nabucco pipeline. There are commercial issues that we can talk about but I think it's very helpful that the agreement is being signed."

The envoy was relatively upbeat about the prospects for a Trans Caspian pipeline to bring gas from Turkmenistan to Azerbaijan for onward export via the Southern Corridor.

Asked whether the pipeline was still on the agenda, Morningstar replied: "It certainly is. I will be in Turkmenistan next Monday and I'm looking forward to meeting with President Berdimuhamedow. He has spoken more positively about a Trans Caspian pipeline over the past several months. There would have to be ultimately an agreement between Turkmenistan, Azerbaijan and the European Union for that pipeline to take place. We would strongly support such a pipeline but it's really up to those three parties to come to an agreement as to how it would happen and we hope it will."

He did not think that the unresolved legal status of the Caspian Sea would have an effect on the pipeline. "As far as we can tell, the relations between Turkmenistan and Azerbaijan are quite friendly and as long as gas is either in Turkmen or Azeri waters, it's our view that that should be OK."

"American companies are in talks with Turkmenistan about offshore projects in the Caspian that could be part of a Trans Caspian pipeline. I think that would actually be very helpful," the envoy added.

On political support from the USA for the project, Morningstar said: "We have certainly always provided political support for a Trans Caspian pipeline and once again, if the gas pipeline goes only through Azeri and Turkmen waters, we see no reason why it shouldn't take place. We can provide political support, the EU would have to provide political support and there would have to be understandings between Azerbaijan, Turkmenistan and the EU as to how it works."

Asked which of the projects competing for gas from Shah Deniz 2 was the most commercially viable, the US envoy said: "One, we prefer the Southern Corridor as a whole... As far as what's preferable from the strategic standpoint, there's no question, at least in our view, that the Nabucco pipeline would be the most preferable. Again understanding that we would support any of those pipelines. The question that one will have ultimately to determine is whether a Nabucco pipeline is commercially viable and the basic issue is that, if that pipeline is completed in 2017, will there be enough gas available that makes it viable at that point.

"We have no question that ultimately there will be enough gas for Nabucco so then the question becomes who bears the risk for the pipeline during the first few years when it might be under-utilized. And that would have to be worked through with the various stakeholders: the company, the Shah Deniz company, the Nabucco consortium, the government of Azerbaijan, the EU, all of which would have a stake. If that can be worked out, there could be a full Nabucco pipeline.

"It's also possible if a determination is made that the full Nabucco pipeline is not commercially viable - at the present time we hope that that would not be the case - then one would have to look at a smaller approach that would expand as more gas becomes more available. That could be ITGI [Interconnector Turkey-Greece-Italy], it could be TAP [Trans Adriatic Pipeline], or it could even be some form of Nabucco, so all of these things are going to have to be looked at over the coming months. It's important that some decision be made so that the Shah Deniz project can go forward and the investments made to produce the gas in the first place. Again the single most important thing is that Shah Deniz gas gets to Europe."

The US envoy said it would make sense to look at possible mergers of the Southern Corridor projects such as Nabucco with ITGI or ITGI with TAP. "Obviously if there was a consolidated approach, from the political standpoint that would be very helpful."

Russia, Iran

Asked about Azerbaijan’s gas exports to Iran and Russia, Morningstar said this was a matter for Azerbaijan.

"Azerbaijan is a sovereign country and as a sovereign country it should be able to utilize the resources as it sees fit. Secondly, as far as selling gas to Russia, we're talking about very small amounts and that would not, in our view, really have an effect on the Southern Corridor. Iran is a neighbour - you know our feelings about Iran, about Iran's potential participation in the Southern Corridor which we're not happy about. But again, Azerbaijan selling its gas to Iran is a matter for Azerbaijan."

Asked about possible US sanctions on the Shah Deniz project because of Iran's involvement in the Shah Deniz consortium, Morningstar recalled his testimony to a House of Representatives subcommittee on the subject last week.

"There has been legislation filed in both our House and Senate. We're still trying to digest that language. There's nothing in the bills that specifically requires that Shah Deniz be sanctioned. There's also waiver ability. I think that there's a very serious policy issue at stake here. We do feel very strongly about Iran sanctions; on the other hand with respect to the Shah Deniz project Iran is a small, passive participant and we have to examine what the unintended consequences of any sanctions on Shah Deniz would be. I made the point on Capitol Hill and I would make it again here that to sanction Shah Deniz could very well be to Iran's benefit because it could make it more difficult, if not impossible, for any gas to go from Shah Deniz to Europe and the ultimate recipients of that gas could be Russia, China or Iran. And so I think we have to consider those possibilities very seriously and I am hopeful that the matter will ultimately be resolved without sanctions on Shah Deniz."

Asked whether gas negotiations between Azerbaijan and Turkey would result in an agreement, the US envoy said: "I certainly hope so. My understanding from all of the parties is that an agreement is very close. You know that there is an election coming up in a few days in Turkey and we hope very much that soon thereafter the agreement will be signed. You know we see no reason why the agreement shouldn't be signed and the time is now, or certainly in the next several weeks."

Richard Morningstar said that he did not know what was the main obstacle to an agreement.

Asked whether sanctions on Syria would affect Azerbaijan's sales of gas to Damascus, the envoy replied that as far as he knew they would not.

Asked his view of Azerbaijan's concern at over-dependence on Turkey as an export route and its interest in the AGRI project to send liquefied natural gas from Georgia to Romania, Morningstar replied that while Azerbaijan and Turkey historically enjoyed a close relationship, every country needed a balanced energy strategy.


See Also

Caspian oil & gas show draws princes and politicians

US backs Southern Corridor for gas export to Europe

US to provide all support to Nabucco - Richard Morningstar



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