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Nabucco to merge with South Stream?

disclaimer: image is for illustration purposes only
by Staff Writers
Rome (UPI) Jan 10, 2011
The European Nabucco natural gas pipeline project and its Russian competitor South Stream could merge, a U.S. diplomat said, in what would be a surprising turn to the years-long pipeline war.

Italian gas giant Eni, Russia's main partner in Europe for the South Stream pipeline, is in favor of such a move, U.S. Ambassador to Italy David Thorne told Italian daily La Stampa in an interview published Monday.

"Eni has changed its approach, favoring a merger between the South Stream and Nabucco pipelines," Thorne told La Stampa, citing "many meetings" with ENI's Chief Executive Officer Paolo Scaroni in Rome and in Washington. "I would say that we are in a phase of constructive dialog."

Eni is the biggest European backer of South Stream, a pipeline project jump-started by the Kremlin to bypass traditional transit country Ukraine.

Observers say South Stream was also drawn up to torpedo Nabucco, launched by Brussels to reduce Europe's dependency on Russian gas imports.

Russian Prime Minister Vladimir Putin has in the past questioned whether Nabucco could be realized in an economically viable manner; people close to Nabucco have also said Russia that is pressuring potential Nabucco suppliers in Central Asia -- Russia's traditional sphere of influence -- into committing to South Stream.

The Europeans, meanwhile, are pushing hard for Nabucco.

Backed by Germany's RWE and OMV from Austria, Nabucco would transport up to 31 billion cubic meters of gas per year from Caspian and Middle Eastern gas to Europe, bypassing Russia.

European Commission President Jose Manuel Barroso and Energy Commissioner Guenter Oettinger are to visit Azerbaijan and Turkmenistan this week to try to secure gas from the region. Consortium members are also in talks to get gas from northern Iraq.

The Kremlin as a response launched South Stream, which would bring double the amount of gas per year and is vying for similar customers to Nabucco.

Experts have questioned that there is supply and demand for both projects, an analysis that has resulted in what the media has termed the "pipeline war."

Ever since a row over gas prices with Ukraine in 2006, the Kremlin has been accused of using its energy reserves as a political pressure tool. The lack of trust has resulted in conflicts over Europe's diversification strategy, with Russia threatening to supply Asia's emerging economies instead.

The problems have intensified as Europe is pushing for renewable energy and in the wake of the financial crisis demand and prices for gas have tumbled.

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