Failure of the Nabucco Project and Norwegian Connotations

In this alliance are e. g. British BP also Norway’s Statoil and French Total or other regional companies. What does this mean for Norway? 

The defeat of the EU

Project Nabucco with EU support led almost throughout the entire Balkans and Eastern European countries to Western Europe. Nabucco was typically European idea of connection new European countries. Instead of that now win a pragmatic solution with advantage of shorter route and fewer countries involved – gas passes through Greece, Albania and under the Adriatic Sea directly to Italy. This eliminates the complex international negotiations. TAP used the infrastructure of the older members of the EU. Albania is smaller state, for which the presence of a gas pipeline is an interesting exclusive investment. It follows that part of the political project of the EU has been replaced by a classic investment project.

Norway takes part

For Norway it is essential to participate in this project. Statoil holds 42.5% share in TAP and in TANAP (Trans-Anatolian natural gas pipeline – the connection between Azerbaijan and Turkey which proceed to pipeline TAP) Statoil have no share. But this Norwegian state-owned company has 25.2 shares on Shah Deniz gas field. This participation of Norway is sufficient. Effort of linking of Europe with Asia gas fields make relatively cheaper sources from Norway, with every new pipeline are Norway fields less exclusive. There were some kind of duopoly of Norway resources and Russian direct pipeline through Eastern Europe. Today, every new pipeline changes the market.

Russian competitiveness

Norway and Russia both are trying to face the changes. The presence of Norway in new projects (like TAP) is also the correct answer to the Russian activity, which in the form of NordStream and SouthStrem means easier transportation of Russian raw materials to Europe. The new pipeline means less cost and less risk for the Russian export. In addition, competition of administrators of pipeline means that the transporting cost of gas will be under competitive pressure. For Russia is important the core price of gas, not the payment of transport.

Important is the interconnecting of continental gas network, as well. For example, in Central Europe, it includes the Czech Republic, Austria and the Slovak Republic are built new nodes and new links of existing pipelines, so the system of transfers will be universally connectable, which make the European energy market more competitive.

Russia has still the disadvantage for future that focuses on long-term contracts, while the Norwegian exporters are more flexible and they are able to change the terms, which prefer majority of customers. With a new pipeline (i.e. NordStream, SouthStream) became event the Russian export more competitive and flexible.

Solutions for Norway

Although it appears that the competitive ability of Norway decreases in the light of reinforcing Russians – Norway has still great advantages. First, it is mentioned Norway’s presence in other new projects. Second reason is a hunger for power in Germany. Due to the problematic approach to green energy there are price increases for the domestic industry and for household. Shutdown cheap nuclear energy is a problem too. Norway as predictable neighbour (albeit through North Sea) should help to fund the long-term solution of situation by better way than even the direct contracts with Russia. Due to the size of the German economy is still a place for Norway raw or energy export.

Author: Vladimir Stipek

28th June 2013, in Prague, for The Nordic Page

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