Azerbaijan and Turkey signed agreements October 25 in Izmir on the delivery and transit of Azerbaijani gas to and through Turkey. This step will facilitate decisions on major new pipeline infrastructure—most likely a new Southern Gas Corridor route across Turkey comparable in character to the Baku-Tbilisi-Ceyhan oil pipeline that opened in 2006. What are the pros and cons of the various proposals on the table? What will be the key factors informing decisions by gas consumers, gas producers, and the governments that may be involved? Beyond an initial pipeline, what are the prospects for expanding the Southern Corridor to include gas from Iraq and other Caspian suppliers?
CHAIR: Mr. Daniel Dombey, Turkey Correspondent, Financial Times
PARTICIPANTS:
- Ambassador Pierre Morel, EU Special Representative for Central Asia, Council of the European Union
- Mr. Harry G. Sachinis,** Chairman and Chief Executive Officer, DEPA
- Mr. Michael Hoffman, Director of External Affairs and Communications, Trans Adriatic Pipeline
TRANSCRIPT
Location: Istanbul, Turkey
Time: 3:15 p.m.
Date: Thursday, November 17, 2011
Transcript by
Federal News Service
Washington, D.C.
PIERRE MOREL: I take always this example, 30,000 Europeans working in Afghanistan today, be it military, be it civilian. So we had to get much more attention towards this region. And we have seen very obviously that if we want to have stability and perspective for this rather wide Central Asian region, I mean, their big asset is energy.
And what we have been facing in the last years, after BTC of course, is diversification in action, with the turning point indeed on the 14th of December, 20(0)9 which for me is a key date. That is the integration of the Turkmen-China pipeline. So you can argue, well, yes, this was done by China. This was not done by Europe. I mean, I would not say this has been a loss for Europe.
I mean, in a way, it has to be – is towards a dimension in Central Asia. I mean, it’s already started with Kazakhstan and they have also the connections. But what was important is that it ended a phase of quasi-monopoly of transportation. And so what you have now is diversification of production and forthcoming transit from Central Asia.
And this gives to this region, which is rather moving fast now after having been forgotten, this gives a new perspective. Look at – well, the Chinese have opened the way in fact. But I would not say they have broken a taboo. But they have shown that these countries of Central Asia – we tend to forget when we speak about – (inaudible). These countries want to have multivectoral policies, I call them.
And this is true for Kazakhstan. Indeed, we see that. But it is true also for Turkmenistan today. I was yesterday in Ashgabat, the Gaffney-Cline study speaks of 26 tcm. And so we know that South Iolotan is going to be a huge operation. Of course, there is one thing about reserves and another thing about production.
But I mean, this is clearly going in the same direction, that Turkmenistan will have to export in different directions. And maybe it’s not as engaged with the markets like Azerbaijan. But it’s very clear that a Trans-Caspian pipeline is now a realistic perspective as TAPI – Turkmenistan, Afghanistan, Pakistan, India – and the I is very important there, of course, you can see why – is now taking a real dimension.
And I would finish in stressing that the awareness of the European Union is so clear that for the first time, on the 12th of September this year – I mean, two months ago – the Council of Ministers of Europe has given to the European Commission full powers to negotiate a treaty for this Trans-Caspian project. And this has no precedent.
Energy is a shared matter between commission and the governments for understandable reasons. We are very close to sovereignty. And you can understand and you can argue that it has been explained – the hesitations of the EU. But now, you have a very clear signal. The negotiations are underway. It has started one month after the mandate – 12th of October. The next meeting is beginning of December.
And we speak about the set of three-dimensional agreements, one which is tripartite in order to shape the pattern between EU, Azerbaijan and Turkmenistan. Another one, bilateral in sovereignty terms, regulation, law and so on about the pipeline itself and a third set of commercial agreements, with, of course, the perspective of buying gas, and therefore, underpinning the operation of construction of the pipeline. This is actual matter of negotiation. So I think it brings some kind of answer to your question.
DANIEL DOMBEY: Harry, do you think – Harry, do you think that this issue is primarily about geopolitics, given the things that Ambassador Morel has talked about and given after all the economic crisis in Europe that may well affect demand over the next 10 years or so?
HARRY SACHINIS: Yes. Actually, I don’t think – I mean, it is obviously geopolitics. But in the end, you have to look what the geopolitics is, the needs of specific countries or specific areas. So in this case you have to look – this is the first time that you are going to have Caspian gas not only flowing to other parts of the world, like China and so on, but having Caspian gas flow into Europe.
It is interesting because if you think of Southeastern Europe, right now 89 percent of the supplies of Southeastern Europe come from one supplier. So this will give us the ability to diversify the supplies. And we all talk – and it’s interesting because you mentioned, Ambassador, that when people started thinking about this many years ago and now we’re coming to some conclusions and so on, it is really interesting to see these conclusions, to see these agreements falling into place.
And I think that the first one of these agreements was the agreement between Azerbaijan and Turkey for transit through Turkey that was signed on October 25th because that really establishes Turkey as a reliable partner both for Caspian countries and for European countries.
So from then on, if we talk about action and things that are happening that really make a difference, the next step would be for the first direct sale of Azerbaijan gas into Europe. As a matter of fact, and many of you may not know this, but already there is Caspian gas flowing into Europe. There is a contract that the company that I run – DEPA – has with BOTAŞ. And that contract is a back-to-back contract with another one between BOTAŞ and Azerbaijan.
And as a matter of fact, there is an MOU between the three companies – SOCAR, BOTAŞ and DEPA – to transfer this agreement – the direct agreement between DEPA and SOCAR. And really if that happens, that is really going for the first time that officially the Southern Corridor will open and that can happen very quickly and this is enabled by the agreement the Azeris signed with the Turks.
When you take it to the next step, we are planning, together with our colleagues from Bulgarian Energy Holdings and our colleagues from Edison, we are planning a pipeline interconnected that connects Greece with Bulgaria. What that means, that based also again on this transit agreement through Turkey, as early as 2013 – and we’re planning actually to do this by 2014 – but we’re saying let’s rush it, let’s make it faster.
So by 2013, we’ll be able to bring excess gas that comes through Turkey through Greece into Bulgaria and then through other existing interconnections into Romania, into Serbia, into the Former Yugoslav Republic of Macedonia. And this is terrific because this is going to be the first time that these countries are going to have gas from other sources and not only from Caspian gas. We will enable them, since this pipeline starts in Greece, to get gas from our LNG terminal in Greece.
So that gives reality to the dreams that we have had about the reciprocation of supplies and especially to these countries like Bulgaria and Romania that will have the biggest demand in that area. And we predict that by 2020, there’s going to be additional demand in Southeastern Europe for about 8 bcm.
So then you go to the next step, with demand in Europe also increasing at that time because we hope that things will change in Europe. And we know very well from basically looking around the world that markets forget very easily. So I think you will see added demand in Europe, added demand in Italy to then bring more gas both to Southeastern Europe and to Italy.
MR. DOMBEY: What do you – what do you make of those kind of arguments, Michael? Do you start with what you have on the ground already and existing – existing infrastructure and are you not, when you talk about projects that begin from scratch, are you not constrained by the terrible time that Europe is going through, in particular countries like Greece and Italy which are important markets in your content?
MR. : I suppose there are different ways – does this work? I suppose there are different ways of looking at this question.
MR. DOMBEY: It’s not working.
MR. : I can’t seem to hear.
MR. DOMBEY: Why don’t I ask Ambassador Morel a question while your microphone is fixed? Ambassador Morel, Richard Morningstar, the U.S.’s special envoy – special envoy for Eurasia, recently talked about how – you have to wait now, I’m afraid.
MR. : Yes.
MR. DOMBEY: Talked about how a pipeline could be smaller and extendable rather than Nabucco. He talked about a smaller, more extendable pipeline.
Are you not concerned after years of working on related issues that the question of Nabucco’s supply and its finances is just too intractable right now and that the talks that you talked about Turkmenistan, though perhaps promising, are not going to be completed in time to produce the infrastructure that’s really needed to make this a viable proposition?
MR. MOREL: Well, it’s a rather complicated question which has been discussed for so many years that people seem to be tired or pessimistic, when in my sense it’s precisely right now the moment during the investors’ decision between the agreements which are popping up and especially the one you quote – which was quoted by our colleague just now between Azerbaijan and Turkey – is precisely the moment where after turning around, impatience, wondering, waiting for, criticizing and so on, you sense that the time for decision is coming up. So I don’t think there’s a moment to precisely say, well, let’s say goodbye, enough is enough, we are tired of it.
On the contrary, I think the first answer on Nabucco is that what is at stake is a new corridor. And you don’t build a new corridor without a very complex mix of decision and gathering of the different partners. I mean, you have numerous countries on the way, yes. You need several companies, yes. But what is at stake here is the very complex framework you need to build in order to have the Southern Corridor. Everybody welcomes that.
We have heard all the morning all the good words in favor of the South Corridor – yes, let’s do it and so on. But it’s a painful exercise. At the same time, remember that the first one was the North Sea and now Norway, then it was Tuzba (ph), then it was Mediterranean. I mean, it is a story of 40 years. And we are now embedding a new corridor which will have to expand on one generation.
So it’s – I would say Nabucco is too easy a target in that respect. This is the whole build-up, and not being an energetician (ph) but being more on the political side, I can tell you it implies a lot of meetings with presidents looking at the context and so on because you don’t do that from scratch.
Therefore, I think what we have seen through these difficult years for Nabucco, as for any big project, has been the ripening of decision-making which comes now. So concerning Nabucco, yes indeed, you can say they have its plus and minuses, as the other projects have, because the small-sized, fine.
But it means that you enter into the network of Turkey where the very important factor agreed by Turkey is building the dedicated, independent gas pipeline throughout the country with international rules and the framework – the legal framework of Nabucco is ready since 13 of July, 20(0)9, signed intergovernmental agreement in Ankara.
So let’s have the wider perspective and let’s see now how all the different points could come into the assessment by the consortium since now it’s time for decision with Shah-Deniz too. But you know that there have been ups and downs for Shah-Deniz too also – a bad time for investment, should we start now or should we wait later and so on and so on.
I mean, there has been plenty of question marks for a long time from many sides. Now, I think we come to closer to a decision and I would not say one formula is better than the other for the time being.
MR. DOMBEY: I’m going to allow the more aggressive person to answer. (Laughter.) Since you are closer to me, Harry?
MR. SACHINIS: OK. I just want to say that Nabucco is indeed a great project. But there is no reason why Nabucco cannot happen at a later stage. So there are countries that need the diversification right now. So we don’t have the time for when Iraqi gas would be available. We don’t have the time for when gas from Turkmenistan is going to be available. So there is no reason to wait. And I think opening the Southern Corridor with some gas could actually show the example in the road to others to follow with bigger projects.
MR. DOMBEY: Yeah, Michael, I’d like you to –
MR. : Maybe if I may add to that. I mean, I think in part we’re in danger here of, you know, political ambitions maybe not fitting entirely with the commercial aspirations that we see with Shah-Deniz. We have Shah-Deniz that has 10 billion cubic meters of gas on offer.
As far as I’m aware, it’s the only gas on offer commercially at the moment. So I totally agree with Harry in this context that if we are to realize the Southern Gas Corridor, we need to use the volumes that are currently available. And we need to make sure that it’s started.
And then to address one simple point to the ambassador, yes, there is the Nabucco IGA internationally regarded. But I think we’re also failing to remember that there is also an IGA signed between Azerbaijan and Turkey to which the Shah-Deniz consortium have added and contributed. And that also allows the safe and secure transit of gas through two options. One is either the – it’s the upgrading of the existing BOTAŞ infrastructure.
The other option is to look at the potential for actually putting in a new dedicated transit line, not to be confused with Nabucco, but a new dedicated transit line. So there is that option to bring safe gas and secure gas through. And I think now with Shah-Deniz, everything is one the table. They have the bids from IGI.
They have the bids from TAP. They have the bids from Nabucco. They have to assess that. And let’s remind ourselves there’s only 10 billion cubic meters on offer. We’re not negotiating. There are no contractual offers with anybody else. Yes, Turkmenistan, yes, Iraq, may all very well come on-stream.
But the important thing I think for Europe now is to look at how do we secure the Southern Gas Corridor as quickly as possible. And again, I totally agree with the ambassador here in the sense that the way that Norway was developed in terms of the North Sea and the gas infrastructure, this was all built step-by-step, piece-by-piece.
So it doesn’t mean that you cannot develop large infrastructure in the future as more gas supplies come on. Of course one can. So as long as we are committed and Shah-Deniz is committed to selling that gas in Europe and they look at the commercial and the technical viability according to their eight criteria that they have established, then Europe wins regardless of whether it’s a Nabucco, an IGI or a TAP. Gas comes in.
But what’s important is that this is a commercial and technical decision upstream. We tend to forget that this is a $22, $23 billion investment. This will not be predicated on the basis of political considerations only. These companies – BP, Total, Statoil, et cetera – have to make money. They’re responsible to their shareholders at the end of the day and they need to assure themselves and their shareholders that they’re going to make money.
Their sharing agreement, you know, expires in 2036. They need to get a move on. And they cannot delay and they can’t wait for a bigger pipeline to be built and for more gas volumes to be found elsewhere. Sorry, I’m getting the signal.
MR. DOMBEY: Harry, I know you wanted to get in. But I just wanted to ask you before you do, what about the BP idea that was floated just a few months ago that would take – but it’s been around for longer – that would take advantage of the existing infrastructure? Given your argument about starting at a realistic level, how serious an idea is that?
MR. SACHINIS: Let me finish the thing that I wanted to say earlier and then I will gladly ask your question. The thing I wanted to say earlier is just to complete the whole picture of intergovernmental agreements that exist, there is also an intergovernmental agreement between Turkey, Greece and Italy that also gives some certainty to certain things, which is another interesting piece to put in the puzzle.
But let’s go beyond that and answer your question about the Southeastern European pipeline that BP is talking about. My understanding is that BP is looking at that as an additional alternative. It’s still in the planning stages.
And there is a big difference when you have something in the drawing board completely from scratch to something that you have actually completed the detailed marine survey, you have gotten all the environmental permits, you have done all these things. So obviously they’re considering it.
And I’m certain they have reasons to consider it because they want to make the best choice for their shareholders. It’s interesting because it looked very familiar to us because it was very similar to an extension of the IGB pipeline the interconnection between Greece and Bulgaria that we were planning and we were already discussing with Bulgaria and Romania about a pipeline that continues all the way up to Hungary.
So, you know, BP will look at that. They will look at what we have and what IGB also provides them. The thing is again let’s look at the phasing because all of this is discussion for 2018. IGB will be ready by 2013. So you have a five-year gap there. So I think IGB by being contracted earlier gives you the ability to think a little bit differently and modify maybe the ways it is conceived.
MR. DOMBEY: And Ambassador, what’s your reply to this argument that you really can’t let vision dominate markets in this way, that you should start with a phased approach, little by little? Could you, for example, have a Nabucco project without necessarily this specific pipeline but taking advantage of this phased approach bit by bit?
MR. MOREL: Well, you have had, I think, many times these kind of discussion and I’ve somewhat the impression that we are as rehearsing some kind of presentation we would make in front of the consortium in Baku. I mean, the beauty contest is part of the game.
I would like to recall that anyway Nabucco has been always considered as step-by-step in its development and what is key to launch the wider investment is to have the second phase assurance from the beginning. This is the trigger for the wider project. And of course, here that’s how there has been discussion about Iraq at some time and that’s how in the last year this has concentrated on Turkmenistan. Not for now. We all know that, but for the following phase.
And this was – in fact, the turning point has been the visit of Mr. Barroso to Baku and to Turkmenistan. I would like to recall that five years ago there was no diplomatic relations between Turkmenistan and Azerbaijan, as simple as that, five years ago. So I mean, this has been the part of the work I was describing.
So we have to have the long perspective anyway when you build a corridor, be it one way or the other. I don’t want to be the arbiter of such a debate. I just try to remind that we are in strategic decision-making, whatever the dimension of the tube, we know the context in which we are.
So then, let the consortium and the different interests enter into consideration. But I would just to recall to finish that, I mean, the value of Nabucco is to go to Baumgarten and beyond. That is at the core of the core of 500 million market, first off.
MR. DOMBEY: Now, I’d like to open up the discussion to the wider participants. I see we have very many distinguished people here – Ambassador Richardson, for example, a veteran – a veteran of similar discussions in the past. It would be very interesting to know what people have to offer. Ambassador Richardson, please – please, you – you don’t see any parallel?
OK, later. Can I ask just a question, then, while people think, which is, is there really a single European market for gas? I mean, people talk – you talked about the market of 500 million consumers. But is there a coherent market, given the reliance on limited interconnectors and so on?
MR. SACHINIS: It’s interesting that you mention this because regardless of what project gets selected – and actually, as I mentioned, there are already pipelines that connect up to a point, you know, Turkey to Greece, for example. But looking at it from the perspective of Southeastern Europe, which is an area that needs more development and an area that needs more diversification.
As I mentioned earlier, 80, 90 percent of the imports come from one supplier right now. I think the idea that you have multiple sources coming into that area, whether it is from the east through Turkey, whether it is Iraqi, Azeri to Turkmenistan gas, from Russia, from Italy, through reverse flow of the connection between Greece and Italy, from Africa through Italy, from LNG through existing or new terminals to be built, from the eastern Mediterranean in one way or another.
If you look at all of that, that creates the conditions in that region for gas-to-gas competition. And that is important because when you have gas-to-gas competition, then you have lower prices. And if you have lower prices, you have more competitiveness for your industry. And that is extremely important for a very vulnerable part of Europe and that is Southeastern Europe.
MR. : Just to add on that point, I mean, certainly with Southeastern Europe and the way one looks at the gas market, you know, it’s a fairly fluid system. It balances itself out. So it’s not particularly important if gas comes in via Baumgarten or it comes into Italy because if 10 bcm come into Italy, it releases another 10 (bcm) coming in from the North Sea, which those, whether Germany, Austria, Hungary can then use from those sources.
And that’s actually a much shorter distance and possibly more economical. The problem is in Southeastern Europe, as Harry rightly points out, it’s constrained because there’s a lack of interconnectivity. They’re paying a premium on average of 25 percent more than their fellow market competitors in the spot markets in Baumgarten or in Italy.
So it’s actually quite important to get gas into that region, whether it’s the Western Balkans or the Eastern Balkans. And that’s where I think SEEP and the Ionian-Adriatic pipeline and the connection to there and the IGB can all make valuable contributions to ensure that gas actually gets into these various markets. And I think to a certain extent that’s where we should be concentrating our efforts, to equalize and balance that out.
MR. MOREL: Of course, if we so much work on the Southern Corridor or Southeast Corridor, it’s precisely we all know that the more specific context of the Balkans compared to the rest of the European continent. At the same time, to answer to your initial question, as you know, there has been these packages of the commission concerning the energy market which has – which have represented each time steps forward and additional competition.
So we are moving with all the regulation needed into that direction to the displeasure of some kind of established situation. But it’s the rule of the market. Beyond that, the lessons of the Ukrainian crisis have added to the sense of solidarity, the need for interconnection which has been now underway and which was not there at the time of the Ukrainian shocks and so on and so on.
So I think we are moving into that direction. And beyond that, just an initial answer, if you want to be strategic, if you want to have the longer perspective, be it now through Nabucco, be it with all the dimension in the long-term, you know, you are coping with countries who will be interested to speak to one person, to one interlocutor.
And this is something we have to get involved in. Precisely, it has been one of the triggers with Turkmenistan, having had this boon to start with China. That is, I want one interlocutor. And of course, when you are responding for the European market and European companies to the plural and to the great plural, it is not easy. And therefore we have tried to face this. And yes, you can argue that market has different dimensions.
But true testing formulas which have been going quite far in – of course, going to the operators and so on – I mean, the formula we have called Caspian development cooperation means that we could go to a country like Turkmenistan and say, yes, we make the deal for this amount and all in all we will have the responding partners for safe commitment for a long time, so allowing the launching of the pipeline.
So I mean, your question about the level of integration of the market, I think the answer has been matured in the last years and can get the proper answer.
MR. DOMBEY: I just wanted to ask if there aren’t any other – a question about – that goes to the piece which is the European economic crisis. How does that affect the scale of projects we’re talking about, particularly given that we’re talking about markets in the southeast and in Greece and Italy?
MR. SACHINIS: OK. When you look at projects like this, they have a life of 50 to 60 years. When you look at the economic crisis, we hope, even this one, they probably will have a life of two to three years. So you almost have to discount the crisis and look strategically right into the future. And here, one way or another, we’re doing something that is important for Southeastern Europe, for the rest of Europe by increasing the different supply sources.
So I don’t think – I don’t think that this really will affect anything because the only thing it may affect is it may affect demand in the short term. But on the other side, you have the nuclear issue in Germany and maybe issues similar to that in the rest of Europe which will increase demand for gas.
So I think it is appropriate to actually start and think strategically and think for the future. And I am certain if we are to sit here 10 years from now, I’m certain Europe and its partners in the Caspian and through Turkey and through other routes, they will have decided for more than just one pipeline. It’s going to be a set of pipelines crisscrossing Europe by that time.
MR. DOMBEY: And if we had this conversation a few years ago, we would be talking about it’s a lot more about South Stream, this Russian alternative. That doesn’t seem to be so present right now. Is that – what’s your perception of how the Russian position has changed, Ambassador Morel? And is there a continuing doubt on your part that any deal with the Turkmens could be disrupted by pressure from Moscow?
MR. MOREL: Well, this is a sensitive subject and we have heard some expression of displeasure here and there to us – Turkmenistan and they have tried to respond their own way. Well, of course, you have well-established and long relations by definition between Moscow and Ashgabat.
At the same time, as you know, they have had difficult years recently and we have not seen great perspectives for Turkmenistan towards Russia. And in a way, once again, I think the 20(0)9 opening of the China pipeline has changed the situation. We are in another – (inaudible.) Now, TAPI is resuming. So of course, this is a matter for debate between Russia and Turkmenistan.
But on this, there’s one very interesting point which is generally forgotten. If you remember, at the time when Nabucco was beginning to get wider attention, there had been a meeting of the three presidents – President Putin at that time, President Nazarbayev and President Berdimuhamedow in Turkmenbashy – 12th of May 20(0)7 and even somebody went to Tashkent to have the signature of President Karimov for one project which was called Pre-Caspian – Прикаспийский in Russian.
And the idea was precisely to build a new pipeline which would add a new link toward Russia. And of course we see the line, then going to Novorossiysk, and well, maybe for a South Stream potentially and so on. This would be, in a way, new source and not just new line of transport. Nothing happened.
Well, there was clearly a way to say there is better way than to just Caspian. EU didn’t react. We didn’t enter into any polemics or warning. That was their choice. They announced it would go fast and quick and Vice Premier Narishkin was then asked by President Putin to solve the matter as quickly as possible.
Nothing happened, maybe in connection with the market, maybe in connection with the fact that he would have demanded heavy investment from Russia they were not ready to do. I don’t know. But the fact is that lead time for Russia to find its own ways to get new transportation for Central Asian gas didn’t appear.
In between, you have had impact of climate change. You have had Fukushima. You have now the news from South Iolotan. It is not with an anti-Russian project that we are working on Trans-Caspian. We have been working on Trans-Caspian steadily in spite of competing offers which have been going up and down. And you could say the same with South Stream.
I mean, if the cost of Nabucco has been rising, I mean, it has been even more rising for South Stream. South Stream is crisscrossing the Black Sea in the east-west axis which is not known. Blue Stream is familiar. But I mean, you have to go to the depths of 2,000 kilometers in the Black Sea for a new route.
So if you have question marks on one line, you have even more question marks about South Stream. This would be for the time being the general feeling. I mean, if this is going to be engaged with European countries, yes, of course it would be considered as it has been said several times with interest and readiness in Brussels. But for the time being, we have a lot of question marks there too.
MR. DOMBEY: And what would you say in terms of the relationship between the Azeris and the Turks? How is that being – how is that played into this whole story because we’ve obviously seen tension with the Turks after the discussion with the Armenians.
MR. MOREL: Yes, you have had a lot of question marks between the two capitals for different reasons, some of them totally alien to gas. And you just quoted them. But once again, I mean, working on the Southern Corridor, we started on the 8th of May, 20(0)9, what we called the South Corridor Summit, and President Gül and President Aliyev were sitting together in Prague. It was Czech presidency.
And then we decided that there would be an agreement between the governments – the intergovernmental agreement. Within months it was written, if I remember in the communiqué. And it’s led to the agreement in Ankara with full engagement from the Azeris.
So when we have, now, this further clarification because you have the company factor added to the intergovernmental factor. Fine, we welcome that.
It’s just confirmation of the fact that in the end, step-by-step, all the involved partners at the different levels – governments and companies – are getting together and we can only welcome this as facilitating this decision-making time we see coming now.
MR. DOMBEY: Prime Minister Erdoğan gave a shout-out today when he was talking to the relationship with Greece and Italy. What do you think was the significance of that?
MR. SACHINIS: We have a great relationship with Turkey and there is an IGA between Greece, Italy and Turkey. So, I mean, there is no real more significance. I don’t think that there is more significance than that. But already Turkey is supplying Greece with gas.
We have a great relationship at the company level between BOTAŞ and DEPA and we have a great relationship at the country level and at the government level. Our minister was here today – Minister Papaconstantinou, who is speaking actually at the next panel. He met with Minister Yildiz. So we cooperate along several fronts.
MR. DOMBEY: Are there any questions from the audience? Please.
Q: (Inaudible.) Let’s assume that these projects are realized and gas comes from Turkey to Greece and Greece to Italy and Greece through Adriatic and Nabucco is built and 50 to 100 bcm reaches Europe through Turkey, Greece, Bulgaria and hits Italy and Austria. Will this make Europe happy?
MR. DOMBEY: Will this make Europe happy? If Nabucco is built, will it make –will it make Europe happy? I suppose he’s asking in terms of what the broader significance of this is for a continent that’s going through a few travails right now.
MR. MOREL: Well, I feel to repeat myself. I mean, we are in a situation where the decisions have to be made by the great operators. The governments and the organizations have to deliver the best possible characteristics in order to make it viable, credible, long-term and, once again, strategic.
If decision were to be taken in favor of Nabucco, indeed, I mean, this is a challenge and I would say that the sense from the European Union and from Brussels is that we have prepared ourselves for this decision. And once again, I mean, for the time being we get through the phase of the consortium.
But if we have been committing in so many ways in preparing the ground for this ambitious project, it is precisely because for us it does make sense. And it’s the continuation of this – let’s say, the consultation of diversity of sources which is, we think, the best guarantee and the more we will need gas, and we know we’re going to need gas, the more we will be able to take strategic decisions in that respect, all the better.
MR. DOMBEY: Harry, do you feel that the era of European grands projets is still going on? The era of great European projects, is that still going on?
MR. SACHINIS: Great European projects. Let me say something in the end and actually bridging that to the previous question. In the end, you have to have a balance. And we’ve seen that everywhere. You have to have a balance between supply and demand. If you are oversupplied and prices are driven down, then this will not make the producers happy.
If you are undersupplied, then prices are very high. Then this will make the countries that are buying the gas unhappy. So there needs to be a balance and I think – I believe in markets. I believe in free markets. So I think as we talk here and as everyone is thinking what is the next step, everyone will be thinking about these things. So in that vein, if there is a lot of demand in Europe, there are going to be great projects.
MR. : May I just add maybe one comment to that? I think the question in a way needs to be rephrased or rather the definition of success needs to be rephrased. It’s not a matter of if Nabucco comes, it’s great for Europe. The question is if the Southern Gas Corridor is realized, that’s great for Europe. And it doesn’t really matter whether it’s IGI, whether it’s Nabucco, whether it’s TAP or it’s SEEP. The important thing is the Southern Gas Corridor.
And that’s I think what we cannot lose sight of. And we cannot lose sight of the fact that this will be based on commercial principles. And as Al Cook said earlier in one of the earlier panels, you know, these pipelines need to meet the needs of the producer and the consumer.
And that’s what we have to remember. And hopefully with that decision-making process, by the end of this year we will establish, or Shah-Deniz will then establish, which is the best way to bring that gas to Europe. Good luck to everybody.
MR. DOMBEY: Ambassador, do you agree that it’s much more important to have the gas corridor than it to be a specific project called Nabucco?
MR. MOREL: Once again, what I tried to describe was precisely the building up of a corridor. Then, you have specific and diverging projects. And you have had some kind of illustration again today about the fact that you have different approaches. But once again, I mean, from the site which has been trying to prepare this strategic dimension, you have projects which are more or less strategic. This you can understand in my answer in the previous one on Nabucco. We are going to face an enormous challenge in terms of extension of capacity for gas.
We know it has to go through an ambitious project indeed. I subscribe to the idea that what is most important is the corridor. But the corridor means that you enter into a long-lasting exercise mobilizing very different countries and going through difficult debates. I mean, there is a debate about Trans-Caspian.
Some argue that Trans-Caspian should not be there because it needs the agreement of the five. This is not the case. There has been – you have thousands of miles of pipelines already on the seabed and never has been asked to be – to get the agreement of the – all the countries. The environment prerequisites have never been asked for any other of these oil pipelines where now it would be gas pipelines.
So, I mean, we try to cope with all the dimensions of the challenge. And yes, it is more than Nabucco. But I would respond to you it’s more than just one response to one moment of the market when we know that we have heard this morning we are moving to 700 bcm in the next decade. I mean, this is worth to think of real capacity of strategic dimension.
MR. DOMBEY: Well, I would – thank you very much. Next question?
Q: Yeah, my question is for Mr. Ambassador. It sounds like you’ve got your mandate to push for the Trans-Caspian and my question to you is what are you planning to do that has not been done before, one.
And two, what are the major obstacles or hurdles you need to jump over? What are you planning to overcome those and, you know, you have any date you wish to, you know, accomplish something sealed for Trans-Caspian?
MR. DOMBEY: What are the major hurdles? What are you planning to do that you haven’t done before and what are the major hurdles?
MR. MOREL: Yes. I mean, first, I mean, I think I started already to answer to your question. Well, I’ve been stressing the Trans-Caspian because I’m the beginning – I’m the beginning of the process. My mandate covers Central Asia. So I’ve some difficulty in following the line all along, even if I’m happy to be in Istanbul today. That’s part of my mission.
So because we are connected in this operation, you have to start in order to sustain the credibility of the Southern Corridor. Otherwise, you would – you could argue the Southern Corridor already exists thanks to BTC. But we know this is not totally the corridor we have all in mind in terms of the request for the next decades. Then, why would it go now?
Once again, because something which would not have been thinkable, I would say, three years ago with a country like Turkmenistan becomes now – takes a real dimension. Once again, I mean, if the European Union was able to put together on a working basis at the level of ministers – the minister of energy from Azerbaijan, Turkmenistan – when you know that they were not speaking to each other five years ago, something is happening. That’s the first point.
Second, in front of some of the objections – and let’s regret that – even intimidation towards these countries, I mean, we can very simply respond that we have no hidden agenda. We are just responding to effective needs which are clearly identified with a huge potential – growing potential in Turkmenistan. We have the basic economic consideration on our side.
And I tried to just quickly answer if you have hurdles of a political nature, I mean, the right of two sovereign states to agree to build between themselves on their own – their sea beds, respecting the connection appropriate for such a corridor, there is no possible objection in international law whatsoever. And even we have precedents in the other side.
And I would like to recall the case of Kazakhstan and Russia. As you know, in the disputed part, North Caspian Sea between Kazakhstan and Russia, the agreement has been established that their platforms will be 50/50 between Russia and Kazakhstan. Fine, good solution, reasonable treatment.
Was there any request to anybody or from anybody to give an advice on this platform? No, and therefore if two riparian countries of the Caspian Sea can agree on that, the same for two other riparian countries.
I mean, this is the kind of debates we have and the kind of potential hurdles. But we have considered that very carefully and we think that we have very simple answers which are the same for everybody. I mean, there is no right of exclusivity in the region. And there is no anti-Russian dimension in my response because all the lesson of this reflection on the fourth corridor is that in terms of volume and in the long future, geology is giving the answer.
The first corridor for European market will be Russia for very long time for geological reasons. So that’s why we face or treat these potential hurdles or objection just reminding basic rules and basic commitments from European Union. I hope I answered somewhat your question.
MR. DOMBEY: It also seemed to be an answer a little directed at Moscow as well, so to say.
MR. MOREL: It’s part of the debate. (Laughter.)
MR. DOMBEY: Terrific. If we don’t have any more questions, I would like to do what hasn’t been done before and finish almost on schedule. I’d like to thank the participants very much indeed. And thank you all as well. (Applause.)
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