BAKU, Nov 15 (Reuters) - A smaller, cheaper alternative to the EU-backed Nabucco pipeline could be the best first choice to carry Caspian gas to Europe, though Nabucco retains U.S. political support, the U.S. special envoy for Eurasian Energy said on Tuesday.
The U.S. envoy, Richard Morningstar, told a news conference in the Azeri capital that Nabucco retained U.S. political backing but economic concerns -- including the potential to scale to available gas volumes -- should take precedence.
“It’s important if Shah Deniz producers and (Azeri state oil company) SOCAR choose a smaller pipeline as the first pipeline,” Morningstar said after meeting the Azeri President Ilham Aliyev.
“It will be extendable as more gas becomes available,” he added.
Three consortia are bidding to carry gas to Europe from the second phase of Azerbaijan’s giant Shah Deniz field.
They are aiming to secure a new alternative to supplies from Russia, seen as prone to political influence since supply cuts to Europe during pricing rows with transit countries.
But two of those consortia -- the Trans Adriatic Pipeline and Interconnector Turkey-Greece-Italy -- propose to run their pipelines through Greece and could run into financial obstacles if Greece defaults or exits the euro zone.
The European Union is backing the 31 billion cubic metre, 3,000 kilometre Nabucco pipeline, which was designed to access both Caspian and Middle Eastern suppliers.
But at a cost of 10 billion euros, Nabucco is “not cheap”, EU Energy Commissioner Guenther Oettinger said on Nov. 4.
In the debate surrounding the routes, a dark horse option has emerged in the form of a pipeline backed by BP, one of Azeri national oil company SOCAR’s partners in Shah Deniz.
The other partner in Shah Deniz is Norway’s Statoil, a leader of the TAP consortium.
SOCAR and its partners in Shah Deniz plan to decide on an export route for 10 billion cubic metres of gas per year from Shah Deniz II by the end of this year.
Shah Deniz has been estimated to contain 1.2 trillion cubic metres of gas, which European companies hope can supply them for decades, cutting their dependence on Russia. Production was launched in 2006, with the second phase seen starting in 2017.
Russia is planning its own new southern route to bypass Ukraine, which is already set to see its share of transit volumes fall with the launch last week of the first phase of Nord Stream, a new undersea route which will ultimately carry 55 bcm per year.
A final investment decision on the South Stream pipeline, which would run around Ukraine along the floor of the Black Sea, was taken earlier this year.
Ukraine, which until the launch of Nord Stream carried 80 percent of Russia’s transit volumes to Europe -- or around 110 bcm -- has quarrelled repeatedly over the price of the gas it buys from Russian export monopoly Gazprom, leading to supply cuts to Europe in 2006 and 2009.
The two are seeking a resolution that could put Ukraine’s transit pipelines under the joint control of Russia, Ukraine and European entity, but those talks have yet to bring a result.
The outcome of those talks could influence the need for South Stream and the so-called “southern corridor” options under discussion for Azeri gas.