Death is now amongst us. Stalking the Nabucco partners… watching as they each pull away. RWE is prefering to get away from the corpse. Death was not the result of a lack of gas, lack of finance or lack of political will: death came from reality. The broader social-political and economic reality that security of supply is not worth $10 billion.
Nabucco rose on the 2009 gas crisis between Russia and the Ukraine – the only viable long term option to for Southeast and Central Europe to diversity away from Russia. The timing was right for the plans and the consortium, the shutting off of gas and the impact it had on countries largely reliant on Russian gas spurred a great impetus to diversify.
Nabucco’s bubble grew with the momentum built on the concept of security of supply for Europe. For companies and governments who supported the project, their commitment and involvement meant that the momentum needed to be maintained. The competition against the Russian backed South Stream, meant there was a race occurring and neither Nabucco’s supporting companies or governments could be seen as folding to the demands – or in the face of Russia’s demands. The hot air continued to be pumped into the bubble as the company executives and politicians spoke.
But now it is done. The decision is made – now the companies and governments have to think of how to exit. I know the feeling. On this topic, I’ve had writer’s block for three months. I couldn’t figure out what was going on. In a previous post, I tried to make sense of it- tried exploring in my writing what was going on. But I just ended up with a feeble post. My friend at Natural Gas for Europe asked for something. I couldn’t deliver, was my explanation…. maybe if I had known my feelings more, I would have known I was watching my prized project – the one I invested so many hours analyzing, die. Like a football fan watching his winning team go down to an inferior team, the impossibility of it all means the mind can’t process the events. Nabucco is dead.
The popping of Nabucco’s bubble was not done in dramatic fashion. Death did not come from the lack of finance, lack of supply or lack of political support. Each of these factors other analysts have claimed would be the reason for Nabucco not to be built. I always argued otherwise; my reasoning was based on the trued concept of Earth, Wind and Fire. Man’s desire for the Earth’s mineral riches is too great, so geology (Earth), finance (Wind) or politics (Fire) could not stand in the way. My argument rested on the nonsensical argument that gas can be created, money spent with flimsy conditions and politicians can all get along. And this is all still true – Man (and I am being sexists in my use of the term) can make anything stupid happen.
The death of Nabucco was caused by a ‘holy shit moment.’ We all have these. Doubts stir, finally they emerge, not just in strong terms, but through clarity. The shift of US support in November 2011 to commercially viable projects that delivers gas to the CEE/SEE region marked an important point. While the other smaller pipeline projects were getting attention and it was ‘out there’ that these could become viable, it was all noise. (That’s all I could hear for the past few months – noise.) But now with the reduction of support from RWE, and the broader shift in the economic conditions in Europe and the world, air is seeping from Nabucco’s bubble. People and companies are ready to buckle down and see how the next few years go. The importance of security of supply is now reduced. We are all back to comfort foods.
Death did not come about by alternative gas sourcing either. Shale gas did not kill Nabucco. Just as Nabucco went through a three year bubble of irrational discourse, so too is shale gas. Pipelines did not kill Nabucco. There are two proposed smaller pipelines that would see the Turkish system beefed up, the Turkish and Azerbaijan TANAP project, and now the strong contender, South East Europe Pipeline project, each delivers less gas for lower cost to Europe – and from available reserves in the region. While these now appear to be commercially viable – it was never realistic that Nabucco could compete – or be built – with small capacity and a short term time horizon for payback. Nabucco was a large long-term project that was on the point of visionary – smaller does not win in the long-term. And so Europe will not either from Nabucco’s demise. Political rationality helped kill Nabucco. The apparent rapprochement, or entrapment – between the Ukraine, EU and Russia over the Ukrainian transit system, means that reality has also returned to the most financially viable method of transferring Russian and Central Asian gas to Europe. (Can the Ukraine afford to have South Stream built?) In an age of comfort food and ‘STOP – what’s rational?,’ then the continued use of the Ukraine for transit is also smart.
The public death of Nabucco will continue for sometime now. It won’t be fast. But for me, Nabucco is dead. South Stream, will be analyzed in a later post, but what killed Nabucco can also kill South Stream. They are the same creature. But just as one is at a loss after a death, I’ll have to search for a new way to perceive the EU- Russia gas relationship. Pipelines are so 2010’s; now we all have to understand and reconceptualize what the new energy relationship is between the EU and Russia – now the fun begins again.