Stage two of the Shah-Deniz field has chosen the Trans-Anatolian Pipeline (TAP) project as the delivery method to Europe. (Photo: BP)

Just like the protagonist in the eponymous opera, the Nabucco pipeline, the one-time leading option for carrying natural gas from Azerbaijan to Europe, has been outmaneuvered and knocked from its preeminent perch.

In the opera, Nabucco is a king of Babylon who is outwitted by a group of palace conspirators and temporarily loses his throne. After undergoing a spiritual conversion, he thwarts his enemies and regains his crown. But the happy opera ending is one thing. In the Caspian energy-export game, it is far from certain whether the pipeline formally known as Nabucco-West will be able to make a comeback. That’s because the simple pursuit of profits, not diplomatic scheming appears to have been the primary reason Nabucco-West lost out among the multiple bids to export gas from Azerbaijan’s largest natural-gas field, Shah Deniz.

On June 28, the international consortium running the Caspian-Sea-based Shah Deniz field (BP, the State Oil Company of the Azerbaijani Republic and Total), announced that the rival Trans-Adriatic Pipeline (TAP) had won the bid to export up to 16 billion cubic meters (bcm) of gas per year from the second stage of the project. The consortium’s decision came as a surprise to many. Nabucco-West has enjoyed much stronger diplomatic support from the European Union and United States than TAP, run by Switzerland’s Axpo, Germany’s E.ON and Norway’s Statoil.

Some observers speculated that the choice meant a win for Russia. The 1,300-kilometer-long Nabucco-West pipeline, running from Turkey through Bulgaria, Romania, Hungary and Austria, was conceived as a way to wean Europe off dependence on Russian gas. TAP, running from Turkey through Greece, Albania and Italy, “does not cross Moscow’s interests in Europe,” commented political analyst Elkhan Shahinoglu, head of Baku’s Atlas Research Center.

But one high-ranking EU-member-state diplomat, who asked not to be named, underlined that the consortium based its choice on the fact that TAP makes better financial sense than Nabucco-West. “One should not look for political reasons here,” he told EurasiaNet.org. “Shah-Deniz-2 is a very costly project, [the] drilling is complicated and [the] amount of investments is constantly growing. Therefore, [the] consortium partners, especially BP and [Norway’s] Statoil, were strongly lobbying for the selection of TAP.”

At a July 1 briefing in Baku, the BP-Azerbaijan executive responsible for the Shah-Deniz project, Vice-President Al Cook, confirmed this thinking, describing TAP as “seriously more efficient than Nabucco-West from the gas price and tariffs points of view.”

TAP offered the consortium a transit tariff of three euros ($3.85) per 100 kilometers of pipeline -- 50 cents cheaper than for Nabucco-West over the same distance. Plus, TAP is 459 kilometers shorter than Nabucco-West, which makes for even cheaper total tariffs.

The investment amount needed to build the TAP pipeline is also far lower – an estimated 4.4 billion euros ($5.64 billion) compared with 6.6 billion euros ($8.47 billion) for Nabucco-West. As a result of the TAP pick, the consortium now holds a 50-percent stake (20-percent for both BP and SOCAR and 10 percent for Total) in the pipeline.

Energy analyst Ilham Shaban also noted that the average purchase prices for gas among TAP’s prospective customers (Greece, Albania, Italy, Croatia, Bosnia and Montenegro) are higher than for Nabucco-West’s projected clients, who would also have access to Russian gas.

Tangential benefits explain the TAP pipeline pick too, Shahinoglu believes. On June 20, SOCAR received approval for its 400-million-euro ($524.2 million) offer for a 66-percent stake in DESFA, the gas distributor for TAP host country Greece. The deal gives SOCAR direct control of a domestic gas-distribution market within the EU for the first time.

While, officially, the TAP and DESFA decisions are not linked, Shahinoglu believes that the TAP card sweetened SOCAR’s bid for DESFA, making the pipeline “part of the deal between the Azerbaijani and Greek governments.”

And while TAP seems in an unassailable position, few are leaving Nabucco-West for dead. Lobbying on behalf of Nabucco-West has not slackened. In addition, President Ilham Aliyev has not appeared firm in the country’s pipeline decision. According to the European diplomat, Aliyev “was not comfortable” during his June 21 visit to Brussels “explaining to EU leaders why Baku did not select [the] EU-preferred Nabucco-West.”

On July 3, EU Commissioner for Energy Günther Oettinger announced that the Nabucco project is still on the EU’s agenda since “Europe’s demand in gas will grow by 2020 and Azerbaijan is planning to increase gas production from other fields.”

“Azerbaijan has other promising gas fields and Nabucco could be needed in future,” agreed BP-Azerbaijan president Gordon Birrel on June 28.

Azerbaijan’s gas production could reach as much as 32 bcm per year by roughly 2025; chief among the gas fields that would need an export pipeline is the offshore Absheron, estimated to contain up to 300 bcm of gas. Production is expected by 2020.

Baku-based energy expert Ilham Shaban is pessimistic about Nabucco’s chances. “Inertia” lies behind the ongoing lobbying for the pipeline, he said. “Nabucco was a very large-scale, ambitious project that was on the agenda for a decade and had lobbying and political support unprecedented in the history of pipelines. Therefore, such a project cannot simply disappear overnight with one decision,” Shaban said.

With time, though, “Europe’s energy map will seriously change” and rival sources, such as shale gas or liquid natural gas, will start to compete against Caspian Basin exports. “Nabucco will have to compete with all these,” Shaban said. In his opinion, “Nabucco’s story is finished.”