Should Azerbaijan say “no” to the Nabucco pipeline project?

Vugar Bayramov: ‘ It doesn’t seem realistic to find an alternative to the Nabucco project neither in an economic nor political sense.’

The Nabucco gas pipeline agreement will be signed on June 6th. From the report of the Turkish Energy and Natural Resources Minister Taner Yildirim, it is obvious that Azerbaijan will not participate. The minister anounced that, the companies OMV (Austria), ‘BOTAŞ (Turkey), “Bulgargaz” (Bulgaria), “Transgaz”( Romania), “Mol Natural Gas” ( Hungary) and RWE ( Germany) will sign the agreement. SOCAR’s president Rovnaq Abdullayev announced that Azerbaijan can transport its gas not only via Nabucco but via other more profitable routes.

According to Vugar Bayramov, SOCAR’s search for alternative routes should not be interpreted as Azerbaian’s political position: ‘First of all, SOCAR doesn’t govern Azerbaijan’s energy system, it is just an executive institution even though it holds energy export. Besides participation of the Azerbaijan president in the ‘Nabucco’ summits shows the political will of the country in this direction. Most importantly, existing pipelines are not enough to transport Azerbaijan’s increasing gas.’

According to Vugar Bayramov, it is not an coincidence that this statement is anounced before the oil-gas exhibition to be held in Baku, as well as the agreement to be signed on June 6th in Turkey: Azerbaijan wants to receive better economic conditions in the Nabucco project. In this sense, the latest statement can be a message for the European Union and Turkey, saying Azerbaijan can find alternative routes to transport gas, ‘Nabucco’ just offers suitable conditions for the country.
The economist has also said that, an increase in the construction costs of the ‘Nabucco’ pipeline is normal.‘ There is an increase in the construction costs of all the regional projects. It is not connected with the increase of materials or services. Increase in the costs is directly connected with the division of evaluation into stages. In the first stage the initial and approximate prices are set, and later the detailed prices are set. For instance, the initial costs of the South Stream project supported by Russia, constituted $12 billion, however now the figure is $26 billion, or the costs of the AGRI project was predicted as 1,5 billion Euro, now it constitutes more than 4 billion euro.’

Vugar Bayramov informed that, existing pipelines don’t fit to transport Azerbaijan’s increasing gas to the world market. Azerbaijan exports 2 billion m3 gas to Russia, and the maximum power of this pipe is 6 billion m3. Azerbaijan exports 1 billion gas m3 to Iran and is not going to increase it. It has technical and political grounds. Baku-Tbilisi-Arzurum pipeline has a capacity of transporting 8,8 billion m3., and it it possible that in the following years, the amount will reach by 20 billion m3. in the best case ,which means Azerbaijan needs a new pipeline. ‘Nabucco’ is not just important in political but also in economic sense.

“The economist mentioned that gas revenues of the country will increase rapidly beginning from 2015 and explains it with the launch of ‘Şahdəniz-2’ platform in the end of 2014. ‘ If we consider, Azerbaijan has produced 29 billion m3 gas in 2010, it is forecasted that in 2011 it will be more than 30 billion m3. Launching of “Şahdəniz- 2” platform may result in increase of Azerbaijan’s gas by 46 billion m3. In this case Azerbaijan will increase its gas export by 30 billion m3. With the current prices it means annual income from gas exports will reach $9 billion. If we consider that by the utilization of the other wells, it is forecasted that gas export will increase by 60 billion m3 by the end of the second decade, it means annual income from the gas export may constitute $18 billion for that period. It indicates that in the formation of the state revenues gas revenues will prevail.’

Vugar Bayramov mentions that, it is possible to divide Azerbaijan’s economy into two stages in terms of state revenues: ‘In the first stage,2011-2015 oil revenues will be prevail in the formation of the state revenues. In the second stage , 2015-2020 ,as a result of the rapid increase in the gas exports, gas revenues will be dominant in the state budget. When we characterize these stages in terms of the amount of the state revenues, in 2011-2015 though the growth rate will not change in the GDP, there will be decrease in the growth rate.The State Statistical Committee has forecasted 3 percent growth in GDP in 2011 which was 4,8 percent in 2010. In the independent researches of the international institutions and the Center for Economic and Social Development (CESD), it is forecasted that, in 2011-2012 the growth rate will not change, however increase rate will decrease in comparison with the previous years. The State Statistical Committe has also approves the same conclusion. The same tendency will continue in 2013-2014. However, increase in export income will cause GDP increase rapidly. If we draw Azerbaijan’s development image in the next 20 years, we will see gas revenues prevail oil revenues.’ The economist has also added, as the gas revenues will prevail beginning from 2015, it is possible to get better conditions in the ‘Nabucco’ project.

According to Vugar Bayramov, the difference of the formation of the state revenues on the account of gas revenues rather than oil revenues is explained with the stability of the prices of the first. ‘In recent five years no decrease has been observed in the gas prices. Instead there has been increase. Whereas the oil price changes each day and it creates problems in the predicting the state revenues. Stabilization and increase of the gas prices will help the country to receive stable predicted revenues. ‘The economist has stated that ‘Nabucco’ doesn’t not hold just economic but also political importance. ‘The project is in the political agenda of the West. This project is important for Azerbaijan’s European Integration. The decision of withdrawing from Nabucco has also political responsibility. In this sense finding alternatives for Nabucco doesn’t seem real either in economic or political sense.

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