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Supply fear sparked Romania pipe switch, according to US cable

The US diplomatic cable reported that the switch was prompted by Romania losing faith in the Nabucco pipeline

Romania lost faith in the Nabucco pipeline being able to secure gas and instead chose to pursue the alternative Azerbaijan-Georgia-Romania Interconnector (AGRI) project, which will bring Azeri gas to Europe, according to a US diplomatic cable released by Wikileaks.

Romanian secretary of the economy, Tudor Serban, signed bilateral energy cooperation agreements with Azerbaijan, Turkmenistan, Georgia and Armenia for the AGRI project, undermining the country’s public support for Nabucco, according to the cable which was sent from the US embassy in Bucharest to Washington DC on 17 February 2010. Romania also signed a memorandum of understanding for Azerbaijan gas supplies, verbally agreeing to take volumes of between 5 billion and 8 billion cubic metres a year.

Serban believed that after an earlier Chinese and Russian agreement with Azerbaijan, the central Asian country only had 8 billion cubic metres a year (cm/y) of additional gas available for Europe, prompting Romania to scramble to secure the supply.

The cable said that with AGRI and Nabucco both competing for the same Azeri volumes, Serban thought the first pipeline to be completed would take the gas, thus prompting Romania to back AGRI. According to the cable, Romania thought the AGRI link would come on stream in either 2012 or 2013, beating Nabucco project which has a start-up date of 2017. AGRI will carry 7 billion cm/y.

Serban also dismissed the idea that Iraq and Iran could supply gas for Nabucco, citing lack of technical ability. Nabucco aims to transport 31 billion cm/y of gas from the Caspian and Middle East to Austria’s Baumgarten hub.

Should AGRI go ahead, Romania would take 2 billion cm/y from the link. The gas would be transported across the Black Sea as liquefied natural gas (LNG), according to a memorandum of understanding from April last year. An LNG receiving terminal would be built in Constanta, Romania, with an export terminal in Georgia.

External pressure

According to the leaked cable, Serban also wanted the US to support the pipeline and LNG plans, anticipating that the AGRI member countries could be subject to "negative external pressures". He also voiced particular concern over Georgia’s level of commitment to the proposal.

Both Nabucco and AGRI would compete with Russia - Europe’s largest gas supplier - for market share. European gas importers have been weighing up alternative supply routes since the Russia-Ukraine gas wars cut supplies in 2006 and 2009. Russia exports most of its gas via trunklines which cross Ukraine.

Gazprom has also acted to calm European nerves, building the Nord Stream pipeline, which runs from Vyborg to Greifswald via the Baltic Sea, bypassing Ukraine. The 55 billion cm/y trunkline will be fully operational by the end of 2012. It also plans to open its own southern corridor to Europe with the South Stream project.

Romanian support for AGRI would be another blow to the European Union-backed Nabucco link. Last month, German utility RWE signed an agreement with Gazprom which will see the pair join forces to develop power generation projects in Europe. RWE is a large gas customer and was one of the main backers of Nabucco, but its entry into the Gazprom joint venture may be a signal it is rethinking its priorities.

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