Since 2011, the Shah Deniz consortium, which consists of various energy companies including BP, Statoil, Azerbaijan's SOCAR, France's Total SA, Lukagip, National Iranian Oil Co., and Turkey's TPAO, has received several natural gas pipeline proposals. The ultimate objective of these projects is to diversify away from Russian natural gas.

Competing Pipelines

Among the proposed pipelines were the Interconnector-Turkey-Greece-Italy (ITGI), the Trans-Adriatic Pipeline, the Southeast Europe Pipeline and the original Nabucco pipeline. But concerns over Greece's financial solvency have prompted Shah Deniz to drop ITGI from consideration. Supply issues and funding problems likewise put the Nabucco project out of contention.  

Meanwhile, Azerbaijan and Turkey have been in discussions over a new pipeline that would carry natural gas from Turkey's border with Georgia to its border with Bulgaria. SOCAR President Rovnag Abdullayev confirmed during a visit to Turkey in November that his company would build the pipeline with a Turkish firm. Called the Trans-Anatolian Pipeline, the project would have a capacity of approximately 17 billion cubic meters (bcm) and would cost roughly $6 billion. Azerbaijan would be the majority stakeholder — reports suggest it could control as much as 80 percent of the project — with SOCAR shouldering the cost of construction.

If implemented, the Trans-Anatolian Pipeline project would be critical for any of the aforementioned projects, but it could revitalize Nabucco's efforts to bring Caspian natural gas to European markets.

The new Nabucco West pipeline would have several advantages. At roughly one-third the length of the originally conceived pipeline, Nabucco West could cost about $6 billion — roughly half that of the original line. While it would have a 10-bcm capacity initially, the pipeline could be scaled up to have a 30-bcm capacity.

Taken together, these traits make the project more realistic and may help influence Shah Deniz's decision, which is expected to come as early as June. Moreover, the United States favors projects that reduce Europe's dependency on Russian natural gas. The possible appointment of Richard Morningstar, a strong supporter of Nabucco projects, as U.S. ambassador to Azerbaijan could bode well for such projects.

However, the Nabucco West project would still face several obstacles. Competition from other firms notwithstanding, the pipeline would require funding from the European countries in the consortium. Given the financial crisis plaguing the Continent, securing these funds could prove difficult.

Nabucco West is poised to become a significant competitor for a Shah Deniz consortium contract given its revised features. Even if its advantages outweigh its disadvantages, ultimately it is dependent on the Trans-Anatolian Pipeline, the future of which remains unclear. While there has yet to be an official agreement on the project, the Trans-Anatolian Pipeline is not set to be completed until 2017 — leaving plenty of time for the region's competitive environment to change.