Western officials never miss an opportunity when visiting the Caspian to state their desire to buy more gas directly from the region in order to enhance European Union energy security and reduce reliance on Russia. But the optimism expressed in two recent, separate visits by Austrian and UK ministers over hopes for supply from Azerbaijan for the proposed Nabucco pipeline and for a planned trans-Caspian pipe from Turkmenistan should be taken with a cold dose of realism (WGI Sep.19,p1).

It's a game that involves by twists and turns the region's complex geopolitical relationships with major powers including China and Russia on the one hand and neighbors Turkey, Iran and Afghanistan on the other, not to mention the often touchy relations between Caspian energy producers themselves.

Austrian gas and oil company OMV trumpeted the memorandum of understanding (MOU) signed during a recent visit to Baku by Austrian Economics Minister Martin Bartenstein with Azeri Industry and Energy Minister Natik Aliyev, which "aims at laying the foundation for procuring natural gas from Azerbaijan and for the integration of Azerbaijani gas volumes into the Nabucco gas pipeline."

OMV, which is promoting the line and has opened an office in Baku, added that, "in accordance with the MOU," it and Azeri state Socar would start detailed talks on the procurement and transport of gas to the Baumgarten hub near Vienna via the estimated $5.8 billion Nabucco pipeline from Turkey to Austria. The four other current Nabucco consortium members are Turkey's Botas, Bulgaria's Bulgargaz, Romania's Transgaz and Hungary's Mol.

But while Austria clearly sees Azerbaijan's large gas reserves playing an important role in Nabucco, Baku is cautious. One senior Socar official emphasized to WGI that "the MOU is not a binding deal to reach an agreement," and that Nabucco is only one of a number of options that will be considered for future gas sales.

Azerbaijan is reluctant to advance toward new transportation deals until it gets a clear understanding of the "transit strategies of neighboring countries," the source said, in a reference to Turkish ambitions to control gas flowing across its territory (WGI Aug.1,p2). "This is the basic problem," the source said. Azerbaijan, which would like a transparent and market-linked transportation tariff for shipments to Europe, fears Turkey will want to take ownership of the gas and sell it on to leverage its position as a transportation hub and optimize revenue.

Azerbaijan is currently committed to execute an agreement to sell gas to Georgia and Turkey from the 8.6 billion cubic meter per year (830 million cubic foot per day) Stage 1 of the BP-led Shah Deniz offshore gas development. Stage 2, which will produce an additional 12.5 Bcm/yr, is due for completion in 2012, but will likely slip a year or two. "Stage 2 volumes will be sold to the buyer who offers the best commercial terms," the Socar source said.

Azerbaijan has also considered supplying the 900 kilometer South Stream pipeline, which would run from Russia to Bulgaria under the Black Sea. It is being sponsored by Russia's Gazprom and Italy's Eni as an alternative to another Blue Stream line through Turkey (WGI Jun.27,p1).

Azerbaijan has been equally lukewarm in its support for a proposed trans-Caspian gas pipeline from Kazakhstan and Turkmenistan under the Caspian Sea, which would compete with its own volumes (WGI Aug.15,p1). "We have enough opportunities and resources to supply gas to Europe," the Socar source said. "If, as a result of discussions between Kazakhstan and Turkmenistan, they come to an agreement on supplying the gas, and if there is a need in Europe to enhance their energy security, then we are ready to discuss the trans-Caspian project. We are not trying to avoid the trans-Caspian pipeline, but we are not willing to initiate it."

Turkmen President Gurbanguly Berdimuhammedov was quoted as saying after meeting with the Austrian and UK delegations that Turkmenistan, "having multiple vectors in its energy policy and creating alternative export routes, including in the southern direction through the Caspian Sea, is prepared to deliver natural gas to European countries."

UK Energy Minister Malcolm Wicks was quoted as saying after the talks in Ashkhabad, "I was very impressed by the president's positive approach" to energy cooperation.

However, Moscow strongly opposes a trans-Caspian line, and it has been quick to assert its influence in Ashkhabad since Berdimuhammedov took over earlier this year. Its campaign aims to ensure that most Turkmen exports continue flowing north through Russia, with some going to China, too (WGI Aug.29,p1).