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Oil & Gas Journal

Eric Watkins
Senior Correspondent

LOS ANGELES, July 4 -- Hungarian Prime Minister Ferenc Gyurcsany, eyeing competition from Russia for Central Asian natural gas, said his visit to the region next week will focus on winning alternative gas supplies for Europe and the planned Nabucco pipeline in particular.

"The European and the Hungarian energy policy objectives are identical in this respect—to secure supplies from diverse resources and on varied routes," Gyurcsany said. He is set to travel to Azerbaijan on July 7 and Turkmenistan on July 8.

"The most important goal is to see clearly whether the agreement between Russia and Turkmenistan still permits other, independent agreements," he said.

The talks should also shed light on "whether sufficient amounts of gas would be available for the Nabucco pipeline so we could accelerate the construction of the pipeline," Gyurcsany said.

Gyurcsany's remarks came ahead of a July 4-5 visit to Azerbaijan and Turkmenistan by Russian President Dmitry Medvedev, former head of OAO Gazprom. Indeed, according to Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies, Medvedev's visit comes at a crucial moment for Europe.

Turkmenistan is considered a potential gas supplier for the Western-backed Nabucco pipeline project designed to bypass Russia and transport 30 billion cu m/year of gas from Central Asia to Europe via Azerbaijan, Turkey, Bulgaria, Romania, Hungary, and Austria.

In March, however, Gazprom committed to start paying European prices for gas from Central Asia by next year. According to Stern, that means Gazprom could start paying around $250/1,000 cu m of gas, leaving Central Asian states with less incentive to sell to Europe or, for that matter, China.

Ahead of Medvedev's visit, Russian officials agreed with that assessment.

"After gradual transition to world prices, which are inevitable, the issue of orienting these [gas] flows to other countries will be taken off the agenda. If Turkmenistan raises the price, the profitability of gas supplies to Russia or through Russia increases," said Sergei Prikhodko, aide to the Russian president.

Contact Eric Watkins at hippalus@yahoo.com.