We'd better learn a new acronym: AGRI. It stands for Azerbaijan-Georgia-Romania Interconnection. Few people have ever heard of this project that is supposed to deliver natural gas from Georgia and Azerbaijan across the Black Sea to Romania. Although I admit I didn't look very hard, the first mention I found of it was in the Oil and Gas Journal on April 14, 2010. The journal informed its readers that Azerbaijan, Georgia, and Romania had signed a memorandum of understanding to transport Azeri LNH to the European Union and that it could apparently come online sooner than the planned Nabucco gas pipeline.
The Romanians were certainly enthusiastic. They considered this planned pipeline "the fastest and one of the most efficient projects" to bring Caspian gas to the European Union. Plans call for gas from Azerbaijan to be piped across the Caucasus to Georgia's Black Sea port of Kulevi where the gas will be liquefied. Then this liquefied natural gas will be shipped by tanker across the Black Sea to a regasification terminal at Romania's port of Constanta and from there to all over the European Union. Apparently the project was conceived after it became clear that the dispute between Turkey and Azerbaijan over gas prices and transit threatened the Nabucco project. AGRI would cost, according to the article in Oil and Gas Journal, €2-4 billion and it is expected to deliver 7 billion cu m/year of gas, with 2 bcm/year going to Romania and the remainder heading on the other EU states. Romania already contemplated the happy state of being "an important gus hub in Europe, with the potential to supply gas to Bulgaria, Hungary, Serbia, and Austria."
I assume you noticed that there was no mention of Hungary here as a part of the deal or a signatory to the agreement. Moreover, even late last night when the Hungarian public first learned about Viktor Orbán's trip to Baku today, the announcement simply said that "Prime Minister Viktor Orbán will take part in negotiations concerning Azeri-Georgian-Romanian-Hungarian energy cooperation." And in case one might think that this was just sloppy reporting, the report also specified that the project, supported by three countries–Azerbaijan, Georgia, and Romania–came into being on April 13 in Bucharest where the three countries' representatives established a firm entrusted with the realization of the project. MTI, the Hungarian news agency, however, remembered that Teodor Baconschi, the Romanian foreign minister, mentioned to János Martonyi when he visited Bucharest on September 1 that "if Hungary wants to join the AGRI pipeline project it should act quickly."
A few hours later, it was all taken care of. MTI reported shortly after noon that the agreement is signed and sealed. "The signatories agreed to support the project and will do their best to acquire backing from the European Union." They are looking for financial assistance from European states and international financial institutions. Surely, they will need it because the four countries' financial situation is not such that they could undertake such a project alone.
This surprise move of the Hungarian government seems to be a real political coup and it is heralded that way in Hungary. However, it is somewhat odd that the state oil company of Azerbaijan, one of the signatories, forgot about Viktor Orbán's presence and Hungary as a signatory. To quote: "Azerbaijan, Georgia and Romania signed an greement establishing a joint venture under the Azerbaijan-Georgia-Romania Interconnection (AGRI) gas transportation project this week, the State Oil Company of Azerbaijan Republic (SOCAR) told Trend today." The news goes on: "The joint venture will operate in Bucharest. Each participant has a 33-percent equity share." Moreover, Ilham Aliyev, Azerbaijan's president, also talked about only an Azerbaijan-Georgia-Romania pipeline. If this is the case, what did Viktor Orbán sign?
Let's see what Orbán had to say about the deal. He mentioned Hungary's commitment to the project. He pointed out that Hungary will cooperate with Romania "in order to make the project profitable." All that sounds rather vague to me even if Traian Basescu, president of Romania, pointed out that "Hungary's adherence is a very important element of the soundness of the project" and President Mikhail Saakashvili of Georgia said that Hungary's joining the project would give it a boost, especially since Hungary will assume the EU's rotating presidency beginning in January.
Romanian politicians are very optimistic about the success of this new pipeline. Europe will be able to reap the benefits of natural gas coming from Georgia and Azerbaijan within three years. They consider the project relatively inexpensive. According to Basescu AGRI would be the most competitive among the three pipelines planned for this region, the other two being Nabucco and Southern Stream, both of which Hungary also supports. At the same time he emphasized that AGRI would not be a rival to them even if they are going to supply the same countries. He went further to explain the arrangement. The project will unify the key role of Azerbaijan, the greatest producer of natural gas, the geostrategic importance of Georgia and Romania, and Hungary will provide "added value" in transmitting the gas farther west.
Miklós Hegedűs, a Hungarian economist specializing in energy, is skeptical about the project. According to him Azerbaijan indeed has fantastic natural gas reserves but they are still underground. The Shah Deniz reserves, the largest in Azerbaijan, are estimated to be between 1.5 billion barrels (240,000,000 m3) and 3 billion barrels (480,000,000 m3) of oil, and 50 to 100 billion cubic meters of gas. Gas production at the end of 2005 was estimated to be approximately 7 billion cubic meters. However, this is not really enough if Azerbaijan through AGRI wants to export 3-8 billion cubic meters. Hegedűs also disagrees with Romanian politicians concerning price. Liquefication and regasification is an expensive business. He is also worries about how realistic it is for three (or four?) relatively poor countries to undertake the construction of a pipeline.
Of course, we have no idea what the real situation is. Politically the move is excellent. Here is a new government and a decisive prime minister about whom all those western papers have written negative things. With this stroke he is now an important player on the energy scene. While the European Union can't get anywhere with the Nabucco pipeline, he can be part of another project. In a month the Hungarian government managed to get on a deal concerning natural gas supplies from Azerbaijan and Georgia. The question is whether the project has any chance of realization. Portfolio.hu raises another red flag. Apparently Russia recently signed a gas deal with Baku according to which Gazprom has a quasi preemptive right to future Azeri gas output.