Nabucco Pipeline Still In Limbo

VIENNA, Austria -- With construction of the EU's ambitious Nabucco gas pipeline slated to begin in less than a year, huge question marks remain over its financing and the actual supplies of gas it is supposed to transport.

The aim of Nabucco is to bring gas from central Asia to Europe, bypassing Russia and Ukraine.

The aim of Nabucco is to bring gas from central Asia to Europe, bypassing Russia and Ukraine where repeated squabbles over prices have in the past left the 27-nation European Union without vital supplies of gas, sometimes in mid-winter.

Nevertheless, the consortium that will build and operate the major new energy corridor has yet to sign a single contract with any of a number of potential supplier countries.

Agreements "will become more concrete very soon," the head of the Nabucco consortium Reinhart Mitschek told AFP in an interview.

The consortium is made up of OMV of Austria, MOL of Hungary, Romania's Transgaz, Bulgaria's Bulgargaz, BOTAS of Turkey and RWE of Germany.

Last month, European Commission chief Jose Manuel Barroso secured the support of Azerbaijan for the project. But no details have been agreed as yet with regard to either volumes or timeframe.

Furthermore, Baku recently redealt the cards by also promising billions of cubic metres of gas to Russia and Iran.

For Azerbaijan to supply 31 billion cubic metres of gas each year to Nabucco, "the Shah Deniz 2 gas field would have to be producing, but that has been set back until 2017," said Societe Generale analyst Thierry Bros.

As a result, the scheduled date for the pipeline to enter operation has been set back once again, this time until the end of 2015.

"Nabucco is not racing against the clock or against any other projects. So it doesn't really matter whether we're ready three months late or three months early," consortium chief Mitschek said.

But with supplier countries hardly queuing up, Nabucco is now considering approaching Russia, Mitschek said, even though the original aim was to reduce Europe's dependence on Moscow.

For the initial phase of the operation, put at 8.0-10 billion cubic metres annually, Nabucco is counting on other Azerbaijan gas fields and on Iraq.

But re-routing the pipeline to Iraq and away from Iran -- in view of the long-running international stand-off over Tehran's controversial nuclear programme -- "will add a further 550 kilometres (340 miles), meaning it will measure 3,900 kilometres (2,400 miles) in total," Mitschek said.

And that will push the costs, already estimated at 7.9 billion euros ($10.7 billion), even higher.

"Without a final decision on investment, all this remains purely theoretical," said Zoe Grainge, European gas analyst at international consultants IHS Global Insight.

"Nabucco doesn't have a single commercial supply contract in place and you need that to provide assurance to investors. There are all sorts of questions about where Nabucco is going to get the gas from if Russia doesn't participate," she said.

Earlier this month, EU energy commissioner Guenther Oettinger urged the consortium to press ahead and start building the pipeline.

"We at the Commission have worked the best we can. The preparations have now reached the stage where the companies can make their investment decision. It is now up to OMV and others to have the courage to move," Oettinger said.

Nabucco is seen as a rival to another pipeline, South Stream, backed by Russian state-controlled energy giant Gazprom and Italy's ENI, which aims to pump Russian gas under the Black Sea to Bulgaria and then onto other European countries.

Source: AFP

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