Nabucco Pipeline Delayed for 2 Years over Natural Gas Supplies

Business » ENERGY | May 6, 2011, Friday // 17:29
Bulgaria: Nabucco Pipeline Delayed for 2 Years over Natural Gas Supplies

The much-anticipated EU-sponsored Nabucco gas transit pipeline will be delayed by two years, the Nabucco consortium has announced raised doubts of increasing uncertainty about the project.

Nabucco Gas Pipeline International GmbH has pushed back the start of construction of its EUR 7.9 B pipeline to carry Caspian natural gas to Europe to 2013; thus, Nabucco is now expected to start operations in 2017 instead of 2015, as previously expected, the company said in a statement.

"The timeline has changed as a direct result of the changes in the timing for gas supplies in the Caspian and Middle East regions, as announced by potential suppliers. Construction is envisaged to commence in 2013 to align the Nabucco timeline with gas suppliers," the consortium explained on its website.

"Nabucco's progress has been positive so far, with the progress of the Environmental & Social Impact Assessment and concrete steps for procurement and other important work-streams. The Open Season process will start as soon as there are firm indications that gas supply commitments are in place. The Final Investment Decision will be taken consequently. We now expect first gas to flow through the pipeline in 2017. The Nabucco project continues to be driven by the needs of its customers," Reinhard Mitschek, Managing Director, Nabucco Gas Pipeline International GmbH, commented.

The Nabucco shareholders are said to have confirmed that "the negotiations with the gas suppliers are encouraging." All gas supply negotiations are being led by the shareholders and by third party gas buyers from Turkey and from Europe and are undertaken completely separate from Nabucco Gas Pipeline International GmbH, which acts as the infrastructure company, Friday's statement notes.

"From today's point of view I don't see further delays. It remains to be seen" when the final investment decision, which was scheduled for this year, would be made," Nabucco Managing Director Reinhard Mitschek told journalists today on a conference call from Vienna as cited by Bloomberg.

Mitschek said Nabucco is open to new partners if there is "added value" and any negotiations would be between the existing partners and a potential new one, which is probably the first time the consortium leadership admitted it was ready to consider linking with other rival projects.

"If that can deliver added value, then we'll take all shippers on board. We see Nabucco as a backbone and frontrunner. We are open to links to branch lines," Mitschek stated.

Mitschek further refuted once again Thursday's reports that the estimated cost of the pipeline had risen from EUR 7.9 B to EUR 15 B.

He did say the pipeline would be 20% - or 550 km - longer than first planned. The 550 km extension results from changing from an Iran feeder line to an Iraq feeder line.

"That does not automatically mean that investment figures need to be increased in the same range. To give any prices now would be premature," a Nabucco spokesman said.

The Nabucco gas pipeline is supposed to reduce EU's energy dependence on Russia by bringing in natural gas from the Caspian region, Central Asia, and the Middle East.

The direct investments in the Bulgarian economy from the construction of Nabucco will be about EUR 400 M and a few hundred jobs. Another about 1000 jobs will be created indirectly by the project.

The Nabucco shareholders are: Bulgarian Energy Holding (Bulgaria), Botas (Turkey), MOL (Hungary), OMV (Austria), RWE (Germany) and Transgaz (Romania), Each shareholder holds an equal share of 16.67% of Nabucco Gas Pipeline International GmbH. Nabucco is estimated to cost EUR 8 B, and Bulgaria, as a partner with 1/6 of the shares, will be expected to provide 1/6 of the total sum, or about EUR 1.3 B, rather than finance just the section on its territory. Bulgaria plans to finance its share in Nabucco with a EUR 1.2 B loan from the European Investment Bank.

Nabucco Gas Pipeline International GmbH, the Vienna-based project company, has been involved in talks with the European Bank for Reconstruction and Development, the European Investment Bank, and the International Finance Corporation, a member of the World Bank Group, asking for an EUR 4 B loan. These negotiations are expected to be completed in 2011.

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Tags: Nabucco Gas Pipeline International, Nabucco, gas transit pipeline, pipeline, Christian Dolezal, turkey, natural gas, Reinhard Mitschek
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