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Nabucco gas pipe’s prospects slim after RWE move 19 janvier 2012

Posted by Acturca in Caucasus / Caucase, Energy / Energie, EU / UE, South East Europe / Europe du Sud-Est, Turkey / Turquie, Turkey-EU / Turquie-UE.
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Reuters, Thu Jan 19, 2012

By Henning Gloystein, London

The Nabucco gas pipeline project is likely to be relegates to the pages of history after RWE said this week it was interested in the new Trans-Anatolian gas pipeline project (TANAP) and would review its participation in Nabucco.

This leaves the field open for a merger of smaller projects that aim to transport central Asian gas through Turkey into Europe.

The 4,000-km, 31 billion cubic metre (bcm) capacity Nabucco pipeline, which has been the pet project of the European Union as it aims to reduce dependence on Russian gas supplies, has so far failed to sign any gas supply deals.

Its critics have long said that Nabucco’s cost – now estimated over $12 billion – was too high and that there would not be enough gas available to fill such a big pipeline with non-Russian supplies.

« An empty pipeline is always a bad business, and with the cost escalation we have seen, Nabucco has become less attaractive to the Shah Deniz Phase II partners, with no imminent additional supplier aligned, » Massimo Di-Odoardo from energy consultants Wood Mackenzie said.

For the foreseeable future, the only substantial non-Russian gas supplies from central Asia will come from Azerbaijan, where producers in the Shah Deniz II field, led by BP and Statoil, plan to ship around 16 bcm a year through Turkey into Europe from 2017 or 2018.

One of Nabucco’s key partners so far has been Germany’s RWE, but the company this week said that it might review its participation in Nabucco and that it could join other projects instead.

« RWE aims at securing access to the Caspian gas resources for Europe, and this is the basis for its plans to participate in the Nabucco development project. However, it is clear that RWE is only going to contribute in building a pipeline if there is enough gas to fill it and if the project is economically viable, » the Essen-based company said.

A Nabucco spokesman declined to comment.

The developments have also changed the tone in Brussels, away from its open support for Nabucco towards a more generic southern gas corridor.

« The Southern Corridor comprises several pipelines – TAP, Nabucco and ITGI, and more recently TANAP and SEEP, » Marlene Holzner, a European Commission spokeswoman, said.

« The Commission is neutral where the gas ends up in Europe and supports all pipelines in the EU, not only Nabucco but also ITGI and TAP, » she added.

TANAP, the missing link?

RWE said it was open for any cooperation that would help fulfill its aims to bring central Asian gas to Europe in the most economic way and that the new Trans-Anatolian gas pipeline project (TANAP), launched last December, was of interest.

« We appreciate the potential TANAP creates to substantially lower our capital commitment and … this option now needs to be explored, » RWE’s head of Supply and Trading, Stefan Judisch, said.

TANAP would run from Azerbaijan to the Turkish border with Bulgaria, effectively duplicating Nabucco in this region.

Initial estimates put a price tag of $5 billion on the project.

Its initial capacity would be 16 bcm a year, with 10 bcm set aside for Europe and 6 bcm for Turkey, although the project is designed to be expandable to up to 60 bcm.

This could make TANAP compatible with Nabucco’s competitors, which initially aim to receive 10 bcm of Azeri gas from the Turkish border and pump it to Europe via Italy, with the possibility of later capacity expansions.

TAP, which has Shah Deniz’s stakeholder Statoil as a major partner, has said it would welcome a merger of projects.

« The merger of projects seems to achieve a number of objectives, including balancing the financial efforts to the size of the project, » WoodMac’s Di-Odoardo said.

Such a merger « is also attractive to the European Commission because, by increasing the size compared to a 10 bcm pipeline alone, it provides upside for future supply developments in Central Asia, thus reinforcing the concept of the Southern Corridor, » he added.

(Additional reporting by Vera Eckert in Frankfurt and Michael Kahn in Prague; editing by Jane Baird)


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