Nabucco Consortium Refutes Any Plans for Merger with South Stream

Energy | January 13, 2011, Thursday // 16:32|  views

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Nabucco Gas Pipeline International GmbH has formally refuted the information on merging of the Nabucco and South Stream projects stemming form a throwaway remark by the US ambassador to Italy, David Thorne.

According to the consortium, it has no considerations in this regard thus dispelling the rumors about a hypothetical merger of Nabucco with South Stream, as reported by La Stampa, which quoted Thorne on January 10.

Nabucco and the Gazprom-sponsored gas transit pipeline have been widely considered rival projects, with EU Energy Commissioner Guenther Oettinger formally admitting in November 2010, the first such admission by an EU institution, that the two pipelines are competitors.

Preparations for the Nabucco project started in 2002 and the intergovernmental agreement between Turkey, Romania, Bulgaria, Hungary and Austria was signed on 13 July 2009. The project is developed by the consortium of six companies. The final investment decision is scheduled to be made in 2011. If built, the pipeline is expected to be operational by 2015 and it will carry 31 billion cubic meters of natural gas per year.

In November 2010, Turkmenistan announced it was ready to provide the project with more natural gas that it can handle, a revolutionary statement of Turkmenistan's First Deputy Prime Minister Baymurad Khojamukhamedov described the Nabucco Consortium as very promising leaving the Nabucco Consortium convinced that it will strike a supply contract with Turkmenistan.

At the present the project company is 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.

Dolezal said the first gas supplies for Nabucco are expected to come from Azerbaijan – about 8 billion cubic meters per year at first, of which 6 billion could come from the Shah Deniz 2 field. Another 10 billion cubic meters are expected from Iraqi Kurdistan, and the consortium is awaiting the outcome of talks with the Iraqi government.

The construction of the Nabucco gas transit pipeline will start in 2012, and the first natural gas deliveries through it should be a fact in 2015, he explained.

From that, 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.

Despite the neat timeline for the construction and entering into operation of Nabucco, Dolezal indicated that 2011 will be key for the project because this is when the first contracts with the natural gas suppliers will be signed by the consortium.

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.

The Nabucco gas transit pipeline is supposed to be ready by 2015. The CEO of the project company Mitschek has made it clear that the project company is certain of Bulgaria's commitment. He has also expressed confidence that the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), and IFC - a member of the World Bank Group, will support the project with respect to finding funding.

South Stream is a proposed gas pipeline to transport Russian natural gas to the Black Sea to Bulgaria and further to Italy and Austria. The project would partly replace the planned extension of Blue Stream from Turkey through Bulgaria and Serbia to Hungary and Austria, and is seen as rival to the planned Nabucco pipeline.

In November, after months of exhausting talks, Bulgaria and Russia signed an intergovernmental agreement for the construction of the Bulgarian section of the South Stream gas transit pipeline in the presence of their Prime Ministers, Boyko Borisov and Vladimir Putin, in Sofia. The ownership of the Russian-Bulgarian joint company to build and manage the Bulgarian South Stream section will be split 50-50%.

The South Stream gas transit pipeline is supposed to be ready by 2015. Its construction is expected to cost between EUR 19 B and EUR 24 B. It will be transporting 63 billion cubic meters of natural gas annually, or 35% of Russia's total annual natural gas export to Europe.

The South Stream pipe will start near Novorosiysk on the Russian Black Sea coast, and will go to Bulgaria's Varna; the underwater section will be 900 km long.

In Bulgaria, the pipe is supposed to split in two - one pipeline going to Greece and Southern Italy, and another one going to Austria and Northern Italy through Serbia, Croatia and Slovenia.

The project was initiated by Gazprom and the Italian company Eni, and the French company EdF is also planned to join as a shareholder. It is seen as a competitor to the EU-sponsored project Nabucco seeking to bring non-Russian gas to Europe.

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Tags: Nabucco Gas Pipeline International, Nabucco, South stream, gas transit pipeline, natural gas, Russia, azerbaijan

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