Nabucco seeks shorter way to bid for Azerbaijani natural gas

LONDON - Reuters

A number of projects joined by Western energy firms are racing to buy Azerbaijan’s natural gas. The project is vital for Europe’s energy diversity as the continent is largely dependent on Russian resources. AFP photo

The Nabucco Consortium has submitted a proposal for the smaller Nabucco West version of its pipeline project to the Shah Deniz 2 group that plans to ship 16 billion cubic meters (bcm) of Azeri natural gas to Europe, the Nabucco group has said.

The Nabucco West option would mean that the pipeline only begins at Turkey’s western border, significantly reducing its length and cost, but leaving the transport through Turkey to another pipeline or existing infrastructure.

The original project aimed to build a 4,000 kilometer pipeline to transport over 30 bcm - around a third of Britain’s annual demand - per year of gas into Europe in order to reduce its dependency on Russian imports.

But its critics have long said that its cost - estimated at over $12 billion - was too high and that it would struggle to find enough gas to fill it with non-Russian supplies.

The Vienna-based Nabucco Consortium has now applied to the Shah Deniz 2 group to build the smaller Nabucco West pipeline that would bring Caspian gas from the Bulgarian-Turkish border to Austria.

“We are convinced that we have submitted a competitive and comprehensive proposal to the Shah Deniz 2 Consortium, and that this proposal represents a win-win situation for our shareholders and for suppliers alike,” said Reinhard Mitschek, Managing Director of Nabucco Gas Pipeline International.

Deadline this summer
The Shah Deniz 2 group is expected to announce the winning pipeline project this summer, with a final investment decision planned for 2013.

“The (Nabucco West) concept foresees the construction of a 1,300 kilometer pipeline that will run from the Bulgarian/Turkish border to the Central European Gas Hub (in Austria),” the group said.

“The pipeline is designed to transport gas initially from Azerbaijan and is fully scalable to meet future gas transport demand from the Caspian Region and Middle-East to the European markets.”

Nabucco said that the project would benefit from the existing legal framework such as the Intergovernmental Agreement, Project Support Agreements and third party access exemptions, that have already been put in place.

Nabucco’s six shareholders are Austria’s OMV, Germany’s RWE, Hungary’s MOL, Turkey’s Botaş, BEH of Bulgaria and Romania’s Transgaz.

MOL and RWE set off a debate over the feasibility of Nabucco’s original size earlier this year and threatened to leave the group.

Nabucco competes with several other pipeline projects to bring the Shah Deniz 2 gas to Europe.
The Trans Adriatic Pipeline (TAP) project aims to pump the gas through existing Turkish infrastructure into Greece, Albania and into Italy.

TAP is run by Norway’s Statoil - also a partner in the Shah Deniz 2 gas field, alongside BP - Germany’s E.ON Ruhrgas, and Switzerland’s EGL.

Italy’s Enel has also voiced its interested in joining TAP. Another option would be BP’s South East European Pipeline (SEEP) is a project, which would mainly use existing gas infrastructure to pump Azeri gas through southeastern Europe, including Hungary, into western Europe.