Curtain comes down on Nabucco pipe dream

By bne IntelliNews June 26, 2013

Nicholas Watson in Prague -

With the words, "the Nabucco project is over for us," OMV's chief executive Gerhard Roiss finally brought the curtain down on the increasingly unloved EU boondoggle to bring Caspian gas direct into the heart of Europe.

Instead, it appears that the private sector Trans Adriatic Pipeline (TAP) project has been given the nod by the consortium developing Azerbaijan's giant Shah Deniz field to transport 10bn cubic metres of its gas annually from the Turkish border to EU markets.

The Austrian energy group OMV, which has been cheerleading a group trying to build Nabucco for over a decade, said in a statement on Wednesday, June 26 before a hastily called news conference that the "Nabucco West project was not selected by the consortium" developing the second phase of Shah Deniz.

"While OMV accepts the decision of the consortium, OMV is of the opinion that the offer which was submitted by [Nabucco Gas Pipeline International Gmbh] met all the selection criteria and was highly competitive," it sniffed.

Nabucco West is the remnant of an overly ambitious - and ultimately doomed - EU plan to bring gas about 4,000 kilometres from Azerbaijan - and perhaps later Turkmenistan - to Austria, avoiding Russian territory. Nabucco had huge political backing given it would help diversify Europe's gas supplies, but it simply wasn't economically or practically feasible. It planned to bring 31bn cm/y of gas a year, but found few suppliers other than Shah Deniz II's 10bn cm/y (16bn cm/y will be made available from the field, but Turkey will take 6bn cm/y for its own use). bne predicted its death five months before it was finally killed.

The shorter and smaller version, the renamed Nabucco West, that emerged in May 2012 was only 1,300km long with a capacity of 10bn-23bn cm/y and was designed to pick up from the planned Trans Anatolia Natural Gas Pipeline (TANAP) that's currently being built by Azerbaijan and Turkey. Construction of TANAP, estimated to cost $7bn, is scheduled to start in 2014 and will be completed by 2018.

However, Nabucco West faced stiff competition from TAP, which has so far not publically commented on the decision but is the only alternative to Nabucco West.

The 10bn-20bn cm/y TAP offers a shorter route from the Turkish-Greek border across Greece and Albania and onward under the Adriatic Sea to southern Italy, with fewer transit countries and fewer partners to complicate matters. Even Nabucco West's own partners weren't convinced of its chances; in April, Germany's RWE left the consortium of OMV, Hungary's Mol, Romania's Transgaz, Bulgarian Energy Holding, Turkey's Botas, selling its 16.7% stake back to the Austrian firm.

TAP also had the huge advantage that one of its shareholders, Norway's Statoil, is at the same time a lead member of the Shah Deniz consortium, together with BP and Azerbaijan's state-owned Socar. TAP's current shareholder structure includes Axpo of Switzerland (42.5%), Norway's Statoil (42.5%), and Germany's E.ON Ruhrgas (15%). On June 17, the European gas infrastructure group Fluxys said it's considering taking a shareholding in TAP project if it was chosen by Shah Deniz; analysts say other companies may also now jockey to join the project.

Kjetil Tungland, TAP's managing director, had been increasingly optimistic that his €2.5bn pipeline would get the nod over the more expensive Nabucco West in the run-up to the decision. "I think the odds are highly in our favour because we were more in front technically and commercially all the time, but politically we had to catch up," Tungland said in an interview earlier this year.

Although no reasons for the Shah Deniz decision have been given, at the press conference Roiss was quoted by newswires as questioning whether higher gas prices could be achieved in skint Greece or enough gas could be sold to Italy, which is heavily involved in Russia's competing gas pipeline, South Stream. The two countries are the main ones on the TAP route. "The question of whether [higher prices] is a fig leaf for a political decision I leave to you to judge," he said.

Indeed, only on June 21 it was announced that Socar had reached an agreement with Hellenic Republic Assets Development Fund to acquire a 66% stake in Greece's natural gas transmission system operator, DESFA, as a way to increase its gas sales in Greece and neighbouring Bulgaria. "I can only speculate that the DEFSA privatisation to Socar tipped the balance between the two options in the end," says Andrew Neff, principal energy analyst of IHS Energy.

Roiss' comments that the Nabucco project is "over" also probably puts paid to the idea that Shah Deniz might want both pipelines built, just at different times. That notion was given credence earlier this year by comments from Socar officials that Nabucco West and TAP were "definitely not mutually exclusive."

Nabucco was named after the eponymous Verdi opera that tells the story of the Jews as they are eventually conquered and exiled from their homeland by the Babylonian King Nebuchadnezzar. The pipeline of the same name has suffered a similarly long drawn-out and sad fate.

Related Articles

Drum rolls in the great disappearing act of Russia's banks

Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more

Kremlin: No evidence in Olympic doping allegations against Russia

bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more

PROFILE: Day of reckoning comes for eccentric owner of Russian bank Uralsib

Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.