Nabucco is dead; long live Nabucco West

By bne IntelliNews May 18, 2012

Tim Gosling in Prague -

The EU's grand dream to build a 4,000-kilometre gas pipeline bringing Caspian and Central Asian gas into the heart of Europe is now officially dead, as the consortium looking to build the Nabucco pipeline submitted a proposal for the smaller Nabucco West to carry gas from the giant Shah Deniz field in Azerbaijan into Europe.

Meeting the May 16 deadline set by the BP-led Shah Deniz consortium for proposals to ship 16bn cubic metres of its gas to Europe, the Vienna-based Nabucco Consortium announced that it has pitched Nabucco West - set to run 1,300 km from the planned Trans-Anatolian (Tanap) pipeline on the Turkish border up to Baumgarten in 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," Reinhard Mitschek, managing director of Nabucco Gas Pipeline International, told Reuters.

He also stressed that the scaled-down project can still source other gas. "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," he claimed. Austria's OMV - a member of the Nabucco constorium - has said recently that Nabucco will be vital for its JV with Exxon Mobil in the Black Sea.

Beset by problems - not least of which has been a failure to secure any of the 31bn cm of gas needed to fill it annually - the original Nabucco had been faltering for years as it strove to provide an alternative to Russian-routed supplies. The European companies behind it have been warding off suggestions that they have abandoned the grand scheme since late last year.

However, with the Shah Deniz deadline approaching, and Russia applying pressure on European partners for its own super-sized South Stream gas pipeline, the cracks really began to open, with Hungary's Mol announcing it was ready to sell its stake in April. Germany's RWE followed, expressing doubt - not for the first time - over its commitment this month. BP and its partners in the consortium developing the Shah Deniz gasfield made no bones about their view ahead of the deadline. "Nabucco classic is dead. That option is now clearly off the table," stated Al Cook, a BP vice president who heads the field's pipeline negotiations, at the Second Annual Azerbaijan Investment Summit in April.

The Azeris, together with their increasingly good friends in Georgia, will build a pipeline known as SCPX to the Turkish border, where Tanap will take over. Shah Deniz now has to choose between two potential routes as the gas reaches Europe: a southern pipeline running across the Balkans and under the sea to Italy, or a northern route across Bulgaria, Romania and Hungary to dock in Austria. Shah Deniz is expected to announce the winning pipeline in 2013.

Nabucco West is initially competing for the latter route with the South East European Pipeline (SEEP) in a first round of competition. SEEP, which is also led by BP, would mainly use existing infrastructure to pump the gas through Hungary and into western Europe. Mol said this week that it may jump ship to join the project.

Meanwhile, the Trans-Adriatic Pipeline (TAP) - led by Norway's Statoil, also a member of the Shah Deniz consortium - plans to pump the gas through existing Turkish infrastructure and on through Greece and Albania to an Italian hub.

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