Nabucco Pipeline Conference Ends With EU Support, But No Cash

by Bruce Pannier | 28 January, 2009

There was an air of optimism following a one-day Nabucco international gas pipeline conference in Budapest. Though the event failed to provide as much clarity as many had hoped, the conference did end with pledges of financing - although no cash yet - and vows to start work on the pipeline this year. The January 27 meeting was attended by offici...

Nabucco pipeline conference ends with EU support,
but no cash

The January 27 meeting was attended by officials representing Europe, the Caspian region, and the Middle East. The goal of the gathering was to push the project forward to the construction stage quickly and end speculation that Nabucco would never be built.

Representatives from gas consumer countries were looking for guarantees there would be gas to fill the pipeline.

Representatives from the gas source countries for Nabucco were looking for signs that Europe has the financial backing and political will to see the project through to the end.

While neither side got all it wanted, both did come away feeling more confident about the future of Nabucco, an ambitious project to import 31 billion cubic meters of gas each year from the Caspian and Middle East to the heart of Europe, while bypassing Russia. That represents less than 10 percent of Europe's needs, but symbolically, it would help to loosen Moscow's grip on European gas imports.

Hungarian Prime Minister Ferenc Gyurcsany gave those potential supplier countries some good news at a press conference, predicting Nabucco's six shareholder companies would convince the European Union to provide the project with an initial 200 million to 300 million euros to start the first phase. He added that Nabucco shareholders would be looking to the EU and European financial institutions to come up with some 2 billion euros for the project eventually.

The Nabucco pipeline (dotted line number 2) will likely run from Iran via Turkey, Bulgaria and Romania to Hungary. In Turkey it will be linked to the Baku-Tbilisi-Erzurum gas pipeline, pumping gas from Azerbaijan's Shah Deniz field. In the future the pipeline may possibly also be connected to a Trans Caspian pipeline (dotted line number 4).

'Highest Possible Political Support'
Nabucco consortium chief Reinhard Mitschek indicated that some of the main tasks in implementing Nabucco would start very soon.

"We expect to start the engineering and marketing of transportation capacity this year," Mitschek said. "We also expect to start the environmental and social impact assessment this year. And for all of these phases, we are convinced [we] have the highest possible political support we can reach."

The pipeline would run 3,300 kilometers from eastern Turkey through Bulgaria, Romania, and Hungary, ending in Austria. Initially, supplies are expected to come primarily from Azerbaijan, on the western side of the Caspian Sea, with Turkmenistan and Kazakhstan seen as eventually joining.

The project is due to be completed in 2013. To date, however, not a single segment of pipe has been laid. The cost, originally estimated at 4.4 billion euros, was recently revised to nearly double that amount.

Of all the potential supplier countries represented at the conference, Azerbaijan gave the strongest statements of support. President Ilham Aliyev addressed the conference, expressing what he said was his country's longtime support for Nabucco.

"As far as Nabucco is concerned, Azerbaijan was always supportive for this project," Aliyev said. "And today, once again, we would like to declare that we will continue to support it and the declaration that is prepared clearly shows that."

Turkmenistan's Support
The head of Turkmenistan's delegation, Yashygeldy Kakaev -- the director of the state agency for management and use of hydrocarbon resources -- repeated that his country stands ready to participate in any gas projects, greatly values energy security, and will work to guarantee such security for as many countries as possible.

Turkmenistan's participation in the conference was interpreted as a positive sign, as was the presence of a Kazakh delegation.

Kakaev noted in his speech that Turkmen President Gurbanguly Berdymukhammedov visited Austria and Germany late last year to discuss Nabucco and that Nabucco and EU officials are in frequent contact with Turkmenistan.

The state secretary of Iraq's Oil Ministry, Motasam Keek, said his country has enough gas to play a role in Nabucco, as well.

"Gas reserves are estimated at 3.1 trillion cubic meters with possible future reserves that could increase that to 6.1 trillion cubic meters," Keek said.

The conference came after a two-week suspension of Russian gas supplies earlier this month due to a dispute between Moscow and Kyiv. The specter of that cut-off was hanging over the conference, with several of the European delegates mentioning it when speaking of the need for projects like Nabucco.

Czech Prime Minister Mirek Topolanek, whose country currently holds the rotating EU Presidency, was deeply involved in trying to persuade Moscow and Kyiv to settle their differences and restore gas supplies. He was among the most vocal advocates for Nabucco at the conference.

"Nabucco is a project of paramount importance for the freedom of the continent," Topolanek said. "The gas crisis lasted only three weeks. Nevertheless, it had a drastic impact on the economy of numerous European countries and severely affected their inhabitants, with losses running into the billions and millions of people suffering from cold. That is the very high price we pay for our energy dependency."

That crisis gave new impetus to the Nabucco project, and officials seemed anxious to take advantage of that in Budapest.

'Excessively Vulnerable'
In a video message, EU Commission President Jose Manuel Barroso said the bloc's executive wants the Nabucco project to move ahead.

"We remain excessively vulnerable regarding gas delivery to the European Union and other neighboring countries," he said.

European Commission Energy Commissioner Andris Piebalgs told journalists that the meeting in Budapest "had the highest level of participation from producer countries" than any previous meetings.

He predicted that the project will be realized.

"Today's conference definitely [has drawn] more public attention [to the Nabucco project]," Piebalgs said, "but it also put pressure on the participants of this process to really deliver by [this summer] the answer that everybody expects: 'Yes, we have all the preconditions in place that in 2015 we will get the gas via Turkey from the Middle East and from the Caspian.' "

It seems clear that Nabucco is being driven as much by politics as by economics. Words like "energy security" and "diversification" were frequently heard in Budapest. And they will likely be heard again at a conference on southern route pipelines scheduled to be held in Bulgaria in April and at a followup of the Budapest conference scheduled to be held in the Czech Republic in May.