Reinhard Mitschek, Head of OMV Gas International, introduced delegates at last years EAGC to the Nabucco pipeline as ‘a missing link between giant gas sources and their potential markets’. This month in MZINE we are going to take a look at this ambitious project and discuss how Nabucco can offer a possible solution to the rising European gas demand.
It is planned that this proposed pipeline will transport natural gas from the Georgian-Turkish and/or Iranian-Turkish border, through Turkey to Austria via Bulgaria, Romania and Hungary. As the picture above shows, the pipeline will cover a distance of 3300 Km and the expected cost of this venture is estimated at 4.6 billion Euros (5.8 billion US$). When built and fully operational the pipeline is expected to have a transport capacity of 31 billion cubic metres per year (bcm/yr), but this is not expected until around 2020.
Talks started in 2002 between OMV Gas in Austria, BOTAS in Turkey, MOL in Hungary, Transgaz in Romania and Bulgargaz in Bulgaria (the Nabucco Partners) about the possibility of transporting gas from the Middle East, Egyptian and Caspian gas reserves to Austria, using a pipeline that would also supply gas to the participating countries that the pipeline crosses. Gas coming into Austria through this pipeline could then be transported into Central and Western Europe gas markets and so bringing fresh supplies into Europe reducing the need for gas imports via Ukraine.
By the end of 2002 all five parties agreed that a feasibility study should be conducted, which was awarded a grant of 50% of the estimated cost from the European Commission (EC) in December 2003. The study indicated, by the end of 2004, that the project was very feasible and so the Nabucco Partners moved onto the Development stage. All being well, it is expected that construction could begin in 2009 and that gas will start to flow in 2012.
Nabucco Gas Pipeline International GmbH is owned by the Nabucco partners. It was formed as the controlling company of the project and it, in turn will be the parent company of the five Nabucco National Companies. The parent company will be responsible for initially financing the project and then selling capacity to shippers. During the second half of 2007 an open season is expected to begin, where interested shippers will be able to share their interest in gas transportation to Nabucco. During 2006 letters of intent were signed with shippers from Norway, Austria, Italy, Germany, Switzerland and Ukraine. Negotiations are also underway with the Netherlands, France, Iran, Italy and the Czech Republic.
At present there are five shareholders in the project, although MOL are looking a bit shaky at the moment as they are appear to be unsure whether to commit to Nabucco or Gazprom’s Blue Stream expansion. A possible sixth and even seventh shareholder is expected to be announced by the year end along with approval for full third party access (TPA) exemption. Then the final investment decisions can be made.
The five National Companies will be based in their respective countries and will be responsible for construction of their part of the pipeline and then operation and ongoing maintenance. The pipeline will be owned by the five national companies, each company owning the pipeline in its respective territory.
Following on from the feasibility study it was decided that the construction would be carried out in two major phases, and that the first phase would be split in to two.
The first part of the first phase is to build the complete pipeline from Baumgarten, Austria’s hub, to Ankara. This is approx 2000 km long and would commence in 2009, connecting to existing pipeline facilities to the Turkish/Georgian and Turkish-Iranian borders. This would allow flows to start in 2012 of up to 8 bcm. The second phase of phase one would be the construction of the remainder of the pipeline from Ankara to the Turkish-Iran and Turkish-Georgian borders. This is expected to be completed by 2013.
The second major phase is to build compression stations along the pipeline to build and maintain the pressure at 31 bcm/yr. This is expected to commence around 2015 bringing the completion date at maximum flows to 2020.
Over the next 25 years gas imports to Europe are expected to rise up to as much as 80%. This would be due to reduction in production in Europe and increase in demand. As there are large gas reserves are in the Caspian, Middle East and Egypt area, the Nabucco pipeline will be well placed to bring a diversification of supply as well as security of supply to Europe in years to come.
Gas supply is expected to come initially through the South Caucasus Pipeline which currently supplies gas to Turkey and Georgia from the Shah Deniz gas field in the Azerbaijan sector of the Caspian Sea, and the Iran-Turkey pipeline which runs from Tabriz in North-West Iran to Ankara in Turkey, but there will be no reason why gas could not come from Egypt, Russia, Turkmenistan, Kazakhstan and Iraq in years to come.
If the Nabucco project gets off the ground it should serve to bring cooperation not only between the five partner countries, but also with the upstream countries who own the world’s largest gas reserves. It should also provide cost-effective gas to Europe through a new gas supply corridor, as well as raising the transit role of the countries along its route. The Nabucco pipeline may also contribute to the security of gas supply to its partner countries as well as Europe as a whole.
In direct competition to the Nabucco pipeline, Gazprom’s decision to expand the Blue Stream pipeline came in August 2005 after the five countries decided to go ahead with Nabucco. This decision has now undermined the partnership somewhat as MOL are now undecided who to back. MOL’s c.e.o. Zsolt Hernardi was reported as saying “we will start with whichever project is ready first”. Nabuuco is ahead of Blue Stream in terms of planning, and is able to source gas supply from any field at the end of a connected pipe. Blue Stream on the other hand is already connected to Russia’s giant reserves.
Who will win this latest battle remains to be seen, but there is after all enough market space for both as well as other enterprising projects to supply gas to Europe over the next couple of decades.
Sources: Nabucco; Heren Energy; BOTAS and Wikipedia
Researched and written by Paul Cassar, MJMEnergy Ltd.
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