The estimated project cost of the Nabucco gas pipeline has been raised to 7.9 billion euros to reflect the impact of higher steel and crude oil prices, Nabucco Gaspipeline International GmbH said in a press release.

The project's costs were previously pegged at around 5 billion euros in a 2005 feasibility study by the Nabucco consortium.

"Since then, crude oil prices have more than doubled -- which consequently has also led to higher prices for all primary energy sources -- also prices for steel," the project's managing director, Reinhard Mitschek, said. "In addition, steel is in high demand because of the large numbers of big projects."

"The competitiveness and the economics of the project will be unaffected," the consortium said. "High demand for energy leads to higher gas prices as well and, therefore, also to higher transportation fees, which make Nabucco considerably profitable."

Nabucco plans to maintain the project's financing approach, with one-third provided by the consortium's members and the remainder split evenly among commercial banks, international financial institutions and export credit agencies, Mitschek told Thomson Financial News.

"The pipeline project's deadlines have not changed on account of the new financing estimate," Mitschek said. The consortium's final investment decision is expected in the spring of 2009, construction work is slated to start in 2010, and gas is expected to flow through the pipeline as of 2013.

The consortium said the new cost estimate is the outcome of its recent capex update, which it based on an actual market survey among major material and service suppliers.

The Nabucco consortium consists of Austria's OMV AG, Bulgaria's Bulgargaz, Germany's RWE AG, Hungary's MOL Nyrt, Transgas of Romania and Botas of Turkey.

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Related Project
Nabucco Gas Pipeline
Facility Type: Pipeline Owner: Nabucco Gas Pipeline International Gmbh
Scope: New Construction Location: Middle East and Central Asia to Europe Turkey