Europe & Russia Pipelines News
EU: Nabucco Receives First Supply Order
by Judy Dempsey The New York Times Media Group International Herald Tribune
June 12, 2008
After months of delays and setbacks, Nabucco, the European
Union's ambitious natural gas pipeline project, received its first
supply order, the EU said Wednesday.
The order is to ship gas from Azerbaijan for sale to Bulgaria.
The pipeline, planned to open in 2013, was designed to reduce
European dependence on Russian natural gas.
Under the agreement, Bulgaria has agreed to buy more than one
billion cubic meters, or 35 billion cubic feet, of natural gas a
year from Azerbaijan, which is rich in energy resources and crucial
for supplying Nabucco. That amount represents about 12 percent of
Nabucco's capacity in its first phase and 18 percent of Bulgaria's
"This is good news," said a European Commission official who
asked not to be identified because he was not authorized to speak on
the record. "Until now, Nabucco had not been going so well."
The planned 3,300 kilometer, or 2,050 mile, pipeline has been
beset with difficulties and is two years behind schedule. The
consortium building it announced last week that Nabucco's
development cost would increase by nearly 60 percent, to euro 7.9
billion, or $12.3 billion, because of the rising costs of
commodities, particularly steel.
That has raised doubts among some consortium members - which
comprise OMV of Austria, MOL of Hungary, RWE of Germany, Bulgargaz
of Bulgaria, Transgaz of Romania and Botas of Turkey - over whether
the project would deliver an adequate return on investment.
Bulgaria's agreement with Azerbaijan coincides with renewed
attempts by Russia - which supplies over a third of Europe's total
gas needs - to win over more European energy companies and countries
to its competing South Stream pipeline.
"Russia will try to prevent Nabucco as far as they can," said
Niklas Nilsson, project coordinator of the Central Asia-Caucasus
Institute and Silk Road Studies Program in Sweden. "This poses a big
question for the EU: Can it ever agree to a strong and unified
energy policy among all the member states? If not, Russia will be
able to tick off one Nabucco partner after the other."
This week, OMV, which is the Nabucco's project coordinator,
agreed to take on the same role for South Stream, which is being
developed by Gazprom, Russia's state-controlled natural gas company.
European countries, too, have supported South Stream, including
Bulgaria and Hungary.
South Stream, which Gazprom is developing alongside Eni, the
Italian energy company, is aimed at reducing Russia's dependence on
transit countries, including Ukraine and Turkey, for its gas
destined for European markets.
Aleksander Medvedev, a deputy chairman of Gazprom, announced last
week that a Russian-Austrian intergovernmental agreement on the
project would "be signed very soon."
The European Commission dismisses suggestions that South Stream
would be a major competitor to Nabucco, even though it would travel
along the same route, running through Bulgaria then spurring north
(C) 2008 International Herald Tribune. via ProQuest Information and Learning Company; All Rights Reserved
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