The second largest investor in the Nabucco gas pipeline, German energy giant RWE, could withdraw from the project.
The aim of the Nabucco project was deliver Caspian gas to Europe.
Now the German company says that it is going to reassess whether it makes business sense for it to remain involved in the project.
Earlier, a similar decision was announced by Hungarian company MOL.
The skepticism of these two companies is shared by many experts, who add that the less popular Nabucco becomes, the more attractive becomes its alternative suggested by Russia, “The South Stream”.
According to RWE, since the project’s conception, its cost has increased from the original € 8 bln to € 15 bln. However, the project doesn’t even have a proper legal grounding so far. It is assumed that the main suppliers of gas will be Turkmenistan and Azerbaijan – but no contracts with either of these countries have yet been signed.
“Small wonder that RWE doubts the potential benefits this project could derive,” President of the Russian Union of Oil and Gas Producers Gennady Shmal says.
“The very decision to build this pipeline was dictated more by political than by economic considerations,” Mr. Shmal continues. “But the project isn’t even backed by appropriate resources. The hopes of Nabucco’s initiators that Azerbaijan would be prepared to supply its gas to Europe have not come true so far.”
“Another country on which the project’s authors pinned their hopes was Turkmenistan – but the latter doesn’t seem to be eager to take part in it either. Talks between European countries, on one side, and Turkmenistan, on the other, have been going on for a rather long time, but they still haven’t bore fruit. In the meantime, Turkmenistan has built two pipelines to deliver its gas to China, while a third pipeline is currently under construction.”
“Germans have always had a reputation for being pragmatic, and RWE is simply being pragmatic. The company just cannot afford investing in a project of such dubious feasibility. And, even if it is implemented, it will most likely be much less profitable than the Russian South Stream.”
Nabucco was conceived as one of the main components of the so-called European South Gas Corridor. It was intended to make Europe less dependent on Russian gas. However, by the end of 2011, this project already had very few supporters. The Azeri company SOCAR and the Turkish BOTAS still remain Nabucco’s shareholders, but now they plan to build a pipeline of their own. This pipeline will be called TANAP and will deliver Caspian gas to Turkey’s borders with Europe. According to a new decision adopted by the shareholders, this is where the Nabucco pipeline is intended to link up with TANAP, carrying the gas across the border to Europe.
Thus, the Nabucco pipeline has turned from a pan-European project into a local one. This has even become reflected in its name – now it is called “Nabucco West”. Besides, it will now carry smaller amounts of gas than what was initially announced (if this project is ever implemented at all).
Russian analyst Grigory Birg says:
“Initially, it was planned that the pipeline would carry 31 bln cubic meters of gas a year. Now, there are plans to decrease this capacity more than two-fold. Of course, this will change the project’s cost-effectivenes. Now, the construction costs of one kilometer of Nabucco will be nearly the same as one kilometer of The South Stream, while the latter has a greater capacity and could solve Europe’s energy problems for longer than Nabucco.”
“Besides, Turkey, which is also involved in the Nabucco project, has given Russia permission to construct The South Stream across Turkey’s part of the Black Sea.”
“Summing it all up, I’ve come to the conclusion that at present, the Nabucco project has very few chances to be successfully implemented,” Mr. Birg says.
And here is what Russian businessman Grigory Shmal adds:
“I believe we can already say for curtain that the Nabucco project is effectively dead. The project’s shareholders will probably make some attempts to revive it – mainly by using political means. But this would be unlikely to help. Another gas-producing country in the Caspian region is Iran. However, given the West’s current attitude towards Iran, there are few chances that the EU would want to invite Iran into this project or that Iran itself would want to get involved in it.”
As mentioned above, the first European company that publicly expressed doubts about Nabucco’s success was Hungarian energy group MOL. Moreover, the Hungarian authorities have also said that they are interested in joining the Russian South Stream.
Initially, Nabucco was intended as an alternative to the Russian project. Now, there is every reason to believe that Nabucco can no longer be called a serious competitor to The South Stream. Recently, Russia’s new President Vladimir Putin ordered to start the construction of The South Stream as early as this year, ahead of the original schedule. Mr. Putin wants the Russian pipeline to start operating in 2015, not in 2017 as it was initially planned. The initiators of the Nabucco project do not expect their pipeline to come into operation until 2018.
Source: http://english.ruvr.ru/2012_05_16/74920749/
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