Nabucco chances grow as Europe’s atomic future dims


MICHAEL KAHN / SYLVIA WESTALL
PRAGUE/VIENNA - Reuters
Tuesday, June 21, 2011

Until the Fukushima Dai-ichi nuclear power plant disaster in Japan, the Nabucco pipeline project was struggling with rising costs and political uncertainties. Now, as Europeans shun nuclear energy, EU plans to link the Caspian and Austria have gained new appeal


Challenged by cheaper rivals and lingering supply questions, the up-and-down Nabucco pipeline project may have a new lease on life following Germany’s decision to switch off nuclear power.

Nabucco’s backers in May said it would open two years later than planned and cost more than its target of 7.9 billion euros ($11.4 billion). The link aims to ease Europe’s reliance on Russian gas by delivering supplies through a new southern route.

Several setbacks this year mainly due to talks with gas producers have deepened doubts about the project, which has been under discussion since 2002 and has not signed any supply deals.

But Germany’s decision to kill atomic power by 2022 in the wake of Japan’s Fukushima nuclear disaster and progress in talks with supplier Azerbaijan have revived Nabucco.

Analysts say it has become more attractive to countries wanting to avoid atomic power or heavy reliance on high-polluting coal. “The new German energy strategy will be a push for Nabucco,” said Claudia Kemfert, an energy analyst at the Berlin-based DIW institute. “It seemed almost dead but the nuclear decision has revived it.”

She said it was the most obvious way for Europe to reduce dependence on Russian gas and that it was important for Germany, which in the meantime may be forced to boost its share of Russian gas supply through Gazprom’s Nord Stream pipeline.

Will Pearson, an analyst at Eurasia Group in London, said Italy’s recent referendum, in which an overwhelming majority of voters chose to ban nuclear energy for decades, underscores the positive prospects for a southern corridor pipeline.

“Italy, along with Germany, will be a leading advocate of moving forward with the decision-making process in the aftermath of Fukushima,” Pearson said.

The aim to bypass Russia

Nabucco plans to bring up to 31 billion cubic metres of gas annually from the Caspian region to an Austrian hub, bypassing Russia and altering the balance of regional power supplies. It aims to start transporting gas from 2017. Backed by the European Union, its partners include Germany’s RWE, Turkey’s Botaş, Austria’s OMV, Hungarian MOL, Romania’s Transgaz and Bulgarian Bulgargaz.

EU Energy Commisioner Guenther Oettinger has said Germany will lose 23 percent of its electricity production when its nuclear power plants go off line. This translates into a 6 percent gap in the EU’s electricity supply, he said.

But while Europe may want more gas from outside Russia as energy demand rises, talks with suppliers have dragged on as their governments weigh advances from several competing plans. A January joint statement between the EU and Azerbaijan requiring the provision of a 20 bcm per year dedicated export pipeline from Baku to Europe could be key.

“There is certainly more than enough Azeri gas to get the full pipeline started,” said Jennifer Coolidge of CMX Caspian and Gulf Consultants.

“The significant development is Azerbaijan and the EU’s requirement for a new dedicated pipeline across the Caucasus and Turkey.”

This may put Nabucco ahead of other smaller European projects such as the Interconnector-Turkey-Greece-Italy and the Trans Atlantic Pipeline, which are also competing for Azeri gas.

Azerbaijan’s Shah Deniz field is being developed by BP and Statoil as well as Azeri state energy firm SOCAR and some others. It is estimated to contain 1.2 trillion cubic metres of gas. Production began in 2006, and the second phase is expected to begin by 2017.

Azerbaijan has been in talks with more than 20 firms and consortiums looking to buy gas from Shah Deniz II and has said it wanted to conclude negotiations this year.

State energy giant Gazprom signed a deal with SOCAR in September 2010 to buy 2 billion cubic meters of gas in 2011 and even more from 2012.

© 2011 Hurriyet Daily News
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