The Nabucco pipeline consortium has
discreetly postponed its final investment decision
by another year, this time until early 2012, with
construction to start in 2012 "at the earliest".
The investment decision had previously been
postponed in October 2010 for 2011, targeting this
year's first or second quarter.
Counter-offers from Russian gas monopoly
Gazprom with its South Stream project, and its
political allies in Europe, have only minimally
and indirectly contributed to Nabucco's latest
postponement. The main reasons behind it include:
a significant challenge to Nabucco's official cost
estimate, tardiness in accessing Turkmen gas, and
unresolved competition between Nabucco and two
other transportation projects over priority
access to Azerbaijani gas.
On February 21, BP's challenge to
Nabucco's official cost estimate became public via
The Guardian, whether through a scoop or a leak.
BP is the project operator at Azerbaijan's Shah
Deniz gas field, whose Phase Two of production is
the designated source for Nabucco's first stage.
BP apparently evaluates the Nabucco pipeline's
construction costs at 14 billion euros (US$19
billion), a far cry from the Nabucco project
management's estimate of 7.9 billion euros.
BP and Nabucco's Austrian-led management
had intensely debated their conflicting estimates
behind closed doors, in preparation for investment
decisions and gas procurement tender. During those
backstage debates, BP complained that the Nabucco
management's cost estimate was insufficiently
substantiated.
Nabucco's Viennese
management dismisses BP's estimate as "pure
speculation", and defends its own cost estimate,
citing feasibility studies. Meanwhile, the Nabucco
management is preparing a re-evaluation through
the ongoing phase of detailed engineering work.
Its figure of 7.9 billion euros dates back to May
2008 (at which point it surpassed the previous
cost estimate by some 50%).
For its part,
BP cites the surge in steel prices since 2010 as a
factor driving up the pipeline's costs. According
to BP, "the Shah Deniz Consortium is keen to work
with the Nabucco and other pipeline groups to make
sure that a viable pipeline brings Azerbaijani gas
to Europe in the near future."
All this
seems to position BP rather suddenly as a
Nabucco-skeptic, with hints at other possible
choices. A Nabucco cost increase of the magnitude
suggested by BP would (if substantiated) render
the Nabucco project unbankable and moot.
By the same token it would transfer the
advantage to Nabucco's rival, the Interconnector
Turkey-Greece-Italy (ITGI, led by Italian Edison),
for access to Shah Deniz gas. If the price of
steel becomes the main argument in assessing cost
effectiveness, ITGI wins simply because it would
use the existing Turkish pipelines (with some
upgrades), rather than building its own pipeline
through Anatolia as the Nabucco project would.
In addition to its originally planned
trunkline, Nabucco needs a feeder line in
southeastern Turkey for gas from Iraq's Kurdish
region. Building that 550-kilometer line would
increase the Nabucco project's overall costs.
According to the Nabucco company's chief
executive, Reinhard Mitschek, leasing the existent
Turkish pipelines along that route, instead of
building a new line, would avoid that hefty cost
increase. The company would only build its own
feeder line from the Iraqi border to the Nabucco
trunkline if a lease agreement cannot be reached
with Turkey's state pipeline operator Botas.
The European Commission has all along
treated Nabucco as the strategic pipeline and
funding priority, within the Southern Corridor.
Compared with Nabucco's planned annual capacity of
31 billion cubic meters, ITGI's 10 bcm targeting a
cul-de-sac Italian destination is a non-strategic
add-on.
However, ITGI and yet another
Italy-bound, 10 bcm project, the Trans-Adriatic
Pipeline (TAP, driven by Norway's Statoil), are
each competing against Nabucco over priority
access to Azerbaijani gas. The Shah Deniz
consortium is preparing a tender to choose the
buyer, or buyers, for the planned Phase Two of
that field's production.
The European
Commission cannot officially take sides between
the competing pipeline consortia, nor directly
influence the choice to be made by the producers'
consortium. Moreover, given the possible upward
revision of Nabucco's project costs, the
commission now encourages the three rival pipeline
projects to consider options for working with each
other.
According to Energy Commissioner
Guenther Oettinger, the "European Commission would
welcome any cooperation that contributes to
achieving the objectives of the Southern
Corridor." The forms of such cooperation, however,
remain unspecified, and are far from being
self-evident. The Nabucco consortium regards its
project as a stand-alone and does not discuss any
kind of merger with another project.
Vladimir Socor is a Senior
Fellow of the Washington-based Jamestown
Foundation and its flagship publication, Eurasia
Daily Monitor. An internationally recognized
expert on the former Soviet-ruled countries in
Eastern Europe, the South Caucasus, and Central
Asia, Mr Socor is a Romanian-born citizen of the
United States based in Munich, Germany. (This
article first appeared in The Jamestown
Foundation. Used with permission.)
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