BP punches Nabucco below the belt

BP tanker gas station.jpg

UK oil major BP said it was no longer considering shipping gas from its Shah Deniz field in Azerbaijan through the Nabucco pipeline, dealing a blow to the troubled European project. But the European Commission said the “full-scale version” of Nabucco was still the main option under consideration.

Iain Conn, BP's head of fuel refining and marketing, said in a speech last week that BP and Azeri state oil group Socar were now considering only two options for the pipeline's route to Austria – a smaller, pipeline from the Nabucco consortium, known as "Nabucco West", and the South East Europe Pipeline (SEEP).

"Nabucco West" is a shorter line that would run from Turkey's western border through Bulgaria and Romania to Austria. The full-scale Nabucco project involves new pipes all the way from Azerbaijan to the Baumgarten gas hub near Vienna.

BP: An interested party

BP is an interested party in the race for the Southern gas corridor and it is not the first time that the company makes statements harming Nabucco’s interests. One year ago, German energy giant RWE, a Nabucco shareholder, blamed BP for expressing concerns about Nabucco's viability.

A major source for the Southern gas corridor is the Shah Deniz II field in the Caspian Sea in Azerbaijan, which is being developed by BP and Statoil of Norway, as well as by the Azeri state energy company Socar and some others. It is estimated to contain 1.2 trillion cubic metres of gas.

BP has its own pipeline project from Turkey through Bulgaria to the Romanian-Hungarian border, called the South East Europe Pipeline (SEEP). Unlike Nabucco, SEEP is expected to make use of the existing gas infrastructure.

A “southern” branch of the Southern gas corridor running from Greece to Italy, the Trans Adriatic Pipeline (TAP), is at an advanced approval stage. TAP’s Managing Director Kjetil Tungsland recently told EURACTIV that for the “northern” branch, Socar would choose between SEEP and Nabucco West, and make a decision this summer.

An Austrian newspaper quoted today a Socar official who played down the statements by the BP official.

"We informed BP that we do not agree with this comment. BP apologised and described the comment as a private opinion," Socar's deputy head Elshad Nassirov was quoted as saying in an interview from Baku, printed by Die Presse.

EU still has faith in Nabucco

The full-scale version of the Nabucco pipeline is still under consideration, the European Commission said on 25 May. "To our understanding, the Nabucco classic version, is still on the table," Commission energy spokeswoman Marlene Holzner said,  quoted by Reuters.

For the European Union – which is seeking to reduce its reliance on Russian gas – the name of the pipeline is not the most important thing, she added in emailed comments.

Rather it is crucial that the "content is Nabucco", Holzner said.

Germany’s RWE says it is likely that the original plans for the Nabucco gas pipeline will still be discussed, even if a proposed shorter route is picked, board member Leonhard Birnbaum said.

"We are confident that Nabucco West will win the bid, and then I still think that the original Nabucco concept will be discussed again," Birnbaum told Reuters in e-mailed comments.

Russia sees Nabucco as dead

In the meantime, the Russian press wrote that Nabucco was “unlikely to survive summer”. Russia is pushing forward its own project, South Stream, largely intended to make Nabucco irrelevant (see background).

Gennady Shmal, head of the Union of Russian Oil and Gas Producers, is quoted as saying that Azerbaijan has only a small amount of gas to supply to the Nabucco pipeline after meeting its domestic needs and fulfilling its contracts with Turkey and Georgia.

Regarding another possible supplier – Turkmenistan – Shmal says that it would not have much gas left for export to the West either, having already constructed two gas pipelines to China and building a third one. 

Nabucco and South Stream are competing proposals with similar timeframes.

South Stream is a Russia-sponsored natural gas pipeline. As planned, the pipeline would run under the Black Sea to Bulgaria, with one branch going to Greece and Italy, and another to Romania, Serbia, Hungary, Slovenia and Austria. Its planned capacity is 63 billion cubic metres per year (bcm/y).

The key partner for Russia's Gazprom in the South Stream project is Italy's largest energy company, ENI.

Another pipeline in the project phase, Nabucco, does not enjoy the favour of Russian state monopoly Gazprom. It resembles South Stream, but is intended to diversify the EU's pool of supplier countries, bringing gas to Europe from the Caucasus and the Middle East to a gas hub in Austria, via Turkey, Bulgaria and Romania.

The construction of the pipeline is expected to start in 2013 and the first gas is expected to flow in 2017. As planned, the pipeline would carry 31 bcm/y of gas.

Subscribe to our newsletters