EU-backed Nabucco project ‘over’ after rival pipeline wins Azeri gas bid

Nabucco TAP.jpg

Nabucco West, the Austrian-led consortium that was bidding to build a pipeline to bring Azeri gas to Europe, has not been selected by the gas field's operators, the company announced yesterday (26 June). The choice of the Shah Deniz consortium is for the rival Trans-Adriatic Pipeline (TAP).

Nabucco, which had been a decade in the planning, was competing with TAP, a project of Statoil, AXPO and E.ON Ruhrgas (see background).

"The Nabucco project is over for us," Gerhard Roiss, chief executive of the Austrian energy company OMV, told a hastily called news conference, putting to rest the suggestion that Nabucco would also be built.

The consortium that chose TAP project over Nabucco West to transport Azeri gas to Europe pointed to higher gas prices in Italy and Greece as the reason, OMV said.

Roiss questioned whether higher gas prices could really be achieved in austerity-plagued Greece or plentifully supplied Italy, which lie on the TAP route.

‘A fig leaf’

"The question of whether that is a fig leaf for a political decision I leave to you to judge," he said.

Last week it became known that Azeri state energy SOCAR will buy a majority stake in Greece’s natural gas grid operator DESFA. The news was interpreted by experts as favouring the choice of TAP.

Also, press reports have suggested that Azerbaijan doesn’t want trouble with its Russian neighbour. It is widely known that Russia has an aversion for the Nabucco project and has  designed its own pipeline project, South Stream, as a means to kill the EU-favoured project.

At the special EU energy summit on 14-15 March, Bulgarian President Rossen Plevneliev said that Nabucco was a priority not only for his country, but for 16 EU members.

The choice of TAP leaves Bulgaria as the biggest loser and Greece as the biggest winner, according to press reports. Bulgaria is almost at 100% dependent on Russian gas imports. Plans to build South Stream, which would also run through Bulgaria, may now be shelved, as the project is seen as largely political and overly expensive.

Italy, which will be the major recipient of Azeri gas from TAP, had the option of building LNG terminals in the event that the Shah Deniz consortium chose Nabucco.

European Commission President José Manuel Barroso said: "I welcome today's decision by the Shah Deniz II Consortium selecting the Trans-Adriatic Pipeline (TAP) as the European route of the Southern Gas Corridor. This is a shared success for Europe and a milestone in strengthening the energy security of our Union. I am confident that today's decision, which builds on the strategic Joint Declaration I signed with President Aliyev of Azerbaijan in January 2011, will provide further momentum to the full and rapid realization of the entire Southern Gas Corridor as a direct and dedicated link from the Caspian Sea to the European Union, which should be expanded over time."

EU Energy Commissioner Günther Oettinger said: "We have a definite commitment from Azerbaijan that gas will be directly delivered to Europe through a new dedicated gas pipeline system. Whether the system consists of two gas pipelines - TANAP and TAP - or one single pipeline as earlier projects had foreseen - does not make any difference in terms of energy security. We now have a new partner for gas, and I am confident that we will receive more gas in the future."

Azeri gas from the offshore Shah Deniz II field in the Caspian offers Europe a means of reducing its dependence on Russia which currently provides around a quarter of the continent's 500-billion cubic-metre-per-year (bcm/y) annual gas consumption.

Two pipeline projects were competing to obtain the 10 bcm/y from Shah Deniz, available for the EU market: Nabucco West and the Trans-Adriatic Pipeline (TAP). The Shah Deniz consortium, led by BP, Norway's Statoil, Azeri firm SOCAR and France's Total, aims to choose between the two projects this June.

Nabucco West - a 1,326-km pipeline with a 122-cm diameter - was to take the gas from the Turkish border across Bulgaria to Romania and Hungary to the gas hub of Baumgarten near Vienna. [see map]

TAP, or Trans Adriatic Pipeline, with a length of 800 km and also with a 122-cm diameter, will take gas from the Turkish border across Greece and Albania, with an offshore section reaching Santa Foca, at the “heel” of the Italian peninsula. [see map]

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