Nabucco delayed as Azerbaijan talks drag on

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The final decision on investment in the Nabucco pipeline will definitely not be taken this year and has been  delayed until 2011 because gas supply talks with Azerbaijan are dragging on, an Austrian newspaper reported today (8 October).

The 7.9 billion euro Nabucco pipeline is part of the EU's effort to diversify its natural gas supplies by bringing up to 31 billion cubic metres of gas annually from the Caspian region to an Austrian hub via Turkey and the Balkans (see 'Background').

Construction on the project, which has already been subject to several delays, is scheduled to start next year with the first gas deliveries at the end of 2014.

"We are definitely not going to manage it [the decision] this year, it will not happen until 2011," Michael Ulbrich, head of international pipeline projects at energy group OMV, was quoted in daily Der Standard as saying.

OMV is one of Nabucco's six shareholders.

The Vienna-based consortium said in a statement that the timeline had been "slightly rescheduled" last month because of gas supply discussions.

"We are aligning our project efforts with the suppliers' side. The shareholders are currently negotiating gas supply contracts which are a basis for the final investment decision," Nabucco spokesman Christian Dolezal said.

Azerbaijan has been in talks with more than 20 firms and consortiums and will decide later this year which project gets gas from its giant Shah Deniz II gas fields, co-led by BP and Statoil.

The government has said the gas contracts will go to the company that offers the highest price, and the Nabucco and Russian offers are seen as the main contenders.

Russian gas export monopoly Gazprom said recently its competitors would not be able to beat its price for gas from Shah Deniz.

Nabucco expects the pipeline will transport its first gas from Iraq, 10 billion bcm, and another eight billion bcm from Shah Deniz in 2015.

(EURACTIV with Reuters.)

Russian Prime Minister Vladimir Putin said that German companies have grown interested in the South Stream gas pipeline project, the Russian press reported today (8 October).

Putin said that after Italian and French corporations have already joined South Stream, German companies may follow suit.

Then, according to his words, South Stream would acquire both an international and a Pan-European status.

According to earlier reports, Gazprom has started talks with the German Company BASF.

Nabucco and South Stream are seen as competing projects and have similar timeframes for beginning and completing construction.

South Stream is a Russia-sponsored planned natural gas pipeline. Once completed, the pipeline will run under the Black Sea to Bulgaria, with one branch going to Greece and Italy, and another to Romania, Serbia, Hungary, Slovenia and Austria. Russia announced that it would more than double its planned capacity from 31 billion cubic metres per year (bcm/y) to 63 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 widely 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 2011 and the first gas is expected to flow in 2014. The pipeline will carry 31 billion cubic metres of gas per year, but this maximum capacity will only be reached in 2018. Investment in the pipeline totals 7.9 billion euro.

The Nabucco consortium comprises leading European energy companies: OMV of Austria, MOL of Hungary, RWE of Germany, BEH (Bulgaria Energy Holding) of Bulgaria, Transgaz of Romania and Botas of Turkey. But three consortium members - OMV, MOL and Bulgargaz, the initial Bulgarian partner - have already signed up to Gazprom's South Stream pipeline, raising questions about potential conflicts of interest and indeed their commitment to Nabucco.

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