Business and Commission in plea for Nabucco pipeline

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Top officials at the Commission and one of Central Europe’s largest oil and gas groups yesterday (2 July) called for progress to be made on the Nabucco project, which aims to reduce Europe’s dependency on Russian gas supplies. But they warned that its realisation would depend on “foreign policy scenarios”.

A good side to high oil prices 

Speaking at a round table organised by the Centre for European Policy Studies (CEPS), Wolfgand Ruttenstorfer, the CEO of OMV, and Mathias Ruete, the European Commission’s Director General for Energy and Transport, agreed that high oil prices are making energy efficiency and environmentally-friendly policies less and less expensive, and could also favour the realisation of pipeline projects, necessary to guarantee Europe’s energy security. They cautioned that gas diversification in Europe can come only through the Nabucco project. 

Russia reliable supplier 

Russia is a very reliable supplier, Ruttenstorfer said, but added that the concerns are that Russia will not be able to cover all Europe’s additional needs, which in his words could be 100-150 billion cubic metres over the next one or two decades. 

“Therefore our commitment is to build the Nabucco pipeline, to get direct access to the gas resources of the Caspian area, and tomorrow to the resources of Iraq and Iran. Huge resources are in Russia, but even bigger are in the area of the Caspian Sea and in the Middle East and Europe is in a very happy position, because in front of our house there are all those reserves,” Ruttenstorfer said. 

Mathias Ruete said estimations substantially differ in terms of Europe’s actual import needs in the future. 

“If we look at scenarios from Eurogas, we will need to build not only South Stream, North Stream, Nabucco, but also a number of other pipelines,” Ruete said. He also hinted that for the EU, Nabucco is not an alternative to supplies from Russia but a necessary additional channel of supply. 

Not enough gas to fill the pipe? 

But Nabucco will not see the light of day if we cannot fill the pipeline, warned Ruttenstorfer. “We think it can, that there is enough gas in Azerbaijan, Turkmenistan, but we also hope that Iraq and Iran will come into the equation. It all depends on the overall foreign policy scenario that you can imagine. For the final investment decision, what is needed is definitely more than 10 Bn up to 15 Bn (cubic metres) for the first couple of years, but then eventually from 25 to 30. We will develop it stages and build the compressor stations accordingly,” Ruttenstorfer explained. 

The OMV CEO also described the current status of the Nabucco project. Six companies are currently in the group, since RWE from Germany recently joined. The next important stage is to reach an agreement with Turkey on the conditions under which Ankara would be prepared to let the gas cross its territory, and an agreement can possibly be signed in autumn. Then Nabucco will invite potential transporters and customers to declare how much they intend to transport and during which periods of time. Based on that, the final investment decision can be taken. 

Accroding to Gazprom forecasts, Russian gas will cost Europe $500 per thousand cubic metres by the end of this year, Alexei Miller, the Russian gas monopoly's chief executive, told reporters in Baku. Miller also said he was still forecasting that oil could hit $250 a barrel before long. "If that happens, the European price for gas would be $1,000 per thousand cubic metres," he added. 

Sergei Prikhodko, a senior Kremlin aide, said before the visit of President Medvedev to Azerbaijan that Russian head of state would raise the possibility of negotiating new energy pipeline routes from Azerbaijan to Europe via Russia. "We have no secrets: we are talking about what we think of the Baku-Tbilisi-Ceyhan project, and in Azerbaijan they are saying they would like to develop different routes," Prikhodko said in Moscow. 

EU dependency on Russian gas imports is currently at 40% and is expected to rise considerably in the coming decades unless supply sources are diversified and/or greater emphasis is placed on locally generated renewable sources of energy. 

The EU and Russia began an 'Energy Dialogue' in 2000 to formalise their energy relations. But relations between the two sides have been marred by difficulties, with European firms complaining about restricted access to key energy resources and investments in Russia (EURACTIV 06/02/07).

These concerns led the Commission to insert a reciprocity clause into its energy market proposals in a move aimed at protecting EU energy infrastructure from control by third countries. The clause - dubbed the "Gazprom clause" in Brussels – would oblige foreign firms to 'unbundle' their production and transmission activities before they are allowed to obtain a controlling stake in European energy companies (EURACTIV 20/09/07). 

Russian President Vladimir Putin ended his term by sealing a deal on the South Stream gas pipeline, a project perceived as a rival to the EU's flagship Nabucco pipeline, which aims to decrease Europe's dependency on Russian gas (EURACTIV 30/04/08). At the same time Russia is offering deals to countries from the Caspian basin to buy their gas "at world market price". 

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