x Abu Dhabi, UAEWednesday 26 July 2017

Europe to sign Nabucco gas pipeline pact

The planned Nabucco gas pipeline, which will take Middle-Eastern gas to Europe, receives a much-needed boost.

The planned Nabucco gas pipeline, which will take Middle-Eastern gas to Europe, has received a much-needed fillip with a decision by the EU to sign a key agreement next week. The importance and sensitivity of the international deal were highlighted yesterday, when two of Nabucco's backers, the Austrian energy group OMV and the German utility RWE, hired Joschka Fischer, the former German minister of foreign affairs, to advise on political communications concerning the ?7.9 billion (Dh40.6bn) pipeline's development.

Austria, Bulgaria, Hungary, Romania and Turkey - the nations through which the pipeline will pass - are to sign the intergovernmental transit agreement in Ankara next Monday. "I can confirm that the commission has received an invitation to the signing ceremony," a European Commission spokesman on energy issues said. It would provide a legal framework for the pipeline project and allocate a share of gas for each transit country.

The five-nation deal would also allow theEU-backed project to start negotiating commitments with shippers to move gas through the 3,300km pipeline during the crucial "open season" preceding the commercial decision on construction, scheduled for next year. Ankara's invitation suggests that the Nabucco transit countries could be close to reaching a deal on one of the thorniest issues contributing to lengthy project delays - gas supplies for Turkey.

In May, the EU energy commissioner, Andris Piebalgs, said Ankara had dropped its demand for 15 per cent of gas earmarked for Nabucco at a discount to European prices. But this was quickly refuted by the Turkish energy minister, Taner Yildiz. Heavily reliant on imported gas to fuel power plants and heavy industry, Turkey said it needed the gas to meet growing domestic demand. Nabucco's European backers said Ankara's terms would make the project uneconomic and suggested that the Turks wanted to resell the gas at a profit.

Mr Yildiz has denied that was Ankara's plan. But last Friday, he discussed a possible role for Turkey in the rival South Stream gas project when he met Russian officials in Moscow. Nabucco, which would deliver up to 31 billion cubic metres of gas annually to Europe from the Middle East and Central Asia, reducing European reliance on Russian gas, is held to be in direct competition with South Stream, a project to transport Russian and Caspian gas to Europe through a pipeline under the Black Sea.

In terms of securing supplies, the Russian project pulled ahead of Nabucco last month, when Azerbaijan promised the Russian gas monopoly Gazprom priority in buying gas from the second phase of its huge Shah Deniz gas development. The Nabucco consortium is led by OMV, in which the UAE's International Petroleum Investment Company holds a 19 per cent stake. Its other partners are the Hungarian energy firm MOL, RWE, Bulgarian Energy Holding, and the Romanian and Turkish pipeline companies Transgaz and Botas.

Now, with Azeri gas supplies for Nabucco looking unlikely, and supplies from other Caspian states by no means assured, those companies are turning to the Middle East. In particular, they are eyeing Egypt's expanding gas output, and prospects for Iraq to develop its substantial gas reserves for export. But Egypt might have little additional gas to spare for Europe after satisfying growing domestic demand, analysts said.

The Hungarian company and OMV recently joined the UAE's Crescent Petroleum and Dana Gas in a project to develop two big gasfields in Iraqi Kurdistan, paying about US$700 million (Dh2.57bn) in cash and shares for a combined 20 per cent of the venture. @Email:tcarlisle@thenational.ae