x Abu Dhabi, UAEWednesday 24 January 2018

Nabucco project finds new legs as EU mulls gas woes

The EU has rallied behind the long-discussed Nabucco pipeline to deliver Central Asian and Middle-Eastern gas to Europe.

The EU has rallied behind the long-discussed Nabucco pipeline to deliver Central Asian and Middle-Eastern gas to Europe as a flagship project that could help bolster Europe's energy security. Following a two-day summit on the project in Budapest, the European Commission yesterday pledged ?250 million (Dh1.21 billion) in financial backing for the pipeline as part of a proposed ?3.5bn funding package for energy projects. The decision followed recent disruptions to Russian gas supplies that left millions of eastern Europeans without heating during two of this winter's coldest weeks.

In a related development, the European Investment Bank (EIB) on Tuesday offered to lend up to 25 per cent of Nabucco's projected ?8bn construction cost. "We are willing to play an active role in the structuring of the commercial contracts," said Philippe Maystadt, the EIB president. The announcement preceded a joint declaration yesterday by the summit's participants in support of the ambitious development aimed at reducing European dependence on Russian gas. Politicians and company executives at the conference pledged to press ahead with efforts to "create the necessary political, legal, economic and financial conditions" for Nabucco to proceed promptly.

The unprecedented financial and political support could break a deadlock in negotiations that has stalled the project for the past seven years. "There is no question about it - the biggest change now is in the attitudes of all the parties involved. They are saying its now or never," said Zsolt Hernadi, the chairman and chief executive of the Hungarian oil and gas group MOL, a member of the six-company international consortium seeking to develop Nabucco.

The consortium's other members are the Austrian energy business OMV, the Bulgarian and Romanian state-owned gas companies Transgaz and Bulgargaz, the Turkish pipeline company Botas, and the German gas and electric utility RWE. The 3,300km pipeline, first proposed in 2002, would initially bring gas from Azerbaijan to Austria via Turkey, giving Europe access to Central Asian gas by a route skirting Russia. Under the consortium's most recent development plan, construction is due to start in 2011, with first deliveries expected in 2014.

By 2020, Nabucco could transport 31 billion cubic metres of gas annually with the addition of further Caspian and Middle-Eastern supplies from countries potentially including Turkmenistan, Iraq, Iran and Egypt. Middle-Eastern gas may become crucial to the project, which has been hampered by doubts that it could attract sufficient support from Caspian region gas suppliers wary over their relationships with Moscow.

On Tuesday, Sameh Fahmy, the Egyptian petroleum minister, said Egypt was "fully committed" to Nabucco as a potential supplier. Iran, a more controversial future source of gas for Europe, said it was keen to discuss a deal. "If the West asks for sustainable energy, Iran is available to talk," Mehdi Safari, the country's deputy foreign minister, said in Athens on Tuesday. Crucially, Ilham Aliyev, the Azeri president, pledged continued support for Nabucco in Budapest.

Guler Hilmi, the Turkish energy minister, told the conference he saw Nabucco as the region's most important energy project, suggesting he would champion the EU-backed pipeline over a Russian rival. Georgia, another potential transit state for Nabucco, also pledged commitment to the pipeline development. In addition to the recent gas crisis in Europe, last August's brief war between Russia and Georgia has heightened European sensitivities over energy security. About 20 per cent of Europe's gas supply was cut off due to a row between Russia and Ukraine, while the Russian invasion of Georgia disrupted oil supplies from Central Asia.

The proposed EU financing package, which requires additional backing from EU governments and the European Parliament, would address those concerns in part by funding several gas pipeline projects, of which Nabucco is the most prominent. Improvements to Europe's electricity supply, including wind power projects, are additional key components of the emerging EU energy plan. @Email:tcarlisle@thenational.ae