BBC Monitoring, Heti Vilaggazdasag website, Budapest,
14, February 2008

Money would be available, but there is no natural gas yet for the Nabucco pipeline, the large-scale European energy project. It was joined the other day by the German RWE but entry by the French GdF has failed.

Nabucco is the only natural gas pipeline in the word that has only one ending, namely not a single natural gas field is momentarily at its starting point, David Buchan, a leading associate at the British Oxford Institute for Energy Studies said in late January, at the planned European terminal point of the future pipeline system, the Baumgarten natural gas distribution facility in Austria. Last week the German energy giant RWE was the sixth company to join the Austrian, Hungarian, Turkish, Romanian and Bulgarian owners responsible for constructing and operating the pipeline. With the new entrant paying almost 10 million euros for membership, the ownership ratio of the investment estimated to be 5 billion euros has been reduced from 20 percent to 16.67 percent. As planned, the owners will cover between 30 and 40 percent of the 3,300 kilometer long pipeline system's construction cost; the rest will be covered by outside financiers, the European Investment Bank (EBRD) and other financial institutions the owners hope. Construction will start in 2009 and will be completed by 2013.

Brussels - reinforcing the plan with an EU coordinator - would also accelerate the construction of Nabucco brought to life in order to reduce Europe's dependence on Russian natural gas. On Monday, the European Commission agreed to exempt the Austrian section of the pipeline from under EU rules and regulations applicable to natural gas pipelines, thus members of the consortium enjoy special rights on up to 50 percent of the pipeline's capacity. Javier Solana, the EU's chief representative on foreign and security policy, urged a few days ago in Brussels that European energy policy be coordinated better and called for the earliest possible construction of the pipeline. His words assumed a timely character because of Moscow's recent threat to shut off the pipeline that crosses Ukraine, once again threatening gas supplies to West Europe as well as to Hungary.

The entry by Europe's sixth, Germany's second largest energy firm also doing business in Hungary could provide an impetus to the Nabucco project that has slowed down somewhat in recent months. Entry by a seventh company, the French Gaz de France (GdF) was also mentioned: Romanian head of state Traian Basescu went so far as mentioning the GdF as a business partner at French President Nicolas Sarkozy's negotiations in Bucharest last week. Romanian Minister of the Economy Varujan Vosganian however quickly cooled down enthusiasm after Nabucco stockholders signed an agreement in Vienna last week, claiming that the invitation of the French firm took place only as part of customary courtesy. By shaking his head vehemently, Austrian OMV Chairman and President Wolfgang Ruttenstorfer present at the Vienna ceremony signaled to Reinhard Mitschek, director of the Nabucco Gas Pipeline International GmbH [limited liability corporation] that further expansion of the membership was not on the agenda. And the Turkish government in Ankara firmly ruled out the possibility of France joining the project, as some kind of action to counter France's objection to Turkey's EU membership as well as because of the debate related to the Armenian genocide.

Stefan Judish, head of the RWE Gas Midstream GmbH directly participating in the Nabucco project told Heti Vilaggazdasag after the signing ceremony that only formalities delayed his firm's involvement with Nabucco. This German company is also interested in exploring and exploiting the natural gas fields in the Caspian Sea region. RWE would like to strengthen its presence in the Central and East European region and Judish did not rule out the possibility of extending the pipeline later in the direction of the Czech Republic.

Hungarian President of the Republic Laszlo Solyom said in Bulgaria the other day that both Nabucco and the rival Southern Stream organized by the Russian Gazprom are equally important to Hungary, and that he would like to see an acceleration of the Nabucco investment. At the Vienna conference Gabor Diossy, a state secretary at the Hungarian Ministry of the Economy and Transportation said that Budapest is prepared to organize a meeting of the governments within three weeks to sign the intergovernmental agreement. On the other hand, responding to a question raised by Heti Vilaggazdasag as to where the natural gas would enter the pipeline, Diossy said that the project is more like an infrastructure investment, one the banks regarded as worthy of financing irrespective of the supplier. From among possible suppliers Azerbaijan, Kazakhstan and Turkmenistan have been mentioned at the Vienna conference, but according to Mitschek, Iranian natural gas could also flow in the pipeline starting in 2015.

There is no unity for now inside Nabucco as to the source from which they should obtain natural gas. According to RWE agreeing with US concerns, there is no need for Iranian gas, the Caspian Sea region should suffice as the source. In contrast, the OMV, the company that has cultivated good relations with Moscow regarding energy issues for the longest time, has signed a natural gas exploitation and liquefying agreement with Iran, despite US disapproval. Kazakhstan and Turkmenistan reached an agreement last year with Russia regarding the construction of a new joint pipeline on the eastern shore of the Caspian Sea. A few weeks ago Bulgaria and Serbia have agreed to permit the Southern Stream pipeline to cross the two countries and to participate in the effort. With Northern Stream going around Poland, Gazprom is establishing direct natural gas contact with Germany; by joining the Baumgarten gas trading center Gazprom has also developed its bridgehead position in Austria.

Although Nabucco avoids Russia, if Gazprom indirectly builds upon this pipeline - the Southern Stream and Nabucco could cross over each other in Bulgaria and Romania - Moscow could also get into the picture by omitting Ukraine. This way not only the Russian, but indirectly also the Caspian, and later the Iranian gas could be delivered under Gazprom's supervision through Baumgarten to West Europe. The presence of RWE would, in principle, make it possible to link the Northern Stream with Nabucco. This way, Gazprom in essence could have a view of all pipeline networks. Incidentally, on Monday the Russian firm mentioned that it might join Nabucco if invited.

It is becoming gradually indispensable for Nabucco to have a natural gas producing country to join its owners, or at least, for such a country to sign a delivery agreement. The first chosen firm is the Azerbaijani Socar state energy company; it received an offer for a 10 percent ownership share. Socar would have to pay money for that, but for now it could pay only with natural gas.