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Nabucco Expects Gas Supply Deals By Early 2011

Source: www.gulfoilandgas.com 5/27/2010, Location: Asia

Europe's Nabucco project shareholders should get the gas supply deals needed to build the pipeline by the end of 2010 or early 2011, Nabucco's managing director said.

Reinhard Mitschek also said he was confident Nabucco would sell the gas at a good price when it opens in 2014. The 3,300-km European Union-backed pipeline, which could cost 7.9 billion euros ($9.71 billion), is designed to bring gas from Central Asia and Azerbaijan to the EU to diversify the bloc's gas sources away from Russia.

Nabucco shareholders have struggled to secure the gas supply deals they need to secure financing for around 70 percent of the project costs, with RWE having to push back signing a deal with Turkmenistan until the second half of the year.

"I am confident that they can make the gas deals this year or early next year in order to secure the investment," Nabucco Managing Director Reinhard Mitschek said, adding there were no firm financial commitments for the project so far but that talks with banks were ongoing.

"We are on track. We expect to finalize all our important pre-requisites in the development phase just in time for the construction start up in the second half of 2011," he said, adding that first gas would likely flow across south-eastern Europe to Austria at the end of 2014.

A lull in European energy demand and a surge in liquefied natural gas supply has driven gas prices down across the region over the last year and led some analysts to question the need for another supply line.

But the pipeline consortium of Germany's RWE, Austria's OMV, Hungary's MOL MOLB.BU, Bulgarian Energy Holding, Transgaz TGNM.BX of Romania and Botas of Turkey can expect higher sales prices and healthy demand for the gas Nabucco transports when it opens and it would be a mistake to delay it because of the current glut, Mitschek said.

"To slow down or lean back would be absolutely the wrong measure," he said when asked if the dip in demand seen in Europe might slow the project.

"We cannot fine tune a long-term project on short-term market developments. In the long run, we expect reasonable prices both for gas, the commodity itself, and also for the transportation services."

Nabucco -- which will cross Turkey, Bulgaria, Romania and Hungary on its way to Austria -- is expected to carry 31 billion cubic meters a year (bcm) but will start with a capacity of 8 to 10 bcm/year and build additional compressor stations over the following four years.

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