Nabucco West Selected as Potentaial Route for Azeri Gas

BP Plc (BP/) and its partners in the Shah Deniz gas field in the Caspian Sea selected the Nabucco West pipeline as a potential export route to Europe, with a final decision due next year.

“The greater maturity of Nabucco West gave the consortium confidence that this project could be developed and delivered on the same timeline” as stage two of Shah Deniz, State Oil Co. (ATPG) of Azerbaijan said on its website today.

Nabucco West, a 1,300-kilometer (810-mile) link backed by the European Union, will now compete with the Trans-Adriatic Pipeline, known as TAP, for rights to export gas from the Shah Deniz field, which may hold 1.2 trillion cubic meters of the fuel in Azerbaijan’s part of the Caspian Sea.

The Shah Deniz partners, which include Statoil ASA (STL) and Total SA (FP), aim to make the final choice before an investment decision on expanding the field is due in mid-2013. First gas exports are seen for late 2017. Earlier this year, the group eliminated the Interconnector Turkey-Greece-Italy, or ITGI, as a potential transport link, and today chose Nabucco over the BP- led South East Europe Pipeline project, known as SEEP.

‘100 Deaths’

“Nabucco had the advantage over SEEP that they had all the feasibility studies and legal requirements years ago,” said Philipp Chladek, an oil and gas industry analyst at Bloomberg Industries in London. “The question that now arises is whether any company of the Shah Deniz consortium will enter the Nabucco consortium or vice-versa, or if this is not desired out of an ‘unbundling’ perspective.”

Nabucco has faced repeated delays in the past eight years after struggling to secure fuel sources amid competition.

“This decision is an important milestone for the Nabucco project and a major step towards the final investment decision,” Nabucco Managing Director Reinhard Mitschek said in a separate statement today.

The pipe “will be pronounced dead 100 times, but it will be alive again 101 times,” Gerhard Roiss, chief executive officer of OMV AG (OMV), which is one of the six companies backing Nabucco, said in April.

Diversify Supplies

Nabucco West would transport gas from the Turkey-Bulgaria border to the Baumgarten gas hub in Austria via Bulgaria, Romania and Hungary. It’s a shorter version of a pipeline that initially would also have crossed Turkey. Turkey and Azerbaijan yesterday signed a deal to build the $7 billion Trans-Anatolia Pipeline pipeline, known as Tanap, across Turkish territory. Nabucco West would have an initial capacity of 10 billion cubic meters a year and can be scaled up to 23 billion cubic meters if there’s enough demand, according to the Nabucco statement.

The EU is seeking to diversify supplies away from Russia, which provides a quarter of its natural gas. Russian gas for Europe piped through Ukraine has been disrupted by disputes between the two countries.

Russia also has been keen to bypass Ukraine and will start construction on the OAO Gazprom-led South Stream pipeline at the end of this year, with natural-gas flows to the EU potentially starting as early as 2014.

Nabucco is a joint venture of Germany’s RWE AG (RWE), Vienna- based OMV, Mol Nyrt. (MOL) of Hungary, Bulgargaz EAD, Romania’s Transgaz SA and Istanbul-based Boru Hatlari ile Petrol Tasima AS. TAP is planned by EGL AG, Statoil and EON Ruhrgas AG.

Shah Deniz is being developed by Azerbaijan’s Socar, OAO Lukoil, Naftiran Intertrade Co. and Turkiye Petrolleri AO, as well as BP, Statoil and Total.

To contact the reporter on this story: Zulfugar Agayev in Baku at zagayev@bloomberg.net, Zoe Schneeweiss in Vienna at zschneeweiss@bloomberg.net

To contact the editor responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.