Nabucco Says Has ‘A Lot to Negotiate’ Over Shah Deniz Accord

The Nabucco natural gas pipeline and operators of the Shah Deniz II, Azerbaijan’s biggest oilfield, have “a lot to negotiate” before signing a joint development agreement, Nabucco spokesman Christian Dolezal said.

The Shah Deniz partners, which include BP Plc (BP/), Statoil ASA (STL), Total SA (FP) and Socar, picked the Nabucco West pipeline in June as a potential export route to Europe and agreed in principle with Nabucco shareholders in Sofia today on joint funding development costs against a 50 percent equity option in the pipeline project. The agreement will be signed in Vienna soon, Dolezal said in an interview.

“It’s important that we have an agreement that will lead to a final decision in June 2013,” Dolezal said. “We still have a lot to negotiate with the Shaz Deniz consortium partners to align everything in terms of the final decision.”

The 1,300-kilometer (810-mile) link backed by the European Union is competing 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 fuel in Azerbaijan’s part of the Caspian Sea. The EU wants to diversify supplies away from Russia, which provides a quarter of its natural gas.

Shah Deniz operators plan to make a final choice between the pipelines before an investment decision on expanding the field is due in mid-2013.

Project Deliverability

“The Shah Deniz gas field is a very big investment to undertake and we have to meet criteria in terms of project deliverability and market penetration among others,” Dolezal said. “We are working very closely and we are in a very good position now to deliver these criteria, but still this is a work in progress.”

Nabucco West would transport gas from the Turkey-Bulgaria border to the Baumgarten gas hub in Austria via Romania and Hungary. It’s a shorter version of a pipeline that initially would also have crossed Turkey and Iran.

“We reduced the cost after reducing the length of the pipeline,” Dolezal said. “We don’t have a new cost estimate yet. We can communicate when we are coming closer to finalizing the field engineering in the course of this year.”

Nabucco Gas Pipeline International GmbH is now working on an environmental and social-impact assessment, Dolezal said.

“We have finalized the submission of public papers to the authorities and we’re now going to public hearings,” he said.

Five Steps

Nabucco shareholders mapped today five steps to be taken until June, which include submitting bids for gas volumes to be purchased and specify the details of the commercial agreement with Shah Deniz, Bulgarian Energy and Economy Minister Delyan Dobrev told reporters.

Bulgaria will set up a project company to build the pipe that will connect Turkey’s national gas grid with Bulgaria’s, which will be the first section of the Nabucco pipeline, Mihail Andonov, executive director of the Bulgarian Energy Holding in Sofia told reporters. The planned 225-kilometer (140-mile) pipe will link Marmara in Turkey with Lozenets in Bulgaria and is estimated to cost 300 million euros ($396 million) of which the European Union pledged to pay 200 million euros, he said. The plan is still being negotiated with Turkey, Andonov said.

To contact the reporter on this story: Elizabeth Konstantinova in Sofia at ekonstantino@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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