Significant progress has been achieved with Turkey on moving forward the Nabucco gas pipeline project, Reinhard Mitschek told, managing director of Nabucco Gas Pipeline International.
Why does the Nabucco pipeline largely continue to be no more than an 'on paper' project?
The construction preparation must be well realised and this needs time, since the project is a complex one. I expect the intergovernmental agreement to be signed in June, for which there is support on behalf of governments and the regulatory authorities.
The January gas crisis, which ceased supplies from Russia, changed the attitude of the participants in the project, and now these attitudes are positive. With coordination by the European Commission, we are heading toward compromise, which will be indicated in the draft agreement, the final variant of which will be ready in May.
Negotiations are being carried out with Turkey for synchronisation of its legislation with the Europeans, which delayed the preparation. During the last few months, significant progress has been achieved.
The signing of the agreement will clear the processes for specifying the track on the territory of the participating countries, as well as preparation of the evaluation of the environmental impact.
For the moment, what hindrances does the project face?
The gas pipeline track passes through five countries. When we commenced the realisation of the project, only Austria and Hungary were EU member states. Bulgaria and Romania were still EU membership candidates, and Turkey is not in the EU zone.
The major challenge was synchronisation of the legislation frameworks of the participating countries. Nabucco International asked for exemptions from the Gas Directive, which will allow us to determine the tariffs and 50% of the gas pipeline capacity to be used by the shareholders, while the rest will be offered to shippers.
We have already been granted approval by the regulators in Bulgaria, Hungary, Austria and Romania. After the signing of the agreement, detailed engineering plans will be prepared.
How will you reach agreement with Turkey, which links its participation in the project to its EU membership, and wants to play a bigger role in the project?
At present, negotiations are only being carried out on one draft agreement and are being coordinated by the European Commission. With the realisation of Nabucco, a connection of the Turkish gas pipeline network with the European one will be constructed. The project will allow guarantees of security of supplies and its diversification. The gas pipeline will increase the liquidity of the gas market and will allow gas transport in an East–West direction and vice-versa. There are considerations, like gas depots to be constructed in the countries following the track.
What risks does the project face?
Existing risks are of a technical character and some others, connected with ownership and the terms of realisation of the project. But the company has the necessary means to lower them to a minimal level. I hope that Nabucco will be successfully realised.
At the last European summit, 200 million euros were granted for Nabucco, but Germany insisted that by the end of 2010, all the projects supported, including this one, must have achieved concrete results. What exactly does hat mean in your case, and is it possible for the project to move on in the next 20 months?
We are facing a slowdown of the global economy due to the crisis. The EU recovery programme targets projects which will bring results in the short and medium term, with effect upon the economies and industries of the respective countries. We plan to achieve such results.
Our intention is by the end of this year to begin the realisation of the engineering operations, via commissions for the pipes and compressor stations. A major purpose of the European policy is to contribute to industry and market recovery and strengthen security of supply.
The actual construction of the gas pipeline will commence in 2011, and in the following year the suppliers will be determined. The talks over the granted resources are yet to come, and the resources will be used at the beginning of the construction.
Both Moscow and Teheran claim that Nabucco is not possible without gas from Iran. Is this correct?
The biggest advantage of Nabucco is that it relies on supplies from several sources – neither only Iranian, nor only Russian.
In the long term, I expect realisation of supplies from Iran, including LNG terminals. Possible are supplies from Iraq and Egypt. For their realisation though, political stability is necessary. Azerbaijan and Turkmenistan can also take advantage from the project, since good investment conditions will be created in the Caspian region.
How would you comment on the supply agreement between Iran and Turkey?
All the gas supply agreements that have been signed up to now increase the security of Turkey itself and have a positive impact upon the project. Nabucco aims at not only guaranteeing security of supply for Europe, but also for Turkey.
Could Gazprom participate in the project, and under what conditions? Does the possible participation of Gazprom make the project pointless, as it was defined as a means of diversifying gas sources?
The aim is supply and route diversification. I would not like to dwell upon interpretations upon which concept would be attractive for the present shareholders in the project and for Gazprom.
Gazprom's participation has not been on the agenda. The present participants have resources, know-how and big markets in Europe. We have sent invitations to all gas producers for participation in the project and we have no intention of excluding any of them.
Gazprom can be one of the suppliers. It is a fact that Russia will remain one of the major gas suppliers for Europe in the next several years.
Which gas pipeline projects do you consider to be rivals to Nabucco?
Nabucco is a gas transportation project. Gas consumption in Europe is to increase. We witness that the competition between the shippers will increase. The project will allow supplies from East to West.
In the next years, the investors will decide upon the construction of gas depots. The projects for such depots in Bulgaria, Turkey, and Romania will be finalised in 2014. Some of our shareholders, such as OMV, which operates in the sphere of LNG, would have an interest toward the construction of such terminals. For all shippers and suppliers, diversification of the sources is necessary, which is also related to their construction.
What impact will the crisis have on the construction of the project?
In the conditions of crisis, the gas market is shrinking. At the same time, the forecasts indicate that consumption in Europe in the long term will increase. We have held talks with the EIB and the EBRD, and with credit export agencies.
Two months ago, at the meeting in Budapest, the CEO of the EIB, Philippe Maystadt, announced that the bank is ready to finance 25% of the project for over two billion euros. The credit agencies are ready to finance the supplies and construction.