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Region: Pipeline connections
The Economist Intelligence Unit
Business Middle East
16 July 2005
Cross-border pipelines are notoriously difficult to negotiate. But two
such schemes are now making progress
The Nabucco gas pipeline project which aims to transport up to 25.5bn
cu metres/year of Caspian gas to Central and South Eastern Europe via
Turkey has taken a step closer to being realised with the signing of a
formal joint-venture agreement.
The agreement allows for the establishment of Nabucco Gas Pipeline
International, in which each of the five partners - OMV of Austria,
MOL of Hungary, Transgas of Romania, Bulgargaz of Bulgaria and
Turkey's Botas - each hold a 20% stake. The new company will be
responsible for general development of the project including securing
necessary financing, which is expected to be in the region of 4.6bn
(US$5.5bn), negotiating transit agreements and establishing five
Nabucco subsidiaries - one in each of the participating countries.
The five subsidiaries, to be established in Turkey, Bulgaria, Romania,
Hungary and Austria, will be founded later this year with each being
responsible for acquiring necessary licences for the operation of
their section of the pipeline and for its subsequent operation. The
line itself will remain 100% owned by the parent company, which will
retain all rights for exportation and sale of gas, hence, providing a
`one-stop-shop' for gas shippers wishing to export through the
line. Following the completion of a feasibility study for the line
late last year and the signing of the joint-venture deal, Nabucco will
now move into the development phase.
Reinhard Mitschek, managing director Nabucco Pipeline Study, told BME
that work on the first phase which involves the construction of a
56-inch line from the Turkish capital Ankara to Austria is due to
commence in 2008 and to be completed within three years. For the first
two years of operation the line will lease capacity from the existing
Botas-owned lines from Ankara to Erzurum and from Erzurum running to
Iran and Azerbaijan - construction of the latter being scheduled to
start later this year. During this two-year period Nabucco will
complete its second construction phase which will involve the laying
of new Nabucco-owned lines from Ankara to Erzurum, and from Erzurum to
Azerbaijan and Iran, to be constructed in parallel with the existing
Botas-owned lines
Once complete the line will have an initial capacity of 25.5bn cu
metres/y, which can be raised to 31bn cu metres/y by the addition of
extra compressors if demand is sufficient. Mr Mitschek said that
negotiations with gas shippers have already begun, with the aim of
putting together a portfolio of supply contracts and securing
take-or-pay agreements for an initial 6bn-8bn cu metres/y of
gas-sufficient to allow financial closure on the project by
2007. Discussions have been conducted with Azerbaijan for between
10bn-14bn cu metres/y, with Iran for 10bn-26bn cu metres/y, with Egypt
for 8bn-10bn cu metres/y and with Iraq for an undisclosed volume, he
said.
Business Middle East 16 Jul 2005, Part 6 of 35
The Economist Intelligence Unit
Business Middle East
16 July 2005
Cross-border pipelines are notoriously difficult to negotiate. But two
such schemes are now making progress
The Nabucco gas pipeline project which aims to transport up to 25.5bn
cu metres/year of Caspian gas to Central and South Eastern Europe via
Turkey has taken a step closer to being realised with the signing of a
formal joint-venture agreement.
The agreement allows for the establishment of Nabucco Gas Pipeline
International, in which each of the five partners - OMV of Austria,
MOL of Hungary, Transgas of Romania, Bulgargaz of Bulgaria and
Turkey's Botas - each hold a 20% stake. The new company will be
responsible for general development of the project including securing
necessary financing, which is expected to be in the region of 4.6bn
(US$5.5bn), negotiating transit agreements and establishing five
Nabucco subsidiaries - one in each of the participating countries.
The five subsidiaries, to be established in Turkey, Bulgaria, Romania,
Hungary and Austria, will be founded later this year with each being
responsible for acquiring necessary licences for the operation of
their section of the pipeline and for its subsequent operation. The
line itself will remain 100% owned by the parent company, which will
retain all rights for exportation and sale of gas, hence, providing a
`one-stop-shop' for gas shippers wishing to export through the
line. Following the completion of a feasibility study for the line
late last year and the signing of the joint-venture deal, Nabucco will
now move into the development phase.
Reinhard Mitschek, managing director Nabucco Pipeline Study, told BME
that work on the first phase which involves the construction of a
56-inch line from the Turkish capital Ankara to Austria is due to
commence in 2008 and to be completed within three years. For the first
two years of operation the line will lease capacity from the existing
Botas-owned lines from Ankara to Erzurum and from Erzurum running to
Iran and Azerbaijan - construction of the latter being scheduled to
start later this year. During this two-year period Nabucco will
complete its second construction phase which will involve the laying
of new Nabucco-owned lines from Ankara to Erzurum, and from Erzurum to
Azerbaijan and Iran, to be constructed in parallel with the existing
Botas-owned lines
Once complete the line will have an initial capacity of 25.5bn cu
metres/y, which can be raised to 31bn cu metres/y by the addition of
extra compressors if demand is sufficient. Mr Mitschek said that
negotiations with gas shippers have already begun, with the aim of
putting together a portfolio of supply contracts and securing
take-or-pay agreements for an initial 6bn-8bn cu metres/y of
gas-sufficient to allow financial closure on the project by
2007. Discussions have been conducted with Azerbaijan for between
10bn-14bn cu metres/y, with Iran for 10bn-26bn cu metres/y, with Egypt
for 8bn-10bn cu metres/y and with Iraq for an undisclosed volume, he
said.
Business Middle East 16 Jul 2005, Part 6 of 35