RWE AG, Germany’s second-largest utility, plans to join the –5 billion Nabucco pipeline project that’s seeking to export natural gas from the Caspian Sea and blunt Russia’s influence in Europe.
RWE will sign a pact to become Nabucco’s sixth partner in Vienna on February 5, Akif Sam, a spokesman for the Turkish Energy Ministry, said in a telephone interview yesterday. RWE beat out competitors including Gaz de France. “We are pleased by these very positive signals,” RWE spokeswoman Annett Urbaczka said.
“This is a step forward, but many questions remain about the viability of such a costly project,” said Wolfango Piccoli, a London-based analyst at Eurasia Group. “The main issue is where the supply will come from.” Nabucco, led by Austria’s OMV AG, has been considering the addition of a sixth partner since last year, while questions of financing and supply remained undecided. Russian gas exporter OAO Gazprom proposed its own South Stream pipeline in June, adding Bulgaria and Serbia as partners earlier this month. Both Nabucco and South Stream aim to move similar volumes of gas, about 30 billion cubic meters of gas a year, through the Balkans to Western Europe. Nabucco will stretch 3,300 kilometers (2,070 miles) from eastern Turkey to Austria, while South Stream will travel under the Black Sea, connecting Russia directly to Bulgaria. While Nabucco is designed to counter dependency on Russia by seeking new energy sources in Central Asia, South Stream will compete for the same gas from the region as Gazprom’s older fields in Siberia are depleted.
Gazprom controls almost all of the gas exports out of Central Asia and is seeking to boost supplies from Turkmenistan, the second-largest gas producer in the former Soviet Union after Russia.
Iran, which has reiterated its readiness to supply Nabucco, is saddled by US-led economic sanctions and faces gas shortages at home.
“It’s an uphill struggle. It will depend very much on the cohesiveness of Nabucco’s partners,” said Piccoli. “The concern is that they speak with one voice when they meet, then sign separate deals with the Russians.”
The other Nabucco companies are Turkey’s Botas, Bulgaria’s Bulgargaz AD, Romania’s Transgas and Hungary’s Mol Nyrt.
Domestic demand
Bulgargaz, Botas and Mol all depend on Russian gas deliveries to meet domestic demand. Bulgargaz signed on as a South Stream partner when Russian President Vladimir Putin visited Sofia earlier this month. Turkish Energy Minister Hilmi Guler said in June that even Gazprom could become a partner in the Nabucco pipeline.
The discussion over RWE’s participation dragged on as Gaz de France faced opposition in Turkey. France’s lower house passed a bill making it a crime to deny that genocide was carried out against Armenians in 1915 in what is now Turkey. Turkey denies claims of genocide, saying Armenians were killed as part of a wider civil conflict during World War I.
The Nabucco project could eventually add a seventh partner, managing director Reinhard Mitschek said last year. The group could choose Azerbaijan’s state oil company Socar as a partner to secure gas supplies from Central Asia, Austrian Economy Minister Martin Bartenstein said in November.