International investment institutions Monday signed an agreement to start a process that will potentially lead to as much as EUR4 billion of financing for the planned Nabucco natural gas pipeline
International investment institutions Monday signed an agreement to
start a process that will potentially lead to as much as EUR4 billion of
financing for the planned Nabucco natural gas pipeline.
The European Bank for Reconstruction and Development, the European Investment
Bank, and the World Bank's International Finance Corporation signed a letter
that "formalizes the conditions under which the three IFIs will conduct
their appraisal of the Nabucco project, and provides an indication of the
potential level of financing," the lenders and the Nabucco consortium said
in a statement.
The EIB will provide up to EUR2 billion, the EBRD up to EUR1.2 billion and the
IFC up to EUR800 million, according to the statement. Under the agreement, the
international lenders will make an analysis of the Nabucco project and decide
whether to give their financing by the end of next year.
Nabucco is a EUR7.9 billion, 3,300 kilometer long pipeline project that would
bring Caspian gas to
Austria
across
Turkey
and
Central
Europe
. Strongly supported by the European Commission, the project is seen as
a way to ease the bloc's dependence on imports of Russian gas, which account
for around 25% of the European Union's annual gas supplies.
Nabucco expects to start an open season to seek buyers for its capacity at the
end of this year or early in 2011, said the project's Managing Director
Reinhard Mitschek during a press conference after the signature Monday.
The pipeline project has wrestled for years with the problem of how to find
reliable gas supplies to fill the expected annual 31 billion cubic meter
capacity and ensure the project's long-term commercial viability.
The most likely first gas supplier would be an offshore Azerbaijani field in
the Caspian basin, but competition for that gas is high and it would offer less
than 10 billion cubic meters a year.
Another potential gas source is
Iraq
, but
procedural, political and technical hurdles suggest that gas also won't be
available quickly enough.
But Nabucco's top management said Monday that it counts on about eight billion
cubic meters from
Azerbaijan
and
another 10 bcm from
Iraq
to
start up the pipeline, which is expected to carry the first gas in about five
years.
"With the gas from
Azerbaijan
and
Iraq
we
can make Nabucco happen," said Werner Auli, chairman of the Nabucco
Steering Committee.
Austria's OMV AG (OMV.VI), Germany's RWE AG (RWE.XE), Turkey's Botas,
Bulgaria's Bulgarian Energy Holding, Romania's Transgaz, and Hungary's MOL
Nyrt. (MOL.BU) form the building consortium. Mitschek said Monday that it isn't
seeking other shareholders.
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