ECONOMY

A new natural gas pipeline

LONDON – A pipeline project to deliver Iranian gas to the heart of Europe is key to ensuring diverse supply sources and routes for consumers who currently rely totally on Russian exports, Austria’s OMV told Reuters. Otto Musilek, managing director of OMV’s gas subsidiary Erdgas said a five-member consortium planning the 4.4-billion-euro ($5.42 billion) Nabucco pipeline would in October complete a feasibility study to determine whether Middle Eastern or Caspian gas could be piped to Central Europe. «This pipeline will not be just for OMV or for the Bulgarian or Romanian companies in the consortium,» Musilek told Reuters. «The goal is to create new infrastructure to supply future European gas demand from a new region and via a new transport route, independent of old ones through Russia and Ukraine.» Nabucco – named for a Verdi opera after a consortium outing in Vienna – is projected to run 3,400km (2,113 miles) from eastern Turkey to OMV’s Baumgarten hub via Hungary, Romania and Bulgaria. It aims to ship 30 billion cubic meters (bcm) of gas annually by 2015, though Musilek said initial volumes from 2009 onward would likely be five to seven bcm. OMV’s trading arm Econgas in January signed a memorandum of understanding to export Iranian gas via Nabucco and to step up exploration there. But Musilek stressed the consortium was open to sourcing from different producers. «The main source in the region is Iran, which has the world’s second-largest reserves after Russia,» he said, but added gas from Azerbaijan or from Russia’s Blue Stream pipeline to Turkey or even Egypt or Libya were potential suppliers. A pipeline already exists between Iran and Turkey but Russia is also exporting to Ankara via Blue Stream, and oil major BP is hoping to ship Azeri gas from the Caspian Shakh Deniz field. Nabucco includes OMV Erdgas, Turkish Botas, Hungarian MOL, Romania’s Transgaz and Bulgarian Bulgargaz. The group recently named Dutch ABN Amro as its financial adviser. Many analysts say Europe may have contracted for more gas than needed, creating a potential «gas bubble,» and projects like Nabucco aim at an already oversupplied market. Large imports are planned via pipelines as well as Liquefied Natural Gas (LNG) terminals. But Musilek said that while two-thirds of Europe’s gas is currently supplied by Russia, demand was burgeoning even faster. He estimated European gas demand by 2030 would be 300bcm higher than current levels of about 500bcm. «The signs are Gazprom won’t able to cover Europe’s entire gas demand in the next 20 years,» he said, referring to Gazprom’s new fields, which require huge investments to bring onstream. «As an energy supplier, we have the responsibility to secure gas supply for the longer term.» Demand growth for environmentally friendly gas is expected to come from European power plants, but some say high gas prices could push buyers toward nuclear power or even back to coal. «Everything depends on market development. If there are more nuclear power plants built and there is no need for gas for power plants, we and all others will have to correct our demand forecasts,» Musilek said. But he said that even if demand growth was just half of what was projected, the 30bcm capacity Nabucco would be viable as it aimed to supply fast-growing Balkan and Eastern European states. «The target at the end of the day is to put in 30bcm at the Turkish border and receive 15-17bcm at the Austrian border,» he said. «The difference should be consumed by Turkey, Romania, Bulgaria and Hungary, where demand is rising fast.» «We estimate that these countries will have the capacity to take an additional 15bcm a year by 2020.»