Sunday

27th Sep 2020

EU banks throw their weight behind Nabucco pipeline

  • The mega-project would require two million tonnes of steel (Photo: Flickr)

The EU's Nabucco gas pipeline received a boost on Monday as the European Investment Bank, the European Bank for Reconstruction and Development and the World Bank made a first written commitment that may lend the project up to €4 billion, half of its total cost.

"International financing institutions are very conservative in their assessments, so if they indicate they are ready to commit funding, they usually end up doing it," Thomas Barrett from the EIB said during a joint press briefing in Brussels.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The potential financing package, pending approval of the environmental and social feasibility studies, will consist of up to €2 billion from the EIB, €1.2 billion from the EBRD and around €800 million from the World Bank. The European Commission has already earmarked €200 million for the project, provided the green light from investors is given by the end of this year or beginning of 2011. The total cost of the project is estimated at €7.9 billion.

The financial commitment from international banks is aimed at alleviating fears in supplier countries – notably Azerbaijan and Iraq – that the consortium lacks the proper funding for the 3,300 to 4,000 km long pipeline aimed at breaking the Russian monopoly on gas exports from the Caspian Sea region via an alternative route.

"Construction will start in 2012, operation of the pipeline is expected to start in 2015, " Nabucco managing director Reinhard Mitschek said during the same briefing, while also signalling "flexibility" on the date of one year earlier or later, depending on the customers' needs.

The 2 million tonnes of steel will be laid through Turkey, Bulgaria, Romania, Hungary and Austria, and secure a maximum of 31 billion cubic metres a year. The gas demand of the EU's 27 member states is expected to rise from 483 billion cubic metres in 2009 to 603 billion in 2020.

The Nabucco project has developed only slowly since 2002, when gas officials from the five countries involved gathered in Vienna and dubbed the pipeline "Nabucco" after listening to Verdi's eponymous opera.

Lack of political support, haggles over transit conditions with Turkey and a pricing dispute with supplier country Azerbaijan have delayed construction.

Mr Mitschek repeatedly stressed that Nabucco is a transporting company and that gas supplies and pipeline capacity will be bid on through open tender.

"We have to synchronise Nabucco first to the gas supply sources," Mr Mitschek said. Once the gas supply has been secured, the "open season" tender process for transporting gas will begin by the end of the year or in the first quarter of next year, he said.

Some 16 billion cubic metres could be secured from Azerbaijan, in talks which are scheduled to start this week in Baku. But company officials from the German energy firm RWE say that the first Azeri gas could only start flowing in 2017. A much earlier prospect would be Iraqi gas from the northern Kurdish region, starting in 2015.

RWE has already initiated prospective talks with the regional government from autonomous Kurdistan and offered support in developing export capacity, along with an internal grid, as the northern Iraqis still rely on gas canisters to prepare their meals and heat up their homes.

The government in Baghdad on Sunday however slammed as "illegal" the memorandum of understanding, stressing that all gas export agreements need to be signed by the central authorities.

"Of course we'll talk with the central government in Iraq," Stefan Jurdisch from RWE said during a separate briefing on Monday. But he also pointed to the fact that since March, the government in Baghdad is "in formation phase."

"We'll see how the political talks go. We need a mature government to deal with this issue."

Mr Jurdisch stressed that by the end of the year investors will have to know on which gas to count first – either from Azerbaijan or from Irak – because there are technical issues related to how these connecting branches are fed into the main pipeline.

Meanwhile, Bankwatch, a watchdog monitoring the way public funds are spent on energy projects, has lambasted the decision of the three international lenders.

"There are a million and one reasons for the EIB, the EBRD and the IFC not to back Nabucco, namely the urgent energy saving measures in the region's homes and businesses that can reduce CO2 emissions massively and create hundreds of thousands of jobs," Piotr Trzaskowski from Bankwatch said in a statement.

One particularly contentious issue is the possibility of linking up the Azeri fields over the Caspian Sea to the offshore Turkmen fields, which have much more unexplored gas.

"There is a high probability that so-called European energy security via Nabucco will be reliant upon major gas supplies from Turkmenistan, an oppressive regime state that ranks alongside North Korea in widely-recognised human rights rankings," Bankwatch said.

Analysis

China's carbon pledge at UN sends 'clear message' to US

China's pledge to become carbon neutral before 2060 is "good news" for Europe, but it sends a clear message to Washington ahead of the US election - in which climate change has become a significant aspect for voters.

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Council meets Belarusian opposition leader Svetlana Tichanovskaja
  2. Nordic Council of MinistersNordic Region to invest DKK 250 million in green digitalised business sector
  3. UNESDAReducing packaging waste – a huge opportunity for circularity
  4. Nordic Council of MinistersCOVID-19 halts the 72nd Session of the Nordic Council in Iceland
  5. Nordic Council of MinistersCivil society a key player in integration
  6. UNESDANext generation Europe should be green and circular

Latest News

  1. Berlin repeats support for EU human rights sanctions
  2. China's carbon pledge at UN sends 'clear message' to US
  3. Far right using pandemic to win friends in Germany
  4. Visegrad countries immediately push back on new migration pact
  5. Why no EU progress on Black Lives Matter?
  6. EU migration pact to deter asylum
  7. 'Era of EU naivety ends', MEP pledges on foreign meddling
  8. Anti-mask protesters pose challenge for EU authorities

Stakeholders' Highlights

  1. Nordic Council of MinistersNEW REPORT: Eight in ten people are concerned about climate change
  2. UNESDAHow reducing sugar and calories in soft drinks makes the healthier choice the easy choice
  3. Nordic Council of MinistersGreen energy to power Nordic start after Covid-19
  4. European Sustainable Energy WeekThis year’s EU Sustainable Energy Week (EUSEW) will be held digitally!
  5. Nordic Council of MinistersNordic states are fighting to protect gender equality during corona crisis
  6. UNESDACircularity works, let’s all give it a chance

Join EUobserver

Support quality EU news

Join us