Thursday

25th Aug 2016

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.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

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.

News in Brief

  1. Switzerland sees increase in migrants from Italy
  2. Norway to build Arctic border fence
  3. Brexit leader Farage addresses Trump rally
  4. Finland holds 'IS fighter' over 2014 Iraq mass killing
  5. Commission allows Portuguese bank recapitalisation
  6. Ex-commissioner: my rules on emissions are not vague
  7. Leading Danish MEP steps down from post
  8. US cooperating with Turkey on Gulen extradition

Stakeholders' Highlights

  1. HuaweiMaking Cities Smarter and Safer
  2. GoogleHow Google Makes Connections More Secure For Users
  3. EGBAThe EU Court of Justice Confirms the Application of Proportionality in Assessing Gambling Laws
  4. World VisionThe EU and Member States Must Not Use Overseas Aid for Promoting EU Interests
  5. Dialogue PlatformInterview: "There is a witch hunt against the Gulen Movement in Turkey"
  6. ACCAACCA Calls for ‘Future Looking’ Integrated Reporting Culture With IIRC and IAAER
  7. EURidNominate Your Favourite .eu or .ею Website for the .EU Web Awards 2016 Today!
  8. Dialogue PlatformAn Interview on Gulen Movement & Recent Coup Attempt in Turkey
  9. GoogleA Little Bird Told us to Start Tweeting About Google’s Work Across Europe. Learn More @GoogleBrussels
  10. Counter BalanceThe Trans Adriatic Pipeline: An Opportunity or a Scam in the Making for Albania?
  11. Counter BalanceThe Investment Plan for Europe: Business as Usual or True Innovation ?
  12. Belgrade Security ForumMigration, Security and Solidarity within Global Disorder: Academic Event 2016