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Derek Brower: Back on the agenda

The Nabucco pipeline project has looked moribund for months. Is a revival in sight? By Derek Brower, journalist ANALYSTS and journalists have been writing off Nabucco for months. But now it seems there could be life in the project yet. According to sources, Hungary’s government will announce in the coming weeks that it will back the pipeline project, considered to be the EU’s most important strategic development in years. Budapest has always officially been one of the countries involved in plans to build the pipeline, which would import up to 31bn cubic metres a year from Central Asia and the Middle East through Turkey and the Balkans and into Central Europe and help diversify the EU’s supply of gas away from Russia. But an agreement between the country’s energy firm Mol and Russia’s gas monopoly, Gazprom, in 2006 was designed to nix the project. Instead, the two companies said they would develop a rival pipeline, an extension of the Blue Stream pipeline that exports Russian gas to Turkey. Ferenc Gyurcsany, Hungary’s prime minister, explained earlier this year that while Nabucco was struggling to find suppliers to fill its pipeline, Gazprom had gas to export. Nabucco was a dream, Gyurcsany said, and you can’t heat homes with dreams. Now it seems Budapest will change its tune, with the prime minister expected to endorse the project next month. There are three explanations for the u-turn. The first is domestic politics, where the Gyurcsany government’s siding with Russia against the perceived interest of the EU was not popular. The second is pressure from the US. Officials from Washington met with the government in Budapest at the end of last month and made their feelings about Nabucco — and Hungary’s responsibility to it — clear. The third explanation is that despite Mol’s agreement with Gazprom, the Russian company has signed a deal with Italy’s Eni to build a different pipeline altogether. That project envisages construction of an entirely new trans-Black Sea link landing in Bulgaria and entering the EU’s gas network there. With so many lovers to choose from, Gazprom had to disappoint one. Mol was it. There are other developments that auger well for Nabucco, too. The first is that Gazprom seems to be easing off from its campaign to make the project irrelevant. Last year, the company’s effective deputy head told me Nabucco was a “virtual pipeline” and would never happen. Now Gazprom is talking of its new South Stream project with Eni as being complementary to Nabucco. Europe needs all the gas it can import if it is to meet growing demand. From that point of view, two pipelines will be better than one. From Gazprom’s point of view, a recent agreement with OMV, the lead company in the Nabucco consortium (which has launched a hostile takeover bid for Mol), to build gas infrastructure in Austria will give it some control over any gas that arrives in Central Europe through Nabucco. So Nabucco’s threat has been minimised for the Russian company. Wolfgang Ruttenstorfer, OMV’s chief executive, told me last October that there could be “synergies” between Nabucco and Gazprom. That means the pipeline will probably take Russian gas – another reason for Gazprom to endorse the project, not seek to crush it. Another boost for Nabucco is that the European Commission is pushing it strongly again. Andris Piebalgs, the energy Commissioner, said this month that South Stream would not distract the Commission from developing its own project. More important still, the Commission has appointed a coordinator to oversee its development. Van Aartsen, a former energy minister of the Netherlands, should bring some direction to a project that has looked rudderless. An indication of Nabucco’s revival is that Germany’s RWE and France’s GdF now want to take a stake in the pipeline. All of that aside, Nabucco still faces one large hurdle: finding gas to fill the line. Azerbaijan recently began exporting to Turkey, but in volumes (9bn cm/y) that would barely fill a third of Nabucco’s planned capacity. Additional gas from Turkmenistan and Kazakhstan is less likely following an agreement between those countries and Russia giving Gazprom control of their exports. And Iran, the other country the Nabucco partners say could fill the line, remains off limits to the Western investors whose capital would be necessary to develop the country’s reserves. Ankara and Tehran continue to negotiate about the transit through Turkey of Iranian gas. And Iran claimed today that it would export up to 35bn cm/y to Europe from its South Pars gasfield. But the politics that are keeping Iran from realising its potential as a gas exporter won’t be resolved easily. www.derekbrower.com