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Report: Nabucco to be shelved by June

May 30, 2012 at 6:30 AM   |   Comments

MOSCOW, May 30 (UPI) -- The long-planned Nabucco natural gas pipeline, once envisioned as stretching from Azerbaijan to Austria, will be abandoned by the end of June, a Russian report says.

Citing unnamed London oil and gas analysts, the Itar-TASS news agency reported the European Commission-backed project to reduce Europe's dependence on Russia for natural gas supplies will officially fall victim to changing market conditions before June is over.

The news agency said British experts have concluded Nabucco's backers -- which include Austria's OMV, Germany's RWE, Hungary's MOL, Turkey's Botas, Bulgarian Energy Holding and Romania's Transgaz -- will abandon the $10 billion effort as competitors appear to be gaining traction.

The consortium that controls Azerbaijan's Shah Deniz II gas field in the Caspian Sea is scheduled in late June to choose between a scaled-down version of Nabucco (dubbed Nabucco West) and the BP-backed South East Europe Pipeline as the candidate to go up against the Trans Adriatic Pipeline in a final decision on which will transport billions of cubic meters of gas annually to Europe.

The Shah Deniz consortium includes BP as well as Azerbaijan's state-owned oil company SOCAR.

The original vision for the Nabucco was for it to have a transport capacity of 31 billion cubic meters per year but, under the Nabucco West version, that has been scaled back to 10 billion cubic meters.

And while the first iteration was to run 2,500 miles from Azerbaijan's Shah Deniz II gas fields through Georgia, Turkey and Eastern Europe to Austria, the downsized pipeline would be 800 miles, starting at the Bulgarian-Turkish border.

But even the smaller version is on the verge of collapse as the result of changing economics, Itar-TASS reported. It cited unnamed London experts as saying the project's downfall is the result dramatic changes in the global gas market, such as the rise in availability of liquefied natural gas and unconventional gas from shale rock.

Comments last week from BP Chief Executive of Refining and Marketing Iain Conn to an audience in Berlin also seemed to cast doubt on Nabucco's viability, the EUobserver reported.

While Conn said the choice of an Azerbaijan-European pipeline connection would be "transparent" with "no pre-determined winner," he added that BP's own SEEP proposal "offers an efficient routing into and through these strategically important markets" in southeastern Europe, while not similarly praising Nabucco.

BP spokesman Toby Odone told the publication the original version is off the table.

"To all intents and purposes it isn't going to happen," he said. "It's just not in the frame … When Nabucco was first planned it talked about multiple sources (including Turkmenistan) coming together. That just hasn't happened."

Meanwhile, Bulgaria defended the Nabucco proposal over the weekend. Dimitar Abadzhiev, the country's representative to the project, told a national radio audience none of the countries involved have even considered dropping the plans, the Sofia News Agency reported.

"We still consider this as the most viable project aimed at connecting the Turkish gas market to Europe," Abadzhiev said, adding, "Nabucco meets all the conditions for a secure pipeline in both versions, the full-scale version and the shorter version, Nabucco West."

His comments came five days after the Bulgarian Parliament approved the construction of the pipeline through the country.

© 2012 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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