EU pipeline to cut Russian gas reliance is dead, says BP

May 25, 2012, Friday/ 16:09:00

A proposed pipeline that would cut Europe's dependence on Russian gas by opening a route for Central Asian and Middle Eastern supplies has been shelved because it is not economically viable, anchor supplier BP said.

The UK oil major is no longer considering the Nabucco pipeline as an option for shipping gas from its Shah Deniz Stage 2 Gas field in Azerbaijan, Iain Conn, BP's head of fuel refining and marketing said in a speech circulated by BP on Friday.

Shah Deniz was supposed to be the anchor supplier for Nabucco, shipping around 16 billion cubic meters per year through the 4,000 kilometer pipeline - just over half the planned total capacity of 30 bcm/year.

Project leader, Austrian oil group OMV, hoped to fill it in coming years by signing up additional suppliers in Turkmenistan, Iraq and possibly even Iran. But BP thought a pipeline that would be half empty for an indeterminant period of time would be economically unfeasible. Brussels had lobbied European Union countries to support Nabucco, which was estimated to cost over $12 billion, but in the end, none was prepared to put up enough to pay for the spare pipeline capacity. The European Commission refused to accept defeat on Friday, saying that the full pipeline was under consideration, despite BP's denial.

As recently as last week, Managing Director Reinhard Mitschek said he was confident the original pipeline proposal could still work. Conn said on Friday that BP and Azeri state oil group Socar were now considering only a smaller pipeline from the Nabucco consortium, which also includes Germany's RWE and Hungary's MOL Group, known as “Nabucco West." This would have capacity of 16 bcm/year and rather than run from twin spurs in eastern and southern Turkey to Austria, only run 1,600 km from the Turkey-Bulgaria border to Austria. A Nabucco spokesman said the focus is now on Nabucco West but if BP and partners changed their position, the Nabucco consortium, would revert to the original plan.

BP and Shah Deniz partners Socar and Norway's Statoil could build their own pipeline, known as the South East Europe Pipeline (SEEP), which would run from the Turkish border to Hungary and mainly use existing gas infrastructure. BP said it could also back a plan to ship gas along a southern route, through Greece and Albania to Italy, via the Trans-Adriatic-Pipeline (TAP), which is backed by Germany's E.ON Ruhrgas and Switzerland's EGL. Conn said the Shah Deniz partners expected to decide whether or not to exclude the Nabucco West option by the end of June  and a final decision on the route by June 2013. Nabucco's other shareholders are Turkey's BOTAŞ, BEH of Bulgaria, and Romania's Transgaz.

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