RWE Supports Pipeline Merger

There's more than enough natural gas to fill the Nabucco pipeline and the consortium isn't considering downsizing the project.

The comments came from Jeremy Ellis, head of business development at RWE AG's Supply and Trading unit, one of the venture's partners.

"We're talking about an excess of 80 billion cubic meters per year from Azerbaijan, Turkmenistan and Iraq," the Nabucco pipeline's most likely initial supplier countries, said Ellis.

"Egypt has also recently expressed publicly an interest to participate," Ellis added.

His comments come in response to recent statements by Iain Conn, BP Plc's chief executive for refining and marketing, which suggested that the company, one of the main members of a consortium negotiating the sale of natural gas from an Azerbaijan gas field to Europe, might prefer a smaller pipeline to the 31 bcm Nabucco project due to a lack of gas in the Caspian region (read more HERE).

"The question raised by BP that there isn't enough gas to fill a pipeline the size of Nabucco is fundamentally wrong."

Ellis added that Nabucco's challenge isn't availability of gas but aligning the timing of gas supply interests from various potential producing countries.

Nabucco seeks to secure gas supplies from Azerbaijan, Turkmenistan and Iraq and talks with producers there are ongoing, Ellis said.

A principal source of Azeri gas will be the second development stage of the Shah Deniz offshore gas field in Azerbaijan. Nabucco is competing for Shah Deniz II gas with at least two other pipeline projects--the Trans Adriatic Pipeline and the Interconnector Turkey Greece Italy or ITGI.

An additional complication for Nabucco is that BP and Statoil ASA led Shah Deniz II isn't expected to produce gas before 2017 and Azerbaijan has guaranteed only 10 bcm for export from that source, not enough to fill Nabucco.

Furthermore, large scale exports from Iraq and Turkmenistan are unlikely in the near term, said Jennifer Coolidge, executive director CMX Caspian and Gulf Consultants.

Iraq 's focus is firmly pegged on re-electrifying the country and Turkmenistan still lacks the gas export infrastructure and "the ability to produce the incremental gas needed to supply Europe," said Coolidge.

With large scale supplies from Iraq and Turkmenistan unlikely to be available to Nabucco in the near term, "Nabucco and the relevant gas buyers will be forced to quote transit tariffs to Azerbaijan's state gas company SOCAR dependent on the level of risk the consortium and the gas buyers are willing to take," she added.

However, Ellis remains confident, saying that the "first gas from Nabucco will likely be in 2017, driven predominantly by the start of production of Shah Deniz II."

He added that talks with Turkmenistan and Iraq are also proceeding and both countries are "working hard towards a timetable to supply gas between 2017 and 2020".

Ellis also said that Nabucco has offered to extend Nabucco to the Azeri capital of Baku .

Connecting Baku to Nabucco could help "lessen complexity and further increase economies of scale", he said. It would also provide Azerbaijan and Turkmenistan with flexibility for growth in its upstream sector and provide increased diversity for exporting Caspian gas, he added.

"We're still waiting for feedback on our proposal from the Shah Deniz II consortium," he said.

Ellis also said that RWE is still "supportive" of a merger between Nabucco and Edison SpA led ITGI, which the European Commission has publicly advocated in recent months.

"We think it would make sense for ITGI to use Nabucco to transport gas to their markets. The benefits of such a merger need to be seen by Edison," Ellis said.

Source: Energia.gr