Nabucco project is discredited

Alexandros Petersen

Woodrow Center Advisor

Wilsona (Whashington)

Prior to final discussion of Nabucco entry conditions from Azerbaijani Shah Deniz, BP unexpectedly introduced an alternative project South East Europe Pipeline (SEEP).
Nabucco pipeline project, which was supposed to become the largest supplier of gas from the Caspian region to Europe, was actually discredited by BP, that was expected to become the major raw materials supplier for Nabucco from Azerbaijani Shah Deniz deposit. But right before the approval of export conditions BP suggested an alternative project — South East Europe Pipeline (SEEP) through Turkey.

SEEP is a cheaper and more realistic alternative to Nabucco. As the implementation of the latter requires guarantees of 30 billion m3 gas packing (which has not been done yet), SEEP capacity is expected to be 10 billion m3, just as much as needed for export under Shah Deniz second development stage. BP also announced future SEEP expansion plans — with resources from the Azerbaijani field Absheron, plus the project can include additional volumes from Turkmenistan.

Today Nabucco seems to be highly expensive — the initial cost is about UDS 20 billion. Even considering EBRD promise to provide considerable amount of funds for the construction, it is still hard to attract private investors. Nabucco consortium does not still have any serious investors as, for instance, German RWE AG or ВР.

However, the SEEP project, announced by BP, is also far from ideal. First it has another competitor — Trans-Adriatic Pipeline (TAP) with the estimated capacity of 10 billion m3 per year, which can be easily expanded to 20 billion m3. The project has large investors, one of which is Statoil. It also has a share in Azerbaijani Shah Deniz. BP has been lately focused on investments to Russia and weekend its influence in Azerbaijan, while Statoil kept strengthening its relations with the government.

As a result, now the region has four pipeline projects (Nabucco, SEEP, TAP and South Stream). The decision – what way to choose – remains with the owners of resources.