RWE Expects International Nabucco Agreement Signed in July

Nabucco Pipeline Project
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BERLIN (Dow Jones Newswires), Jun. 25, 2009

German utility RWE AG expects an intergovernmental agreement between the five transit countries of the Nabucco natural gas pipeline project will be signed in July.

"We're very confident the intergovernmental agreement will be signed in July," Neil McMillan, RWE's head of Nabucco political liaisons & strategies, told Dow Jones Newswires in an interview Wednesday.

RWE is part of the consortium that plans to build the 3,300 kilometer-long Nabucco pipeline, which aims to ship natural gas to Europe from Central Asia via Turkey and Austria. The Nabucco consortium comprises RWE, OMV AG of Austria, MOL Nyrt of Hungary, Transgaz of Romania, Bulgargaz of Bulgaria and Botas of Turkey. Each of the shareholders own a 16.67% stake in the consortium.

McMillan said the four European Union member states that are transit countries -- Austria, Hungary, Romania and Bulgaria -- are already willing to sign the agreement.

"We are hopeful that Turkey will be ready for the signing in the course of next month," McMillan said. Turkey is the only non-E.U. member transit country.

McMillan's comments were echoed Thursday by Turkey's minister for E.U. affairs, Egemen Bagis, who said in Brussels that Turkey will sign the agreement in mid-July.

RWE's McMillan said the consortium is optimistic it can resolved the "few remaining issues."

"We know that Turkey sees Nabucco as also in its interests," he said, adding that the pipeline will help bring down gas prices in Turkey and increase security of supply.

"Nabucco is also a project that will encourage significant further energy infrastructure investment in Turkey," he added.

The pipeline would provide incentives for follow-up investment in the Turkish gas and electricity market and help to further develop the country's wholesale market.

RWE, for instance, has already announced plans to invest in the Turkish power market, McMillan said.

However, the intergovernmental agreement needs to be signed quickly to make sure that Azerbaijan and Turkmenistan, who are the primary suppliers for Nabucco first two construction phases, will commit their gas to the project, he said.

The Nabucco pipeline is considered crucial to secure Europe's growing demand for natural gas as domestic supply is steadily falling. The pipeline, with a planned capacity of up to 31 billion cubic meters of gas a year, would further diversify Europe's supply sources, bypassing traditional pipeline routes for Russian gas.

The estimated costs for the Nabucco project have previously been raised to EUR7.9 billion from EUR4.4 billion.

After the signing of the intergovernmental agreement, the Nabucco consortium plans to launch an open-season process at end-2009 to gauge demand for the pipeline and its capacity, said McMillan.

"A final investment decision for Nabucco is expected to be made in 2010. Construction could then begin in 2011," he said.  

Copyright (c) 2009 Dow Jones & Company, Inc.


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