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Investment decision on Nabucco imminent

A FINAL investment decision (FID) on the Nabucco gas pipeline project could be taken in early 2010, according to Werner Auli, head of gas and power at OMV, the company leading the project. Speaking at an economic forum in Vienna last month, Auli said the financial structure for the €8bn ($12bn) venture could be finalised by the end of the year.

FID would help the consortium overcome one of the projects biggest weaknesses: securing supply commitments to fill the 31bn cubic metres a year (cm/y) pipeline, which is designed to break Russia's stranglehold on gas exports to Europe by importing gas from the Caspian and Middle East without crossing Russian soil.

"The commitment to an FID would be a strong indication that Nabucco is moving ahead and would provide sufficient incentive for Central Asian, as well as potential Middle Eastern suppliers, to shift their official positions and ensure the flow of gas through the pipe," says IHS Global Insight, a consultancy.

Azerbaijan would be the main supplier to the pipeline, although it is yet to sign a supply agreement. Other potential suppliers are Turkmenistan, Iraq, Egypt, Kazakhstan and Uzbekistan, all of which attended a July meeting where the leaders of the pipeline's five transit countries – Turkey, Bulgaria, Romania, Hungary and Austria – signed an intergovernmental agreement officially backing the project.

Iran was absent from the signing ceremony. Turkey is keen to involve the country in the project, but the US is opposed to this, at least until the impasse over the country's nuclear programme is resolved. Auli said Iran is not being considered as a potential supplier, but would not rule out the possibility.

Perhaps the biggest supply hope for Nabucco is Turkmenistan, which has made more-friendly advances to Europe since President Gurbanguly Berdymukhamedov came to power in 2007. In late August, he visited both Bulgaria and Turkey to discuss bilateral relations, including the Nabucco pipeline. Russia buys most of the country's 66bn cm/y of gas production at a cost significantly below international prices.

Mikhail Korchemkin, executive director of East European Gas Analysis, a consultancy, is confident Turkmenistan will participate if Nabucco is built: "Turkmenistan will supply the Nabucco pipeline for two reasons: first, Europe will continue to pay the highest prices, making it the most attractive gas market; second, Nabucco is the shortest route from Turkmenistan to the EU."

On the demand side, Auli said a 2008 survey indicated the demand for gas from Nabucco far outstrips its capacity. "Nabucco will be two to three times overbooked," he said.

Together with OMV the Nabucco consortium groups Germany's RWE, Hungary's Mol, Transgaz of Romania, Bulgaria's Bulgargaz and Botas of Turkey.

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