Pipeliners

23 March 2009 - New Europe by Kostis Geropoulos - Despite efforts to the contrary, European Union leaders in Brussels have given final approval to 200 million of investment in the controversial Nabucco project, mentioning the gas pipeline by name. This is a victory for the European Commission, which now hopes that these funds will be used to raise more money to help construct the pipeline, which will carry Caspian natural gas to Europe, lessening EU’s dependence on Russia. The spokesman for EU Energy Commissioner Andris Piebalgs, Ferran Tarradellas Espuny, could not hide his enthusiasm. “Nabucco is being done. We received the money,” he told New Europe late on March 20. London-based HSBC analyst Paul Spedding noted that 200 million is “only a drop in the ocean. Nabucco will cost billions.” However, he told New Europe, “It’s a good start that could help unblock the project.” The EU energy spokesman explained that the EU will not give 200 million to the Nabucco consortium, but to the European Investment Bank, which in turn will use this money to raise more money. “When a bank raises money out of the funds it has received it can go from one to 10 so it’s possible that the European Investment Bank could raise funds of about two billion for Nabucco,” Tarradellas Espuny said. “The idea is that Nabucco is not going to receive 200 million, but it’s going to receive loans for maybe two billion, which they would have to give back of course. But they are going to have credit in a time that is very difficult to get credit,” he said. He reminded that the feasibility study for Nabucco is already done and that this money would be spent to construct the pipeline and generate jobs, which is the idea behind the recovery plan. The EU leaders have given final approval to five billion Euro of investment in energy and telecom infrastructure projects, including Nabucco and the ITGI project. The ITGI gas pipeline that will carry from Azerbaijani gas to Italy via Turkey and Greece has been allocated 100 million. The investments are part of a larger EU economic stimulus programme aimed at combating the global economic downturn. “It is construction, creating jobs, putting tubes on the ground, buying steel... Otherwise it doesn’t make sense; with a feasibility studies you don’t spend money, you don’t create jobs, you don’t re-launch the economy. This is the point of the recovery plan,” Tarradellas Espuny said. Initially, German Chancellor Angela Merkel came out against the proposal, saying that there was no need for EU financial support for Nabucco. Merkel also said Germany would only support projects that had a stimulating effect on the economy in 2009 and 2010. This was interpreted as an argument against Nabucco, as the pipeline’s construction is supposed to start only in 2011. “The issue is not about Nabucco but rather long-term verses short-term investments,” Spedding said, adding that building pipelines is a long-term goal. “Nabucco is about boosting energy security,” he said. Markel’s pressure, however, may have eventually worked to Nabucco’s advantage given that the construction of the pipeline will have to start sooner. “It is money that has to be committed before 2010,” the EU spokesman told New Europe. “This for Nabucco is very, very important because it means they are not going to wait. Moreover, it’s possible that they are going to advance it otherwise they are going to lose the money. That’s for Nabucco and for all the other pipelines. All the companies that want to make these projects know that they are going to have money and they are going to start building earlier than expected, which the very idea of the recovery plan,” Tarradellas Espuny said. Nabucco also overcame another hurdle last week. In a previous conclusions document presented at the EU summit, the Nabucco name had been replaced by the more general expression “Southern Energy Corridor.” Romania, Austria, Poland and Slovakia did not accept this replacement and said they could not vote the projects list unless Nabucco was on it. The EU energy spokesman said that he is very happy that the word “Nabucco” was included in the project list. “Personally I’m very satisfied. The fact that they called it ‘Southern Corridor’ gave me a lot of problems because they immediately thought they were talking about South Stream and had to make a lot of telephone calls to tell them that it isn’t like that. ITGI is also mentioned by its name and it is receiving an additional amount of money. If you take the Southern Corridor as a whole it’s an additional amount of money than initially thought for Nabucco,” he said. Don’t break out the champagne just yet. HSBC’s Spedding said that securing financing and adequate gas supplies as well as competition from Russia’s rival South Stream pipeline were issues that would determine Nabucco’s future. Russian energy monopoly Gazprom is moving in favor of its South Stream pipeline to Italy and Central Europe. “Unlike in the case of Nabucco, we have everything we need for this project (South Stream) to materialise,” Russian television quoted Gazprom deputy chief Alexander Medvedev as saying earlier last week. “We have gas, the market, experience in implementing complex projects and corporate management.” But the EU energy spokesman, who just returned from an EU-Russia energy dialogue in Moscow on March 20, brushed off Moscow’s claims. “They say a lot of things. They say South Stream on the contrary is more advanced. Well, Nabucco is going to have money and South Stream I don’t know where it’s going to get the money from,” Tarradellas Espuny said. He said the European Commission is not afraid of a little healthy competition so bring it on. “Competition, well, we are for free markets and competition is not bad. But we support Nabucco and when the Commission supports something normally it goes forward. I think Nabucco is going to be done. There are things to be solved, but there is a lot of will and commitment to be done by all the parties including Azerbaijan, Turkey, the European Union with the interest of other countries like Turkmenistan,” he said. “We don’t think it’s going to be easy, but it’s going to be done.”