Work on Nabucco pipeline gets underway

The pipeline will cross Turkey, Bulgaria, Romania, Hungary, to Austria, from where the gas will be distributed to France, Germany, and other EU countries via the existing pipeline networks, and will cost around $6.25 billion, which will be split between the five countries the pipeline passes through. It will have the capacity to transport 25 billion cum/yr of gas.

The pipeline has important strategic and economic significance as it offers an alternative source of supply to the EU to gas from Russia, and will compete with Russia’s monopoly and control over the gas supply to Romania. The 3300-km long pipeline, including 457km through Romania, was initiated by the European Parliament and the European Council on 26 June, 2003, and is to be finished in 2010. Currently, Romania produces 13-14 billion cum/yr of gas, and imports an extra 3 billion cum/yr from Russia.

Three banks – the EIB, the EBRD, and the IFC, the private sector arm of the World Bank – are understood to be interested in financing the construction of the project, according to Kiril Gegov, executive director of the Bulgarian state-owned gas company Bulgargaz. Preliminary talks have already been held with representatives of the IFC and EIB, and further negotiations are to be held this month wit ha view to the final financial arrangements being in place by 2006. Construction is expected to get underway in late 2007 or early 2008, with 2011 as the completion target.

The Nabucco Co Pipeline Study GmbH was recently transformed into Nabucco Gas Pipeline International Ltd, a commercial partnership between Turkish state-owned company Botas, Bulgaria’s Bulgargaz, Hungary’s MOL, Austria’s OMV, and Romania’s Transgaz SA Medias in which each partners holds a 20% interest. The five countries will set up local companies that will be wholly-owned by Nabucco International. The contracts for the pipeline’s lead designer and its environmental impact study will be tendered this autumn.

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