Costs nearly double for Nabucco project

Nabucco Gaspipeline International GmbH., a consortium to build and operate the Nabucco pipeline to bring Caspian area gas to western Europe, said the cost was now estimated at 7.9 billion euros ($12.3 billion), compared with a previous forecast of 4.6 billion, said the website.

Reinhard Mitschek, Managing Director of Nabucco Gaspipeline International as a result of the decision of the running Steering Committee Meeting said: "The Nabucco feasibility study, undertaken 2005, anticipated an investment requirement of about EUR 5 bn for the construction of the whole length of the Pipeline. Since then, crude oil prices have more than doubled - which consequently has also led to higher prices for all primary energy sources - also prices for steel. In addition, steel is in high demand because of the large numbers of big projects and steel companies also capitalize on this high demand".

The project investment costs for Nabucco to build a 3,300 km long pipeline to carry 31 bcm of natural gas are now expected to reach EUR 7.9 bn as of the figures of today.

The altered forecast is the outcome of a recent CAPEX update for the Nabucco consortium, based on an actual market survey amongst major material and service supplies. Such investment increases are in line with all major infrastructure projects which require a high amount of raw materials as all are facing the same pricing challenges. However, the competitiveness and the economics of the project will be unaffected. High demand for energy leads to higher gas prices as well and therefore also to higher transportation fees which make Nabucco considerably profitable.

Shortly, Nabucco Gaspipeline International GmbH will start a market sounding in preparation of the open season process. So far the market has shown big interest in the provided capacities. Nabucco Gaspipeline International GmbH has already signed various Letters of Interests with potential shippers. This market sounding will now be adressed to all potential shippers to deliver their interests and to receive their feedback for further analyses. The market sounding is non-binding process and is expected to start in mid June 2008.

After that, in July an intergovernmental agreement is expected to be inked in Turkey.

The pipeline, which will be one-third financed by the owners, and two-thirds by banks, is meant to diversify and lessen Europe’s dependence on Russian gas from 2013.

The project requires two million tonnes of steel, 200,000 pipes and more than 30 compressor units.

The pipeline consortium - Nabucco Gas Pipeline International Ltd. is equally owned (16.67% each) by Austria’s OMV, Hungary’s MOL, Turkey’s Botas, Bulgaria’s Bulgargaz and Romania’s Transgaz and Germany’s RWE.

Named after the Babylonian king in the eponymous opera by Italian composer Giuseppe Verdi, the pipeline will take 31 billion cubic meters of gas each year from the Middle East to Europe from 2012 at the earliest. It is likely to deliver the first gas to Europe in 2013.

/APA/