Friday, October 24, 2014

2030 Energy Security | Brussels | Dec 10th
EVENT: EAGC 2014 | DMG | Hope Grant | Paid one month
Drew EGC Report

“Nabucco is a Truly European Project": An Interview with Reinhard Mitschek

Reinhard Mitschek
Reinhard Mitschek

“Nabucco is a truly European project. The Commission has identified Nabucco as a preferential corridor.”

Natural Gas Europe was pleased to have the opportunity of interviewing Reinhard Mitschek, CEO of Nabucco Gas Pipeline International GmbH.

How would you assess the cooperation so far between Nabucco and the Shah Deniz consortium?

Our cooperation with the Shah Deniz II Consortium is ongoing, transparent and very successful. In January we signed a Cooperation Agreement and an Equity Option and Funding Agreement with the Shah Deniz partners. The latter also lays out the principles under which the Equity Option will be exercised, i.e. the Shah Deniz partners will become partners in Nabucco.

The Cooperation Agreement in particular emphasizes alignment of project schedules between the Shah Deniz Consortium and the Nabucco project. This is what we are focusing on currently, as we work towards ensuring that Nabucco will be ready to transport gas when the Shah Deniz gas field is ready to deliver it.

In the meantime Nabucco continues to advance in project development. In parallel with the signing of the agreements, we announced the commencement of the re-FEED for Nabucco West, which will build upon engineering work already done for the project. We have also launched the pre-qualification process for steel pipe producers for Nabucco West. We are also in the process of finalizing an overall business and funding plan for Nabucco, which will further ensure our financial viability.

In relation to the above question, how has the collaboration of the transit countries with Nabucco been developing over the past period?

Nabucco has several unique advantages in terms of collaboration with transit countries. Firstly, in addition to having a signed and ratified Intergovernmental Agreement in place, we also have signed Project Support Agreements (PSAs) with the parties to the Agreement (Austria, Hungary, Romania, Bulgaria and Turkey) in place. These documents, the IGA and the PSAs, guarantee long-term stability for the project and allow us to offer a stable, long term tariff. Of course the further ongoing good will of the State Parties is needed to continue this good cooperation. A sound investment basis is an inevitable precondition for a long term infrastructure project. We need state-of-the-art conditions for technical standards, for the right of way acquisition, for a predictable tax basis, etc to synchronize our activities in the countries in which we want to invest.

Secondly, Nabucco West will transit Bulgaria, Romania and Hungary before reaching Baumgarten; all growing and commercially attractive markets with a pressing demand for energy supply diversification. Nabucco West provides the best option for all these markets to access Caspian gas, as has been emphasized by representatives of the countries themselves in recent high-level political meetings.

The two recent political committee meetings we have held (a third is coming up soon), have further emphasized the political support Nabucco enjoys. The state parties to the IGA have already affirmed that the IGA and the PSAs are valid for Nabucco West. The political committee meetings also present a valuable forum for communication and discussion among the transit and partner countries of Nabucco.

Nabucco will deliver a set of benefits and chances for the national economies involved. Nabucco’s construction and operations will create jobs in the Nabucco countries and also in Greece and the Western Balkan countries.

And lastly, of course, collaboration with transit countries is not limited to the political level. We continue to work with stakeholders and communities in all the countries we will transit, following and in some cases exceeding international best practices in Environmental and Social Impact Assessment. In Hungary, the environmental impact assessment permitting process is complete, in Bulgaria and Romania we are far advanced and nearing completion.

I would like to ask about your overall assessment of the European natural gas market future and the role for Nabucco in it?

Despite a temporary dampening of demand due to the global recession, natural gas remains a viable and growing market. In Europe in particular, the keyword is diversification, as consumers look to new sources to fill growing demand. This is especially true in the case of countries in South Eastern Europe and elsewhere, where growing economies offset by long dependence on single sources of gas are looking in other directions for supply, for example shale gas, untapped reserves in the Black Sea, and Caspian gas.

In this context, Nabucco’s role is extremely important. The 48” diameter, 1320 km long pipeline will link its transit countries as well as Turkey to a liquid market at Baumgarten, and via Baumgarten to other gas hubs across Europe. Additionally, infrastructure already exists for gas from Nabucco to reach Serbia, Croatia, Bosnia and Herzegovina, Macedonia, Slovenia, and Italy, and with the construction of a few, short interconnectors, Montenegro, Greece and Albania.

Therefore, with the expansion of existing infrastructure, Nabucco could connect the transmission grid of the entire SEE area, with Baumgarten at one end and new reserves of Caspian gas at the other, diversifying energy supply across the region.

Furthermore, from Baumgarten, capacity exists to transport the gas further into Western Europe, to Germany, the Czech Republic, Italy, France, and further.

As a highly scalable pipeline, the capacity of Nabucco West could also be scaled up from 10 to 23 bcm in the future in a tailor made way to meet increasing demand.

And lastly, there are over 16 bcm of gas storage capacity along the Nabucco West route, promoting flexibility and energy security.

Therefore, Nabucco presents the best possible option to open the Southern Gas Corridor.

What can be described as the greatest challenge, if any, for Nabucco, either on a technical level or an operational one?

Nabucco is one of the largest and most complex infrastructure projects in Europe. The Nabucco West pipeline will cross 1320 kms, and four national borders. In addition, the project is a path-breaking concept in terms of its goal of diversifying energy supply across Europe. It has a potential market of over 500 million consumers. It is inevitable that there are challenges in the course of a process of this magnitude, but what is important is that we have examined all the risks, and have effective processes in place to address and adapt to them.

Would it be possible to mention certain details regarding the timetable for the construction of the pipeline?

Our current focus is on continued alignment with the Shah Deniz II project and with TANAP, a process that is going very well. Every part of the value chain must work together and align project schedules to ensure that the delivery deadlines are met. In any case we will be ready to receive first gas flows from the Shah Deniz gas field, as soon as the exports will start.

How do you assess the current position of the EU towards Nabucco? Has Nabucco been recognized as project crucial for European energy security?

Nabucco is a truly European project. The Commission has identified Nabucco as a preferential corridor. Therefore the project is listed within the EEPR framework for direct funding of up to MEUR 200. Our shareholders, and our route, are drawn from EU member states. Nabucco will benefit Europe, of course in terms of diversification of energy supply, diversification and will offer freedom of choice to customers.

JOIN US
EVENT AD: European Autumn Gas Conference (EAGC 2014) - Hope Grant/Lawrence Allen (Oct 28-30)
EVENT AD: Chatham House: Climate Change
EVENT AD: Chatham House: MENA Energy: The Dynamics of Power, Leadership and Production (Alex, Esther)
MAPLECROFT RUSSIA COUNTRY REPORT
Natural Gas Asia