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Nabucco pipeline cost rises to €7.9 bln

The consortium planning to build and operate the Nabucco pipeline to bring Caspian area gas to western Europe said on Thursday the cost was now estimated at €7.9 billion ($12.3 billion), compared with a previous forecast of €4.6 billion.

A statement issued by the Austrian-based Nabucco Gas Pipeline International company said the altered forecast mainly reflected accelerating material and service costs. Managing director Reinhard Mitschek said the previous sum had been estimated after a feasibility study done in 2005. “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,” he said. Steel companies were also capitalizing on high demand for a large number of big infrastructure projects, Mitschek said. He said the competitiveness and economics of the project would not be affected because high energy prices in turn meant that Nabucco was needed and that its transport earnings would be highly profitable.

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 consortium is made up of Austria’s OMV, Germany’s RWE, Hungary’s MOL, Turkey’s Botas, Bulgaria’s Bulgargaz and Romania’s Transgaz. “We haven’t changed our policy. It is important for Europe,” he told Reuters, when asked about the new estimate. 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. It faces a number of serious challenges -- securing supplies, with only Azerbaijan committed, Russia’s Gazprom proposing a rival route and mainly US hostility to sourcing Iranian gas, although Washington backs the project.

Mitschek said separately on Thursday he expected a decision about the construction in the first few months of 2009 and the start of work in 2010. Nabucco operators aim to build a 3,300 km pipeline to carry 31 billion cubic meters of natural gas. The project requires two million tons of steel, 200,000 pipes and more than 30 compressor units. The statement also said the group would start sounding out potential shippers from mid-June in a so-called open season process.

The pipeline owners have reserved half the capacity for themselves. An RWE spokesman said: “The higher costs do not change our commitment to Nabucco. The pipeline is an important cornerstone of European gas supply.” (Reuters)