Bypassing Moscow?

It must have been a meeting in good spirits, back in 2002, rounded off by a visit to the famous Vienna opera. That evening's performance? Verdi's Nabucco - and the officials from energy companies from Turkey, Bulgaria, Romania, Hungary and Austria seemed to have enjoyed the show.

But a great performance was probably not the only reason for naming their planned pipeline Nabucco. Like Verdi's protagonist, who attempts to free his people from bondage, the deal was nothing less than an ambitious plan to win independence from government-controlled Russian oil and gas giant Gazprom and to build a separate pipeline from Austria to Azerbaijan, allowing Central Asian gas to bypass Russian territory.

Poor planning

Ten years on, there is little left of that optimism. Citing EU diplomats, the Frankfurter Allgemeine Zeitung now says the project is too expensive. The German energy company RWE is reviewing its participation in the project and is thinking about quitting it.

Hungarian company MOL this week announced it was refusing to keep paying for a bill that's spiraling out of control. The mounting costs are simply unacceptable and it would therefore not agree to the 2012 budget, the company said in Budapest. Instead, Hungary, which depends on Russia for 80 percent of its gas imports, threw its weight behind the Russian-backed rival South Stream pipeline.

According to reports, the initial eight billion euros ($10.6 million) for Nabucco have turned into as much as 15 billion. This is due largely to rising costs for the construction materials, especially steel.

This means the priority for the members of the Nabucco project has to be to save money, said Jonas Grätz of the Center for Security Studies at Zurich's Technical University. "Hungary is currently in an economic crisis and Russia has made very good offers to Budapest," Grätz told DW.

South Stream, designed to carry gas from Russia via Hungary all the way to Italy, is only one of a number of competitor projects that Nabucco has to stand up to. There also is Turkey's Tanap project and yet another pipeline planned by BP.

A shorter pipeline

The Nabucco project still has a chance to survive. A cheaper version could be to build the pipeline just to the Greek border and then rely on existing Turkish pipelines – rather than extending Nabucco all the way through Turkey to the border with Azerbaijan.

And Germany's Bayerngas has expressed interest in joining the project. "We continue to be in talks with the Nabucco consortium," a company spokesman said.

Nabucco is seen as a national security matter in some central European states – diversifying supply routes to eliminate dependence on Russia was the reason they supported the pipeline. But the emergence of the BP pipeline plan may help address this issue.

"The central question will be whether it'll be possible to get gas from Central Asia to Europe independent of Russia. Whether it'll be Nabucco or the BP pipeline that does the job doesn't really matter," Grätz said.

So far there aren't even any partners on the Azerbaijani side to provide the gas. It also remains to be seen whether the EU will be willing to throw its weight behind Nabucco despite the explosion of the costs for the project.

Back in 2002, the plan was for Nabucco to start operating by 2015. Now, plans are a lot more cautious. Grätz says he does not expect the pipeline to carry any gas before 2018.

Author: Friedel Taube / ai
Editor: Simon Bone