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UPDATE: Nabucco West pipeline loses race for Shah Deniz natural gas

26 Jun 2013 17:53:32 | esgm

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The Nabucco West pipeline has lost the contest to supply Azerbaijani natural gas from the Turkish-Bulgarian border to central Europe, indicating that competing project Trans Adriatic Pipeline (TAP) is the winner.

Project leader OMV, the Austrian gas incumbent, announced on Wednesday that the Shah Deniz II consortium - including UK-based BP, the State Oil Company of Azerbaijan Republic (SOCAR) and French energy major Total - had rejected Nabucco's bid to supply the gas.

TAP - backed by Norwegian gas and oil firm Statoil, German utility E.ON and Swiss energy group Axpo - did not confirm that it had won, saying the official decision of the Shah Deniz II consortium will follow on Friday.

The consortium was unavailable for comment before publication.

The decision will end years of competition between the pipelines over the gas volumes to be extracted from the Shah Deniz fields in Azerbaijan.

The rejection of Nabucco means the Shah Deniz gas will not be shipped straight to the traded gas hub in Austria. The Nabucco pipeline would have ended there, going through Bulgaria, Romania and Hungary. If TAP has won, this gas would instead be routed to Italy via Greece. Along the way, the pipeline will also be able to supply Bulgaria and the Balkans.

The first gas volumes could arrive in 2019, according to TAP.

Traders active in the Italian gas market said that even if TAP was chosen as the supply route, it was not sure the Azerbaijani gas volumes would end up in the Italian market. Low demand is curbing import interest, and incumbent Eni is currently negotiating to decrease volumes in long-term supply contracts.

Azeri gas transported through TAP could instead be flown onwards to north European hubs, particularly as Belgian transmission system operator (TSO) Fluxys are in talks to join the pipeline consortium.

Fluxys is working with Italian TSO Snam Rete Gas to enable reverse flows of gas from Italy to Switzerland and Germany (see ESGM 17 June 2013).

BP, state-owned SOCAR and Total will have the right to take 50% ownership in the pipeline, if they have chosen it as the route for the Shah Deniz gas.

OMV said its plans to grow in the upstream gas business would not be affected by the Nabucco rejection. Maria Haensch

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