MOL To Sell Nabucco Shares, BEH Uncertain Over Project’s Future

MOL To Sell Nabucco Shares, BEH Uncertain Over Project’s Future

On 26 April, three days after a statement by Hungary’s Prime Minister Viktor Orban effectively announced the withdrawal of state-controlled MOL from the Nabucco gas pipeline project (MEES, 30 April), MOL CEO Zsolt Hernadi confirmed the company’s decision. “There’s nobody who knows what the Nabucco project is, or what it costs. As long as this is the case there’s nothing to talk about,” Mr Hernadi said, adding that Nabucco “has yet to secure a source of natural gas while its cost estimates kept on rising.” Mr Hernadi stressed that Nabucco had not presented a realistic adaptation of its costs to “present day conditions” and that MOL was ready to sell the 16.67% it owns in the joint venture.

MOL’s decision suggests that even a shorter European version of Nabucco would still be too expensive for MOL’s ability to finance, compared to its potential participation in the rival South East Europe Pipeline (SEEP). This is also likely to be the case for the other Southeast European states which form the backbone of Nabucco’s Balkan route and are also “flirting” with SEEP. Mr Hernadi’s comments are seen as particularly significant to the Nabucco partners given that MOL was fully cognizant of: the economic details of a Nabucco West option which was presented to the Shah Deniz partners on 10 April (MEES, 16 April); and the new deadline of 16 May Shah Deniz has given to SEEP and Nabucco for the submission of their final proposals for the Central European route.

OMV, MOL’s upstream partner in Iraq and leader of the Nabucco consortium along with Germany’s RWE, played down Mr Hernadi’s statement. On 26 April OMV CEO Gerhard Roiss told Handelsblatt that the withdrawal of MOL will not affect the project’s implementation. He said the loss of MOL will not influence Nabucco “since the legal preconditions for building the length of the pipeline have been secured” and “there are other companies that want to join the consortium.” Mr Roiss did not name the potential replacements for MOL although Germany’s Bayerngas is the only company that has expressed interest in joining Nabucco of late (MEES, 10 October 2011). It is unlikely that Bayerngas would join Nabucco before 16 May.

In related news, Bulgaria’s BEH has also expressed doubts about the feasibility of Nabucco. At a press conference in Baku on 28 April Bulgaria’s Prime Minister Boyko Borisov promoted the completion of a gas interconnector between Turkey and Bulgaria, “without which the word [gas supply] ‘diversification’ would not exist as a term for the EU.” Mr Borisov is looking to use EC funds earmarked for the Nabucco project to finance the construction of a 3-5 bcm/year capacity interconnector with Bulgaria, which he describes as the first step of Nabucco’s implementation. Given the fact that Nabucco is a 31 bcm/y capacity project, Mr Borisov’s proposition is viewed unrealistic by the EC. Also, Bulgaria has already secured €45mn of EU funding for the development of the 3-5 bcm/y Interconnector Greece-Bulgaria (IGB) pipeline, which could also supply Bulgaria with Azeri gas via the Greek gas grid. MEES understands that some EC officials feel the existence of IGB has rendered the utilization of EU funds on the proposed Interconnector Turkey-Bulgaria (ITB) redundant.

Regarding Nabucco, Bulgaria’s Minister of Energy Delyan Dobrev told BNR radio on 28 April that the signing of a memorandum of understanding (MOU) with Azerbaijan increased Bulgaria’s chances of receiving gas by 2014, noting that Bulgaria succeeded in “committing them [Azerbaijan] to cooperate in order to realize the first Azerbaijani gas supplies to Bulgaria in 2014.” Mr Dobrev also added that he and Mr Borisov “discussed with the Azerbaijani energy minister all possible routes, including which will be the pipeline that will transit large quantities of natural gas from Azerbaijan as of 2018, because this is still unclear.”

Copyright MEES 2012.