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Nabucco supply deals imminent, RWE says

disclaimer: image is for illustration purposes only
by Stefan Nicola
Berlin (UPI) Nov 10, 2010
A top official at German utility RWE said Wednesday he was "very optimistic" on the realization of Nabucco, identifying two major gas sources he said could come into the project soon.

RWE on Friday will start the third round of negotiations with the consortium behind Shah Deniz, Azerbaijan's biggest gas field, Stefan Judisch, the chief executive officer of RWE Supply & Trading told reporters on the sidelines of the European Autumn Gas Conference in Berlin.

The Germans are optimistic that negotiations will lead to the signing of a supply contract at the end of the first quarter of 2011, when the companies involved in Shah Deniz -- among them European oil and gas giant BP -- are to announce their final decision.

"We are very confident in what Nabucco is bringing to the table," Judisch said.

Nabucco is designed to carry up to 31 billion cubic meters of gas per year from the Caspian and the Middle East to Western Europe, reducing the continent's energy dependence on Russia.

Securing gas from Shah Deniz is a make-or-break deal for Nabucco, which has come under pressure from a Russian competitor pipeline, South Stream. Experts say there won't be supply and demand for both pipelines.

Competitors for the Shah Deniz gas include the ITGI pipeline from Turkey to Italy and the Trans-Adriatic Pipeline, led by Statoil ASA and Elektrizitaets-Gesellschaft Laufenburg from Switzerland.

But Judisch said ITGI and TAP might not materialize because they lack transit capabilities in and outside Turkey and therefore can't be financed.

"Our competing projects have a number of problems to meet for which we don't think there are answers," Judisch said.

Yet Nabucco has problems itself. Potential supply contracts with Turkmenistan and Azerbaijan have been delayed by Russia's eagerness to keep its influence over Central Asia.

The Nabucco consortium, which apart from RWE includes companies from Austria, Hungary, Bulgaria and Turkey, is eyeing gas from northern Iraq to help fill Nabucco but exports from the region have been delayed by conflicts between the national government and the Kurdish authority in the north.

Jennifer Coolidge, an energy consultant from London, said Tuesday at the Berlin conference that Iraq will likely not supply gas to Europe before 2020. A day later, Judisch strongly contested that view.

The Kurdish provinces in Iraq are safe, "full of easy-to-access gas," and can bank on a functioning transit pipeline stretching almost to the Turkish border, Judisch said. Moreover, the Kurdish regional government is eager to sell its gas because it can easily meet domestic demand.

"We expect to sign a deal with the KRG by the end of this year," he said.

Iraqi leaders are in talks to break an eight-month deadlock over the formation of a new government, and Judisch said there are signs that a deal is imminent. That would mean Kurdish officials would first align their position within a central government before signing a contract with Nabucco.

"That could delay the process a bit but would at the same time make the supplies even more secure," Judisch said.

The official added he couldn't understand the criticism that has rained down on Nabucco in recent weeks, saying instead the pipeline's main competitor, the Russian-backed South Stream, should be questioned.

"They have no supply concept, they have no financing concept, they have no routing concept, they have nothing," Judisch said.

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