Hungary has raised some serious questions
about the viability of the Nabucco gas pipeline
project and the performance of the project
company's management. The Hungarian critique has
strongly reverberated in all quarters: at the
European Union in Brussels, among the Nabucco
partner-governments, within the project consortium
and in Azerbaijan, which is the only possible
source of gas for any pipeline's first stage
(whether Nabucco or its two remaining rivals).
Responding to that critique, all the other
players within and near the Nabucco project have
reaffirmed their interest in the reconfigured
Nabucco-West, albeit not unconditionally.
On April 23 in Brussels, Hungarian Prime
Minister Viktor Orban
described Nabucco as a
deeply troubled project, and predicted that
Hungarian MOL would withdraw from the project
consortium. While acknowledging that Budapest
needed Nabucco to reduce dependence on one
supplier [Russia], Orban nevertheless expressed
hope for Hungary to be included in Gazprom's South
Stream project, if implemented.
He seemed
to assume that project would move forward and, in
that case, "better to be in than out". Orban made
these comments extemporaneously, responding to
questions following his speech at the European
Policy Center in Brussels and on the eve of his
scheduled meeting with the European Commission.
On April 26 in Budapest, Hungarian MOL
elaborated on the company's view of the Nabucco
project. In a briefing by its top two officials
and a press release, MOL cited Nabucco's cost
overruns, persistent uncertainties over funding
and lack of guaranteed supplies of gas. Ten years
after the project's inception, "hardly anyone can
say today what exactly this project is, and how
much it would cost to build it."
MOL had
raised these concerns within the Nabucco
consortium since 2010, but to no avail. It also
had raised its concerns about the project
company's "structure and management."
Consequently, MOL is prepared to sell its
stake in the Nabucco consortium; it does not
approve the project company's operating budget for
2012, and is withholding disbursement of MOL's
contribution to that budget. According to its top
management, MOL remains committed to the goal of
diversifying Hungary's and the entire region's gas
supplies and, if the Nabucco project is eventually
implemented, "nothing would stand in the
pipeline's way through Hungary".
MOL's
wholly owned subsidiary Natural Gas Transmission
(FGSZ) is one of the six equal shareholders
(16.67% each) in the Nabucco consortium. MOL
itself is 24.5% state-owned but the company speaks
on its own behalf, not for the government.
Beyond energy supply issues, there is also
a political dimension to Orban's unexpected change
of attitude. The European Commission along with
the International Monetary Fund are delaying
credit guarantees necessary to crisis-hit Hungary.
The European Commission demands changes to certain
Hungarian laws, effectively setting some political
conditions to the anti-crisis measures for
Hungary. Such conditionality seems unprecedented
and, if so, discriminatory.
Orban's
remarks on South Stream in Brussels might be seen
as a form of pushback or seeking counter-leverage.
Such a dynamic, once started, can spin out of
either side's control. More productively, the
European Commission might pursue its concerns in
parallel with releasing that package instead of
setting political-normative preconditions to
urgently needed anti-crisis measures.
The
Nabucco pipeline project (Turkey, Bulgaria,
Romania, Hungary, Austria and the German RWE),
favored by the European Commission in recent
years, lost credibility all around in its original
configuration. The final tipping point of
credibility loss (in that configuration) can be
traced to late 2011. Since December 2011, the
Azerbaijani-Turkish Trans-Anatolia pipeline
project (TANAP) has replaced the Nabucco project
on Turkey's territory. TANAP presupposes a
continuation pipeline from the Turkish-Bulgarian
border into Central Europe. The Nabucco project is
being reconfigured for that role as
"Nabucco-West", shorter and more bankable.
Hungary's critique is convincing on a
number of counts. It is grounded in the Nabucco
project's pre-2012 history. It can help focus
attention on past omissions by the project
management and the corresponding lessons learned.
These include outdated or overoptimistic estimates
of construction costs (increasingly questioned and
challenged with the passage of time); unrealistic
expectations to access gas in Iraq's Kurdish
region or in Egypt (also discounting the
additional transportation costs); and failure to
include a major gas-producing company in the
Nabucco consortium (its members' gas-related
activities are mainly in trading and
transportation).
Ultimately, these and
other omissions made Nabucco look unpersuasive,
despite the European Commission's dedicated
support for the project. A sense of
Nabucco-fatigue had taken over by 2011 in most
quarters.
A critique grounded in the past,
however, seems to discount the Nabucco project's
recent reconfiguration as Nabucco-West. This would
continue the planned Trans-Anatolia line into EU
territory from the Turkish-Bulgarian border to the
Baumgarten continental hub near Vienna. With
Azerbaijan taking charge of Nabucco's former
Turkish section, the cost of building Nabucco-West
could be 50% lower than the cost of Nabucco's
previous version.
The Hungarian statements
stopped short of mentioning Nabucco's rival
project, the South-East European Pipeline (SEEP),
promoted by British Petroleum (BP) since September
2011. Both compete over the same 10 billion cubic
meters of Azerbaijani gas per year from Shah Deniz
Phase Two of production. While Nabucco would run
to Baumgarten (see above), SEEP would end in
Hungary, using interconnectors onward to Austria
and Croatia. This quasi-hub feature of SEEP may
well look attractive to Hungary.
The Shah
Deniz gas producers' consortium has set a May 16
deadline for Nabucco and BP to submit their
respective proposals. Within the producers'
consortium, Azerbaijan's State Oil Company favors
Nabucco-West linked to the planned Trans-Anatolia
pipeline.
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