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21 Mar, 2009 06:43

Nabucco survives as EU priority project

The EU Commission has included the Nabucco pipeline in its list of priority projects, which means it will get €200 million from the EU budget to finance the first stage of construction.

Still a priority – the Nabucco pipeline managed to stay on the EU list despite pressure from Germany and Italy. But the EU cut its budget funding of the project by 20%, according to Aleksandr Vondra, the Deputy Prime Minister of the Czech Republic.

“Nabucco is on the list of projects. In fact, it is the first one – under the name Nabucco, and 200 million euros is the amount for that. It concerns particularly Austria, Hungary, Bulgaria, Romania and Germany -all countries involved in the project, because they are involved or one of their companies.”

Nabucco is likely to rely heavily on subsidies from the EU. Several member countries questioned the economics of the project.

The pipeline is due to connect the European Union to gas deposits in Central Asia, through Transcaucasia and Turkey, and may cost up to $10 billion.

For that money, Amy Myers Jaffe, from the James A Baker III Institute for Public Policy, says, it won't add much to the energy security of the European union.

“Natural gas pipeline and electricity connections in Europe are maybe a more effective strategy, and are helping Europe diversify response to its energy security.  Maybe some of those options make more sense than the Nabucco pipeline, which is very costly and still very insecure as to where the supply would come.”

The pipeline is supposed to transport around 30 billion cubic meters of gas annually. In terms of gas suppliers the project's backers have named Iran, Iraq, Azerbaijan and Turkmenistan, and this adds to doubts for Kenneth Medlock from the James A Baker III Institute for Public Policy

“I don’t really see any promise for a Nabucco-type project until gas from the Middle East – if it ever actually does come – is able to move from Turkey.”

Gas experts say currently Nabucco may be filled only with Turkmen gas. But this may double the cost of the project. Besides Turkmenistan's gas output is contracted to Russia up until 2028.