Tim Gosling in Prague
April 27, 2012
Hungarian oil and gas group Mol announced on April 26 that it is ready to sell its stake in the Nabucco gas pipeline consortium, after saying earlier in the week that it is refusing to finance the project's 2012 budget. Meanwhile, other partners insist rumours of the project's demise are exaggerated.
Speaking at a news conference following Mol's AGM, chairman and CEO Zsolt Hernadi said: "We have signalled that we are ready to sell our shares if necessary ... we merely had to send a very very strong signal now that we are not willing to finance this any longer," reports Reuters.
The wider Nabucco dream, which was supposed to run a pipeline 4,000km from Austria to the Caspian in a bid to cut Europe's dependence on Russian gas and supply routes, appeared to have finally foundered late last year on the back of persistent problems securing the gas to fill it and the capital to finance its cost - which is estimated at over €10bn.
Although Brussels has yet to admit that failure openly, speculation is now of a more limited project - Nabucco West - that would run to Turkey to connect with the planned Tanap network that would carry gas from Azerbaijan's giant Shah Deniz field. Shah Deniz is set to select from amongst a host of projects competing to carry its gas to Europe next year, it said in April.
Although other members of the project - Germany's RWE in particular - have also expressed concern, Mol is the first to try to pull out. The Hungarian company has been voicing doubts since 2010, but made its stand on April 24 by announcing it has rejected Nabucco's budget for 2012. That statement came around a week after Hungarian Prime Minister Viktor Orban agreed to bestow the status of "strategic project" on Russia's rival South Stream project.
At his press conference, Hernadi complained that despite making little headway, Nabucco has already cost Mol about €20m, and criticized the management of project company NIC, in which his company shares ownership with Turkey's Botas, BEH of Bulgaria, Romania's Transgaz and Autrian OMV, as well as RWE. No one has answered the vital questions concerning gas sources, construction costs, and final shipping costs, he added.
"This is not a club where you can enter or which you can leave, but a company where we have a capital stake," Hernadi said, pointing out that whilst Mol has pulled financing, it obviously needs a buyer before it can offload its shares.
"Today nobody talks about that old big Nabucco dream that for God knows how much - we don't even know this number - [would] bring gas from the Caspian region to ... Austria," he said. "Who will provide gas into the pipeline, under what conditions it will be shipped, what will be the transit conditions ... there is no answer. There has not been an answer for over 10 years."
However, other partners in NIC have rallied this week to insist that rumours of Nabucco's demise are exaggerated. Romania's Tranzgas reiterated its commitment on April 25. A day later, OMV CEO Gerhard Roiss claimed that Nabucco West has plenty of options, although he inadvertently confirmed that the wider project is indeed dead at the same.
"For us it is a secondary issue who builds the pipeline through Turkey," he said according to Reuters. "The important thing is getting gas to Baumgarten [the Austrian hub] and from there to the rest of Europe," he said. "Nabucco is alive. OMV recently made its biggest gas discovery ever off the Black Sea coast and you need a pipeline for this as well."
Whilst Mol appears pessimistic that it will find a buyer for its stake in NIC, Germany's Bayerngas reiterated on April 24 that it still intends to join the consortium. "We continue to be in talks with the Nabucco consortium," a spokesman said, adding that Bayerngas hopes for a decision this year, with a precondition that the project is economically viable.