Industry and Energy

Home page

Industry and Energy

The Financial Times: RWE can sell Nabucco share to OMV

03 December 2012 10:14 (UTC +04:00)

Baku. Malahat Najafova - APA. RWE, the German utility, is in talks to quit the Nabucco gas pipeline project it long championed, a move that would be a further blow to a scheme that once was billed as key to ending western Europe’s dependence on Russian gas, APA reports citing Financial Times.

People familiar with the project said the Essen-based company was in talks with OMV, the Austrian oil and gas company, about the purchase of the German group’s 16.7 per cent stake in the venture. Should negotiations continue at their recent pace, the Financial Times was told, an announcement could come as early as this week.

While RWE and OMV declined to comment, Germany’s second largest utility had said in May that it was reviewing its role in Nabucco, which was conceived as far back as 2002 to carry gas from the Caspian basin, rivalling Russian gas supplies.

RWE joined the five founding shareholders, including Hungary’s MOL alongside OMV, four years ago. But the German company’s more recent financial constraints and a new chief executive – Peter Terium, who started in July – have seen it grow more wary of a long-term commitment to an extremely capital-intensive scheme.

RWE’s departure would be the second blow for Nabucco this year. In spring, the project partners had to scale back their plans after acknowledging it would take years for enough gas to be on tap to make the initial scheme financially viable.

Instead of the original plan for a 3,900-km pipe to carry 31bn cubic metres of gas each year from Georgia via the Balkans to Austria, the project now envisions a shorter, slimmer Balkan section called “Nabucco West”, which aims to use a rival Turkish pipeline as a feeder for gas only from Azerbaijan’s Shah Deniz 2 field.

Nonetheless, the BP-led consortium that operates the huge gasfield named Nabucco West as one of two final contenders to become its artery for Caspian gas to Europe. The other is the Trans-Adriatic Pipeline (TAP) through Greece and Italy.

While BP and its partners have pledged to name a winner at the start of 2013, people briefed on the matter said RWE had decided the process was taking too long. RWE has also seen its balance sheet hit by Germany’s accelerated exit from nuclear energy, and has been looking at cash intensive projects it might shed.

Any shareholder changes at Nabucco would be a boost for the TAP. It was once seen as an also-ran but has won fans for being smaller and scaleable, allowing it to be built comparatively cheaply, and then to grow should more gas be found.

In addition, part of the Trans-Adriatic Pipeline would run through Greece. Should BP and the other members of the Shah Deniz 2 group opt for this pipeline, the EU would be able to point to much needed foreign investment in the debt-saddled country, German government officials have noted in recent weeks.