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EU energy security: Green light for €4 billion Nabucco gas pipeline

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Monday, 06 September 2010 13:49

An important step has been taken towards a potential financing package of up to €4 billion for the flagship Nabucco gas pipeline project, with today’s signature of a mandate letter that marks the start of the appraisal process for the project.

The European Bank signed the mandate letter for Reconstruction and Development (EBRD), the European Investment Bank (EIB), IFC (a member of the World Bank Group), the shareholders of Nabucco and NABUCCO Gas Pipeline International GmbH.

Nabucco is the flagship project for meeting future EU gas demand and will diversify Europe’s pool of supplier countries. The potential financing package will consist of up to €2 billion from the EIB, up to €1.2 billion from the EBRD, and up to around €800 million from IFC.

The Nabucco gas pipeline project addresses the EU’s priority goal of achieving energy security via the diversification of gas routes and gas supplies. It will deliver additional volumes of gas from different sources through a new supply route to the EU member states and their neighbours. Nabucco provides a strategic solution by enabling the transport of gas from both the Caspian Region and the Middle East.

The mandate letter formalises the conditions under which the three International Financial Institutions will conduct their appraisal of the Nabucco project, and provides an indication of the potential level of financing. It sets out the work that will be required before a final financing decision can be taken.

A press release from the EIB said the involvement of the three IFIs was a demonstration of global and European support for the project, and represents an important milestone in ensuring the overall financing of Nabucco.

Nabucco is the new gas bridge from Asia to Europe and the flagship project in the Southern Corridor. It will be a pipeline to connect the world’s richest gas regions - the Caspian region, Middle East and Egypt - to the European consumer markets.

The pipeline will link the Eastern border of Turkey, to Baumgarten in Austria - one of the most important gas turntables in Central Europe - via Bulgaria, Romania and Hungary. When completed the 3,300 km pipeline’s annual capacity will be 31 bcm.

The 2009 Intergovernmental Agreement signed in Ankara in July 2009, which harmonises the legal framework and grants stable and equal transport conditions for all partners and customers, supports the construction of the pipeline.

It is widely acknowledged that Central and Western Europe will face a considerable shortfall in its energy supply over the next two decades, with gas prices expected to increase as domestic production declines. Consequently, it is crucial that new infrastructure be established to meet further demand and ensure both security of supply and supply diversification.

The main pipeline will be built in one phase from Ankara to Baumgarten. Construction will start in 2012, with the first gas flowing in 2015.

Global Arab Network

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