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. Last Updated: 07/27/2016

Pipeline Group to Cut Costs on Steel

ANKARA, Turkey — Nabucco will revise downward the 7.9 billion euro ($11 billion) cost of its gas pipeline this fall because of plunging steel prices, its managing director said Monday.
A detailed physical study of the pipeline will be done this year ahead of the budget revision and the steel orders will be placed this year, or in early 2010, Reinhard Mitschek said in an interview.
The intergovernmental agreements signed between the Nabucco transit countries have cleared up the political problems that have plagued the project and allowed the Nabucco consortium to focus on the commercial aspects of the pipeline.
“We have this downturn in prices of 50 percent or even more for steel and other products to date,” Mitschek said in Ankara on the sidelines of the Nabucco transit agreement signing.
“In the autumn we will have a revision of the budget. We will order all these materials — these pipes — either at the end of this year or the beginning of next year,” Mitschek said.
“No one knows the developments of the [steel] prices in the next six to eight months and so I have no specific figures,” he said.
He also said the Nabucco Consortium, comprising Austria’s OMV, Bulgaria’s Bulgargaz, Turkey’s Botas, Germany’s RWE, Hungary’s MOL and Romania’s Transgaz, could see a rise in the number of bids made in tenders from firms to buy up the capacity of the pipeline for consumers.
European Union Commissioner Andris Piebalgs said Monday that the consortium had received 16 non-binding bids before the start of the open season capacity bidding.
The transit agreements signed Monday would increase commercial appetite for the pipeline, Mitschek said. “We believe that the number of shippers will even increase [beyond 16] because we think that with the intergovernmental agreement, confidence will increase.
“Suppliers from Central Asia and the Middle East will be keen to export gas to Europe,” he said.
The Nabucco chief also said that in the future Russian and Iranian gas could transit the pipeline — if the political conditions were right.
“The first step will have gas from Azerbaijan, Egypt and Iraq. There can be gas from Russia and Iran if it is politically sound, that is something we will see in the future,” Mitschek said.
“Capacity build up will continue to 2018, 2019, and a lot of developments may occur that allows for the possibility of Iranian gas in the pipeline,” he said.
The United States, which backs the project along with the European Union, is opposed to Iranian use of the pipeline until it normalizes relations with Tehran. The two are at odds over Iran’s nuclear program.