Hungary PM Orbán says MOL is leaving Nabucco gas pipeline project

“A number of uncertainties have arisen around the Nabucco project that would be hard to ignore," MOL said in an email today, without confirming whether it will opt out of the project or not.

“I’m not an expert on the subject, but what I can see is that even the Hungarian company, MOL, is leaving the whole project," Orbán told reporters in Brussels on Monday, adding that “Nabucco is in trouble."

Orbán said it was part of Hungary’s economic strategy to become independent in this sense, as the country greatly depends on Russian gas. As part of its strategy the government wants maintain or even add new ones to the supply routes from Russia, but also wants to find new routes.

That is why the cabinet supports a pipeline with Slovakia, although this would be rather costly in the short term. Negotiations on a link with Croatia are also under way, Orbán said, adding that “we would like to find a way somehow to the Italians."

The PM noted that he would like to be able to say within three years that the country does not depend on a single country in terms of energy supply.

After obtaining this independence nothing will prevent Russia from contributing to Hungary’s energy supply at a reasonable price, Orbán said. He added that he also feels Moscow has become more active in the construction of the South Stream pipeline.

“We have repeatedly argued that the re-think (or even failure) of the project would present an opportunity for MOL: the management and capital resources related to the project could be reallocated to upstream, which we believe would be welcomed by investors. This is particularly true in light of the most recent cost estimates for Nabucco, which range from EUR 12bn to EUR 15bn," commented Péter Császár, analyst at KBC Securities in Warsaw.

In January, Russian gas giant Gazprom brought forward the start date for building the rival EUR 15 bn South Stream, which will bypass transit nations such as Ukraine and supply European customers directly.

Orbán met Gazprom Chief Executive Officer Alexey Miller in Budapest on 17 April, the Russian company said in an e- mailed statement. Miller and Orbán stressed the importance of South Stream, which “meets the strategic interests" of both countries, Gazprom said.

The question for Hungary in this respect is simple: does it want a pipeline that goes through the country or one (South Stream) that goes around it? From merely an economic perspective the answer is that a pipeline going through Hungary would be much better.

MOL reacts

MOL said: “with regard to the project both the financing background and the source of the natural gas are uncertain. The construction costs of the project have been constantly rising since 2003, but it remains unclear what the total cost will be. On the other hand management of the project have failed to find and ensure a natural gas source up to this day that would feed enough gas to the pipeline therefore the quantity and source of the available natural gas remains questionable."

“We have signalled these concerns of ours in the Board of the Nabucco Gas Pipeline International GmbH. We remain committed to the diversification of Central and Eastern Europe’s energy supply, but as an independent company we are responsible for our shareholders; we owe them the highest possible economic performance."

The construction of the more than 3,800-km Nabucco pipeline has been planned since 2002, with the goal of creating energy independence for Europe from Russia. It would run from the Turkish/Georgian border across Turkey and then across Bulgaria, Romania and Hungary to the main central European gas hub, Baumgarten in Austria.

The link, which is slated to bring as much as 31 billion cubic meters of natural gas a year from the Caspian region to Austria starting in 2017, has repeatedly postponed its start date after struggling to secure fuel sources.

Nabucco, a joint venture of Hungary’s MOL, Germany’s RWE, Vienna- based OMV, Bulgargaz EAD, Romania’s Transgaz SA and Turkey’s Boru Hatlari ile Petrol Tasima AS, or Botas, may be scaled down and linked up with the Trans-Anatolia Pipeline, known as Tanap, at the EU’s southern border, Nabucco Managing Director Reinhard Mitschek said last month.

Total construction costs were originally estimated at EUR 7 bn, but even the most upbeat projection now is for EUR 24-26 bn total cost.

• Tags:
• energy,
• natural gas,
• pipeline,
• equity,
• orbán,
• mol