TAP, Nabucco Vie In Final Stage To Pipe Caspian Gas to Europe

By Alkman Granitsas and Alessandro Torello

ATHENS--The two pipeline projects vying to transport Azerbaijan's natural gas to Europe are gearing up for the last stage of a long battle, promoting their plans just months before a decision that will have major consequences for the region's energy policy.

The Trans Adriatic Pipeline AG, or TAP, and rival Austria-based consortium Nabucco Gas Pipeline International GmbH have competed for years to be selected by the companies developing the giant offshore Shah Deniz II gas field in Azerbaijan to carry that gas to the European Union. The winning pipeline would help to diversify Europe's supplies away from dependence on Russian gas.

Kjetil Tungland, TAP's managing director, is increasingly optimistic that his EUR2.5 billion pipeline will get the nod when the Shah Deniz consortium decides on the winning bidder in just over two months.

TAP is no longer the underdog to Nabucco, Mr. Tungland said. A fresh commitment of support this month by countries most directly involved in TAP--Greece, Italy and Albania--and a change in policy stance by the European Commission have boosted TAP's prospects, he said.

"I think the odds are highly in our favor because we were more in front technically and commercially all the time, but politically we had to catch up," Mr. Tungland said.

Final submissions for the pipeline tender--after years of delay--are now set for the end of March. The Shah Deniz consortium--in which BP PLC (BP), Norwegian state oil company Statoil ASA (STO) and Azerbaijan's Socar are the main players--is expected to reach an initial decision in June and a final deal by October. Socar officials declined to comment on whether they were leaning toward one project or the other.

Nabucco, long seen as the favorite, has recently faced challenges. German utility RWE AG has quit the project, while the consortium was forced to almost halve the capacity of its project and reduce the route to 1,300 kilometers from nearly 4,000 kilometers. The newly dubbed Nabucco West project would now run from Turkey's western border to Baumgarten, Austria.

The European Commission had for years thrown its weight behind Nabucco, a consortium of European Union companies including Austria's OMV Gas and Power GmbH (OMV.VI), Hungary's MOL Nyrt (MOL.BU), Bulgaria's state-owned energy holding company and Romanian state-run pipeline operator Transgaz Medias (TGN.RO). Now, however, the Commission says it has no preference for either project.

Nabucco still believes it has a good chance of winning the competition. "We offer the best comprehensive package," said Christian Dolezal, spokesman for the Nabucco consortium. "Nabucco countries have all concluded legislation steps to make our project the priority project" and "there is a lot of willingness in these countries to politically support us," he said.

Write to Alkman Granitsas at [e-mail] and Alessandro Torello at [e-mail]

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