The Nabucco-South Stream race intensifies

The race between the two EU’s eastern gas pipelines is going on while next winter can again show some supply problems via Ukraine. South Stream got latest boost on 11th November 2009 as Russia’s Energy Minister Sergei Shmatko and Slovenian Economy Minister Matej Lahovnik signed an agreement on the passage of the South Stream gas pipeline across Slovenian territory. Same time shareholders in the Nabucco have started talks with two European top lenders over borrowing almost €1.5 billion for the pipeline’s construction; a €5.6 billion loan is needed for the construction first stage of the project and the shareholders have also started talks with two credit insurers. Besides loan Nabucco still desperately is searching gas for its planned pipe.

With South Stream Russia is looking a more reliable route for its gas exports to Europe as it bypasses Ukraine and Belarus, where price disputes have in the past led to gas shortages. EU Commission tries with Nabucco provide a supply of gas not subject to Russian control.

The competition

The competition over gas is coming harder. In my article “New Player in Caspian Sea Power Corridor” I described how China has came to game to take big share of Turkmenistan gas.

For contest between EU’s Nabucco and Russia’s South Stream China’s actions favor later. Today’s arrangements are securing gas for South Stream while Nabucco still is searching supply. It is more clear that Nabucco should be filled with Iraqi and/or Iranian gas and political aspects related to this may delay finding(private) investors and the implementation of project as whole. In bottom line while Russia is taking its part from old gas fields and China from old and new gas fields the Nabucco pipe still is more than half empty.

More about this comparison one may find from my post “EU’s big choice – Nabucco or South Stream?“.


From 2015 South Stream is scheduled to take gas into the EU via Bulgaria. A northern branch ends up in Italy via Serbia, Hungary, Slovenia and eventually Austria. A southern route takes the gas through Greece and under the Adriatic Sea to Italy. With Slovenia Russia has all the necessary European partners for us to be able to complete its project. During Summer 2009 there was discussions if South Stream could pass Bulgaria. Russia however agreed on 6th August 2009 with Turkey about energy cooperation with South Stream and also development of Blue Stream pipeline between Russia and Turkey under Black Sea so South Stream has secured also an alternative route. After that the discussions between Bulgaria and Russia got a new boost.



Austria has officially backed Nabucco even some of Austrian companies are also partners in South Stream. On 11th Nov. 2009 Russia and Austria had meeting. PM Putin said after talks with Austrian Chancellor Werner Faymann that they agreed to draft an agreement on cooperation in South Stream. Faymann said South Stream is in Austria’s interests and that Austria’s government had given a mandate to start negotiations two weeks ago. He said Nabucco and South Stream shouldn’t be viewed seen as competitors: “We believe that this is diversification as well as a chance to make the energy supply more secure,” Faymann said. More in CNBC news.

Bottom line

Russia made already on May 2009 a proposal including the South Stream gas pipeline to pump natural gas from Russia to the Balkans and onto Europe in a list of EU priority projects. The U.S./EU backed Nabucco project had been included in the list, but South Stream not yet. From my point of view I would like to see EU to change priority status from Nabucco to South Stream. Nabucco could still be kept alive in case to wait stabilisation in the Middle-East.


4 Responses to The Nabucco-South Stream race intensifies

  1. […] The Nabucco-South Stream race intensifies […]

  2. dinos says:


    Does the following change the situation? German energy giant RWE said on 10 March that it signed a memorandum of understanding for oil and gas exploration in Azerbaijan. RWE, which is one of the six members of the consortium overseeing development of the Nabucco gas pipeline for Europe, and Azeri state oil company SOCAR signed an MOU to explore the hydrocarbon potential in the Nakhichevan deposit.
    The deposit is in the Caspian Sea about 50 miles south of Baku, the capital of Azerbaijan. Estimates of the structure’s natural gas reserves top one trillion cubic feet. “Europe needs access to the immense oil and gas reserves in the Caspian Sea,” said RWE Chairman Jurgen Grossmann.
    The European Commission last week said it would dedicate $270 million to the Nabucco gas pipeline. The 2,000-mile Nabucco is to deliver 1.1 trillion cubic feet of natural gas to European markets each year. Gas deliveries are expected through Nabucco by 2014.

    • Ari Rusila says:

      In my opinion no as Azeri gas is not enough to fill Nabucco. Besides earlier Azerbaijan has already made gas deal with Russia. As Turkmen gas is going to China and Russia and possibly to Iran the only alternative for Nabucco – without Russian gas – is Iran and Iraq. The first alternative has some political problems due nuclear dispute the second is depending regulations about gas income share inside Iraq as the Nabucco gas probably is coming from Kurdistan. Due these obstacles I have doubt that any gas via Nabucco is flowing on 2014, not even 2017.

      • dinos says:

        Good explanation. As you know Russia begins actual construction of Nord Stream on April 1st. Here is an Azeri opinion:

        PhD Candidate in International Relations with the Bordo-based Institute of Political Studies Samuel Lussac says that Nabucco has a chance to exist if the project proves to be financially profitable.

        Lussac believes that the year 2010 will be a breakthrough for Nabucco thus supporting the view of the Director of the Nabucco Gas Pipeline International Reinhard Mitchek.

        “2010 will definitely be a breakthrough for Nabucco. And the less I can say is that Reinhard Mitchek’s statement was a bit surprising compared to his previous ones. He said that the Nabucco project now lies in the hands of its potential clients and these will decide its fate. To make it short, if these clients decide to buy gas from the Caspian to be transported through Nabucco, then this project will come to reality. If not, it will disappear like other projects before (the Trans-Caspian gas pipeline project in 1999 for instance). This statement differs from the previous one because, until now, Mitchek was very confident about the implementation of Nabucco,” the expert said.

        “This decrease (not to say lack) of confidence is due to the several events that gas markets have encountered in the last few months. First, due to the recession, gas consumption in Europe has decreased, making the implementation of Nabucco less urgent. Then, the development of new technologies to produce shallow gas in the United States deeply changed the deal. It is now possible to exploit gas difficult to access in the latter but also in Poland and in Germany. This is very likely to make these countries less dependent on gas exports. Thus, the need for Nabucco may decrease.”

        “To sum up, the situation for the Nabucco project has deteriorated. This project still faces structural problems (lack of investments, too much division among its European backers) and now has to deal with these conjonctural issues. Its future is still at stake and lies in the hands of its clients. To become true, Nabucco has to be commercially viable. For the moment, it seems it is not the case yet, especially compared to its other Western competitors (ITGI or TAP for instance),” the expert noted.

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