Oil and Gas

REFILE-Russia-West gas pipeline race speeds up

* Russia says will complete its project first

* Baghdad rejects Kurdish region’s gas deal with UAE firms

* Baghdad says to supply Europe from another field

(Refiles to replace a garbled, incomplete version that was issued in error and withdrawn [nLI361145])

By Simon Webb

DUBAI, May 18 (Reuters) - The race to build new gas pipelines to Europe accelerated on Monday as Russia, keen to maintain its grip on the continent’s market, said it would finish its scheme before a rival EU-backed project.

The West’s Nabucco pipeline secured a deal at the weekend to obtain gas from Iraq’s Kurdistan region, to help cut dependence on Russia’s gas supply, but the central government in Baghdad on Monday voiced opposition to the agreement.

“I consider South Stream to have every chance of being realised earlier than Nabucco,” Russia’s Energy Minister Sergei Shmatko told reporters on Monday, speaking of the Moscow-backed pipeline plan.

“Nabucco has a range of issues which still need to be resolved.”

Russia signed deals on Friday to accelerate South Stream, due to start in 2015. It also rebuked the United States and former Soviet satellite nations for backing Nabucco.

Moscow, with the world’s largest gas reserves, had the edge until this week. The European Union relies on Russia for around a quarter of its gas.

Nabucco had political backing but little gas to sell until two of its shareholders, Austria's OMV OMVV.VI and Hungary's MOL MOLB.BU joined up with the United Arab Emirates Crescent and Dana Gas DANA.AD to source supply from Iraq's Kurdistan.

This project could now supply enough gas to kick-start the project and supply Europe by 2014. [ID:nSP496384]

“It’s an important and promising development for the acquisition of a huge volume of natural gas for Turkey and for Europe via Nabucco,” Nabucco Managing Director Reinhard Mitschek said of the deal.

The existing timetable would put Nabucco supplies a year ahead of South Stream.

“The competition between South Stream and Nabucco is hot,” said Agata Loskot-Strachota, energy security analyst at the Warsaw-based, state-funded Centre for European Studies. “If the projections made ... are confirmed, this deal gives a strong push to Nabucco.”


The scheme to pump gas from Iraq’s Kurdistan still needs to surmount political and operational obstacles, notably from Iraq’s own oil ministry.

The ministry said on Monday it rejected deals signed by the Kurdish Regional Government with Crescent and Dana in 2007 to appraise and develop the fields that would supply Nabucco.

Iraq would supply Europe from another field, the Akkas field, government spokesman Ali al-Dabbagh said on Monday. Iraq expected enough gas from that field could be produced for export to Europe by 2014, he said.

Iraq’s oil and gas ministry has criticised oil and gas contracts that the KRG has signed with international oil companies, calling them illegal. The KRG, which has clashed with Baghdad over draft oil legislation, has countered that the deals are legal and comply with Iraq’s constitution.

“Any contract now signed with Iraq is very risky,” said Borut Grgic of the Brussels-based Institute for Strategic Studies.

Nabucco itself has been dogged by squabbles between shareholders. Transit country Turkey has threatened to block the project unless it can keep 15 percent of the gas that goes through the pipeline.

There are also questions as to how much gas is in the fields in the Kurdistan region and how quickly it can be brought to market.

According to U.S. government data, the fields in Iraq’s Kurdistan contain around 3.6 trillion cubic feet. That would be insufficient to pump the 3 billion cubic feet per day (cfd) that the companies say they can pump by 2014.

But Iraq’s oil and gas reserve estimates are based on old data, and were likely to be revised up as more thorough appraisal of resoures is undertaken, analysts say.

Crescent and Dana have been appraising the fields since signing a deal with the Kurdish Regional Government in 2007.

The 3,300 km Nabucco pipeline was initially planned to carry Caspian gas via Turkey, Bulgaria, Romania and Hungary to Austria. The first phase of the pipeline was to have capacity of around 1.5 billion cfd, with the second phase double that.

OMV and MOL each have a 16.67 percent stake in Nabucco. Other stakeholders are Bulgaria's Bulgargaz, Romania's Transgaz TGNM.BX, Turkey's Botas and Germany's RWE RWEG.DE. (Reporting by Katya Golubkova and Dmitry Zhdannikov in Moscow, Sylvia Westall in Vienna and Anna Mudeva in Sofia; editing by Anthony Barker)