Boost for Nabucco from Iraq gas deal

By Carola Hoyos

Europe took a surprise step towards reducing its dependence on Russian gas on Sunday as two of its oil companies agreed to develop a gas field in Kurdistan, Iraq’s semi-autonomous region.

OMV, of Austria, and Hungary’s MOL agreed the deal, which will feed the planned Nabucco pipeline.

The 3,300km pipeline is the centrepiece of Europe’s energy policy and attempts to reduce imports from Russia by providing the region with gas from central Asia.

However, it is struggling to find suppliers. OMV and MOL, with their regional partners, are to invest $8bn (€5.9bn, £5.3bn) in Kurdistan’s gas fields and believe they could eventually pump as much as 3bn cubic feet of gas – almost twice as much as the combined consumption of Belgium and Luxembourg. About half that gas could eventually flow to Europe via Nabucco.

However, Kurdistan’s ability to export gas is entangled in a dispute with Baghdad. The two sides are deeply divided about how to share the country’s vast oil and gas wealth among its regions.

OMV and MOL each bought 10 per cent of Pearl Petroleum, which is developing Kurdistan’s Khor Mor gas field.

Pearl is jointly owned by Crescent Petroleum and Dana Gas, two regional exploration and production companies, and has spent $605m developing the field for the local Kurdistan market. OMV agreed to make an initial investment of $350m, while MOL exchanged 3 per cent of its shares for its 10 per cent stake in Pearl. MOL and OMV each hold a 16.67 per cent stake in Nabucco.

On top of finding too few potential gas suppliers able to fill the pipeline, it will have to to compete with South Stream, the pipeline being being built by Gazprom, Russia’s powerful gas monopoly, and Eni, the Italian energy group.

Paolo Scaroni, chief executive of Eni, told the Financial Times on Friday that he doubted Nabucco would ever become a reality.

“Nabucco will fly only when it will be fed by gas from Turkmenistan, Kazakhstan and perhaps Iran,” Mr Scaroni said. “From what I have read, that is not going to happen.”