Hungary's MOL Sees No Progress For Nabucco Without Source Of Gas Supply

As long as there is no definite source of natural gas supply, no final investment decision can be reached on the Nabucco pipeline project, said the chief executive of Hungary's energy company MOL Nyrt. (MOL.BU) Friday.

"For the time being, there is no obvious source of gas and there is also much uncertainty about the volume of the necessary investments. As such we can't even begin to discuss the project's returns," MOL's Chief Executive Jozsef Molnar said, when asked at a press conference about MOL's perception of Nabucco's future.

MOL, through its gas distribution arm FGSZ Zrt., is the Hungarian member of the consortium developing the Nabucco project, a pipeline planned to bring gas from the Caspian to the European Union and ease the region's dependence on Russia's imports.

However, Nabucco is competing with a similar project called South East Europe Pipeline, designed by BP PLC (BP), and with two other pipeline plans that aim at carrying the Caspian gas to Italy. The Trans Adriatic Pipeline, or TAP, is sponsored by Statoil ASA (STO, STL.OS), and the Norwegian energy giant that also has a 25.5% stake in the Shah Deniz consortium, which is looking at taking hydrocarbons from Shah Deniz II, a field in the Azerbaijani area of the Caspian basin.

The other competitor is the Interconnector Turkey-Greece-Italy, or ITGI, which is being developed by Italy's utility Edison SpA (EDN.MI) and Greece's gas company DEPA.

Late last week, Christian Dolezal, a spokesman for the Nabucco consortium, claimed the consortium was in the process of calculating several scenarios "including different sizes in terms of capacity and length of the pipeline [but] no final decisions have been made, yet."

The initial six members of the Nabucco consortium include German utility RWE AG (RWE.XE), Austria's OMV AG (OMV.VI) and MOL, each of which holds approximately 16.7%. The original project was a 3,900 kilometer-long pipeline running from the eastern Turkish border with Georgia all the way to Austria, with a capacity of 31 billion cubic meters.

Nabucco, which has been strongly supported by the EU's executive body, has hit hurdles recently since the project's large planned capacity means that it would need to get additional gas when compared with the amount expected to be available in the region for Europe this decade.

MOL is the second Nabucco shareholder to voice concerns over the project, after German utility RWE AG's (RWE.XE) Chief Executive Juergen Grossmann said recently that his company could scrap its plans for Nabucco.

"Almost 10 years ago when we entered Nabucco and it was a promising a project," Molnar said. "Its primary purpose was to deliver natural gas from Iran to the European market," he said.

However, political concerns regarding Iran meant that Nabucco started looking for alternatives and is now trying to reach an agreement in Azerbaijan with the consortium developing the Shah Deniz II field, its only concrete potential natural gas source.

-By Gergo Racz, Dow Jones Newswires, +361-267-0622; gergo.racz@dowjones.com

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