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Despite Progress, Nabucco Still Faces Lack of Suppliers

Friday, Sept. 24, 2010

On Sep. 6, the European Investment Bank, the European Bank for Reconstruction and Development, and the International Financial Corporation (a branch of the World Bank Group) signed a mandate letter with the consortium behind the Nabucco natural gas pipeline, marking the start of an appraisal process that will eventually secure a €4 billion financing package for the project. The three international financial institutions committed €2 billion, €1.2 billion and €800 million, respectively. Along with the more modest €200 million grant provided by the European Commission last March, the contributions will certainly boost confidence in the project among private investors, who must finance 70 percent of the estimated €7.9 billion necessary to complete the pipeline.

A few days after the signing, the consortium's managing director, Reinhard Mitschek, confirmed that the pipeline will be supplied by two feeder lines linking the Turkish terminal of Eruzum to Georgia and Iraq, adding that deliveries should start in late 2015. However, despite the progress in financing the project and the optimistic pronouncements, filling Nabucco with gas still represents a major challenge. A third feeder line from Iran, contemplated when the project was first proposed in 2002, has been ruled out for geopolitical reasons. And notwithstanding Mitschek's assurances, no binding agreement has yet been signed for the remaining two. ...

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