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South Stream and Nabucco pipeline may merge part of their route

Eni boss Paolo Scaroni suggested that the competing Nabucco and South Stream pipelines would benefit by merging for at least part of their route.

South Stream and Nabucco pipeline may merge part of their route

Eni boss Paolo Scaroni suggested that the competing Nabucco and South Stream pipelines would benefit by merging for at least part of their route. "What we have here is what investment bankers would call a strategic fit", Scaroni said at the IHS Cera Week conference in Houston, according to prepared remarks. "Should all partners decide to merge the two pipelines for part of the route, we would reduce investments, operational costs and increase overall returns". Scaroni explained that, in his opinion, the two projects have complementary strengths and weaknesses.

South Stream, which partners Eni and Russian monopoly Gazprom, would carry Russian gas under the Black Sea to southern Europe. Nabucco is backed by a consortium of OMV, Bulgaria's Bulgargaz, Turkey's Botas, Germany's RWE, Hungary's MOL and Romania's Transgaz. Detractors say the Nabucco project has yet to sign up a major supplier, though talks continue with producers in the Middle East and Caspian regions. Both would bypass the Ukraine, where volatile relations with Russia have led to gas cutoffs in the past.

Scaroni said merging at least a portion of the two projects would still allow Europe achieve its goal of diversifying supplies. "They would bring together Europe's major actual and potential suppliers and its major consumers – the gas and the market for gas", Scaroni said. "And they would still meet their strategic objective of diversifying supply sources and transit routes". Eni sees the diversification of gas transit routes and supplies as a move to prepare for a tight gas market.

The world is currently awash in cheap natural gas but low prices and an economic recovery could spur a price recovery in the not too distant future, he said. The shale gas boom in the US has reduced import needs, freeing up supply elsewhere, he said. But demand cratered amid the economic crisis and recession. However, natural gas is perceived as a bridge between more carbon-intensive fossil fuels and alternatives. Low prices have chilled investment in production and infrastructure, which will lead to a supply crunch once demand returns. "Gas will come full circle and we will need to prepare for a tight market", he said.


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