Europeans Look to Break Russian Monopoly on Gas Supply with Major New Pipeline

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A major new project has just been approved in Europe that has the makings of a mini stimulus package in its own right. The Nabucco Gas Pipeline will run from Azerbaijan in the initial stage but the intention is to extend spokes to Turkmenistan, Kazakhstan, Iraq, and perhaps Iran to double the capacity. Turkmenistan alone is said to recently prove a new gas field ranked fifth in the world according to a WSJ report and has ample reserves to become a major supplier to Europe. In fact the name Nabucco comes from a Verdi opera meaning freedom from bondage and is the brainchild of the Europeans fearful of being held to ransom by a Russia which has shown it is willing to use energy supply as a political weapon.

The project is being built by a consortium from Austria, Hungary, Bulgaria, Romania, and Turkey. It aims to be in service by 2014 with an initial target of 31bn cubic meters a year, equal to a quarter of current supply from Russia’s Gazprom. The 2,000 mile pipeline will not only provide lucrative construction projects but will represent a sizable steel demand in its own right. A similar project called Blue Stream earlier this decade ran two x 28 diameter pipes with 1.25 wall thickness from Russia to the west. If Nabucco was designed with no more than the Blue Stream project (and Blue Stream was only a 16bn cu mtrs compared to Nabucco target of 31 bn cu mtrs) this would require nearly 3.4 million tons of steel pipe, plus pumping stations, large amounts of sacrificial anodes and associated metals. The pipe size may be an underestimate and not just due to the volumes being promised, a project to bring natural gas from Alaska to Chicago earlier this decade was proposing 52 diameter pipe and much heavier walls due to the pressures needed to pump gas the 3600 miles required. Nabucco is not intended to be that long but at 2,000 miles plus it is getting closer than Blue Stream’s 500 miles. Larger diameter and greater pressure also requires more sophisticated steel alloys probably requiring higher molybdenum content. With major steel producers in the area there will be intense competition to supply. Blue Stream was mostly supplied by Kawasaki, Nippon, NKK and Sumitomo plus Corus in the UK, but European backers may well be looking for local mills to play a bigger role this time.

–Stuart Burns

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