Falcon Oil and Gas Ltd.

>And the build up to our project goes on.By the end of this year, Hungary will hopefully be a major contributor to this thanks to MAKO

I certainly hope so too Lux. Here is a Hungarian take on this historical event.

"While the pipeline is unlikely to reach full capacity before 2020, EU politicians consider the deal a breakthrough, given that continental countries with natural gas assets have never before joined forces in a project of this magnitude."

Portfolio.hu

Hungarian PM signs Nabucco deal with Turkey, 3 EU member states

Monday, July 13, 2009 12:36:00 PM

Hungary's Prime Minister Gordon Bajnai has on Monday signed the intergovernmental agreement with Turkey and three other European Union member states on the Nabucco natural gas pipeline. Hungary is to start talks on the practical issues of the pipeline's construction with the Nabucco consortium already this month, Bajnai said in Ankara, Turkey.

“Nabucco will provide energy security to Turkey, to South East Europe, and to Central Europe," said José Manuel Barroso, President of the European Commission.

The agreement is between Turkey and Austria, Bulgaria, Hungary and Romania - four EU member states. The pipeline will run between Eastern and Southern Turkey and Baumgarten in Austria, and therefore crosses the territory of these states.

“This agreement could - in the months and years to come - open the door to a new era in the relationship between the European Union and Turkey, and indeed beyond," Barroso added.

The signing of the deal makes it more likely that Nabucco will actually be built, offering an alternative gas supply route and decreasing Europe's energy dependency on Russia.

While the pipeline is unlikely to reach full capacity before 2020, EU politicians consider the deal a breakthrough, given that continental countries with natural gas assets have never before joined forces in a project of this magnitude.

PM Bajnai emphasised that it was Hungary that initiated to establish a high-level political body that would allow senior politicians of the participating countries to continuously monitor the progress made in the building of Nabucco.

He also noted that what was signed today is more than a piece of paper - the signing of the intergovernmental agreement has both a political and a social significance since it shows that co-operation could be the way out of global crisis situations, including the current economic and financial crisis, Bajnai said.

Bajnai's predecessor, Ferenc Gyurcsány was widely considered a supporter of Nabucco's rivalling project, South Stream. When he stepped down in March, Russian papers said Gazprom - the local energy giant - has lost an influential politician.

Gyurcsány signed up for South Stream participation in Moscow this March. While most analysts believe the two pipelines cannot co-exist, Hungary has stood beside both projects, depending on who sat on the other side of the table, the EU or Russia.

A few hours before the signing of the agreement, Hungarian government spokesman Domokos Szollár told index.hu that Hungary believes in the “two pipelines are better than one" principal and Budapest does not want Russia to consider today's contract signing as a hostile move.

A main impediment to signing the Nabucco deal was Turkey that abandoned its demand for buying 15% of Nabucco gas only last Friday. At the same time it would have right to take a share from 15 billion cubic metres, or half of the gas flowing through the pipeline.

Launched in 2002, Nabucco project involves the construction of a 3,300 km natural gas pipeline that will connect the shores of the Caspian Sea to Western Europe.

The project, whose completion date is projected for 2014, was brought back on the EU's agenda after the gas crisis that erupted earlier this year, following the disrupted gas deliveries by Russia to Ukraine. Construction costs are estimated at EUR 7.9 billion but it is yet to be cleared who and to what extent will cover the expenses. The EU has so far pledged only a symbolical help of a few hundred million euros.

Nabucco Gas Pipeline International GmbH consortium was founded in 2004 with equal stakes of 16.67% given to Austria's OMV, Turkey's Botas, Bulgaria's Bulgargaz, Romania's Transgaz, Germany's RWE and Hungary's MOL.
What next?

The next stage in the project is to conclude capacity contracts. These are commitments to put gas into the pipeline for a fixed period. Either buyers of gas or sellers of gas can make these commitments. These commitments are what underpin the financing of the pipeline. This stage will begin in the second half of 2009.

Nabucco is a third party access pipeline; at least 50% of its capacity will be sold on the open market so that any shipper may buy capacity in order to ship gas. The remaining 50% is given by a first option to the pipeline's owners or their affiliates; if these companies do not make use of this option, the capacity is offered on the open market.

There is strong interest from companies in Azerbaijan and Iraq to make commitments immediately. Further gas can come from Central Asia and the Caspian region. There is no shortage of potential gas sources available to the pipeline as the Caspian/Middle East region contains the largest gas reserves in the world.

In the medium term, the European Union and Turkey will jointly look at how to construct a Caspian Development Corporation to provide an assurance to Turkmenistan and other potential suppliers that European Union and Turkish companies are able to make commitments to purchase and pay for gas.

The 7.9 bn project may kick off already next year and the pipeline could start delivering 8 billion cubic metres of gas annually from 2013 or 2014.

The project's few aficionados believe Nabucco, getting around Russia, could give EU member states access to up to 31 bn cubic metres of natural gas annually by 2018.