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Cablegate: German Energy Giant Rwe Joins Nabucco

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OO RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHRL #0153/01 0390928
ZNR UUUUU ZZH
O 080928Z FEB 08
FM AMEMBASSY BERLIN
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0392
INFO RUCNFRG/FRG COLLECTIVE
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHMO/AMEMBASSY MOSCOW 1906
RUEHKB/AMEMBASSY BAKU 0074
RUEHTA/AMEMBASSY ASTANA
RUEHAH/AMEMBASSY ASHGABAT 0118

UNCLAS SECTION 01 OF 02 BERLIN 000153

SIPDIS

SENSITIVE
SIPDIS

FOR EEB U/S JEFFERY AND EUR/FO DAS BRYZA

E.O. 12958: N/A
TAGS: ENRG EINV PREL PGOV GM
SUBJECT: GERMAN ENERGY GIANT RWE JOINS NABUCCO

ENTIRE TEXT IS SENSITIVE BUT UNCLASSIFIED. NOT FOR
INTERNET DISTRIBUTION.

1. (SBU) SUMMARY: After negotiations lasting nearly
a year, German energy giant RWE became the sixth
member of the Nabucco Gas Pipeline consortium. RWE
joins energy companies from Austria, Bulgaria,
Hungary, Romania and Turkey in the EU-supported
project to pipe gas from the Caspian region to
Europe by 2013. Nabucco is expected to make final
decisions on planning and construction during the
first half of 2008 amid concerns that the recently
announced Gazprom supported Southstream project to
link the Caspian region via Russia to Europe may
jeopardize its viability. Although a prime goal of
the project was to reduce dependence on Russia and
break Gazprom's monopoly on pipelines feeding into
the European energy grid, Nabucco CEO Mitschek
announced that the pipeline could also transport
Russian gas. END SUMMARY.

2. (SBU) After protracted negotiations with the
Nabucco consortium, the CEO of RWE's newly formed
RWE Gas Midstream, Stefan Judisch, signed the
contract to join the project on February 5 in
Vienna. Existing members are Austrian OMV,
Hungarian MOL, Romanian Transgaz, Bulgarian Bulargaz
Holding EAD and Turkish Botas. Talks are reportedly
underway with Gaz de France as a potential seventh
member. Azerbaijan is also seen as a potential
partner and has reportedly expressed interest.

3. (SBU) RWE upstream activities are currently
focused on Germany, the UK, Norway, Denmark,
Northern Africa and the Caspian region. Its
relationship with Gazprom is currently limited to
buying gas and does not have an interest in any
pipelines or other forms of joint ventures with the
Russian energy giant. It thus sees participation in
Nabucco as an opportunity to diversify supplies and
reduce dependence on Russian gas. A senior RWE
official told Embassy Berlin that RWE participation
in Nabucco is based on the expectation that Iranian
gas would not be needed to make the project
economically viable.

4. (SBU) Originally planned to reduce European
dependence on Russian gas and pipelines, the $7.4
billion EU-sponsored Nabucco project to construct a
3,300 km pipeline to carry 31 bcm natural gas per
annum from the Caspian region to Europe has been
dogged by ill fortune since its foundation in 2002.
Russia has been eager to lock up gas via long term
contracts from other major suppliers in the region
such as Turkmenistan, Khazarkstan and Azerbaijan.
This has led many experts to question the pipeline's
viability, especially if Iranian gas remains
politically unfeasible. It what many view as a
further blow to Nabucco, Gazprom was recently
successful in reaching agreement with Italian ENI,
as well as Bulgaria and Serbia, on the competing
South Stream pipeline.

5. (SBU) The Nabucco Consortium reacted to the
Russian Southstream announcement by issuing a nine
million euro-contract to a British engineering
company to coordinate technical planning with the
goal of the pipeline being operational by 2013.
However, the latest announcement by CEO Mitschek
that the pipeline could also carry Russian gas is a
complete reversal of previous policy and could be
seen as a last ditch stand to save the pipeline.
However, our contacts with the major German gas
competitors said that although they view Southstream
as a competing project, the demand for gas in Europe
will be so large that both pipelines could be
viable, provided other supplies from the region
(e.g., Iraq or Iran) become available. They also
saw a potential for linking the two projects.

6. (SBU) With a turnover of approximately 10
billion euro per annum in gas and 10 million
customers, RWE is currently Europe's sixth largest

BERLIN 00000153 002 OF 002


gas company. Its market share ranges from seven
percent in the Netherlands, eight percent in Germany
and the UK to 41 percent in Hungary and 82 percent
in the Czech Republic. RWE Gas Midstream was formed
to consolidate gas procurement, supply, trading and
sales as well as commercial responsibility for LNG
and non regulated gas transport, transit and
storage. RWE DEA is now responsible for consolidated
upstream oil and gas activities.

7. (SBU) COMMENT: Russian moves to undermine EU
attempts to reduce dependence on Russian gas and
pipelines can be seen as a pincer movement with the
Baltic Sea Nordstream Pipeline in the north and the
Southstream pipeline to Italy and the Balkans in the
south. Given that the Russians have also
successfully contracted Caspian gas, there are
serious doubts about the ability of the Nabucco
consortium to obtain enough gas to feed the
pipeline. A side-effect of Russian support for Iran
could be to polarize the EU in its efforts to obtain
non-Russian gas. In this light, the sudden
announcement that Russian gas may also be acceptable
for the Nabucco pipeline could be seen as a
strategic move by Nabucco to defuse Russian
resistance. Whether this succeeds or merely
emboldens Gazprom further remains to be seen.
Gazprom's agreement with Italian ENI on the
Southstream project also highlights the apparent
inability of the European Union to achieve a common
position in developing a common energy policy. END
COMMENT.

TIMKEN, JR

© Scoop Media

 
 
 
 
 
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