Azerbaijan, Baku, May 5 / Trend , A. Badalova/
Global financial and economic crisis has had a considerable impact on the world energy market so far. One of its main consequences was a sharp drop in oil prices, which in turn was caused by a reduction in global demand for fuel. According to the forecasts of the International Energy Agency (IEA), oil demand in 2009 will be 83.4 million barrels per day, which at 2.4 million barrels lower compared to the year 2008. As stated in the IEA report, the current reduction in oil consumption corresponds to the fall in demand recorded in the early 1980's.
Many energy projects in the context of the crisis were under threat. There are risks of delay their implementation. But, along with many minuses, caused by crisis, you can see a plus, which could include reducing the cost of capital expenditures on major projects.
Over the past year, the cost of major energy projects has improved significantly in connection with record-high prices for oil.
For example, the Nabucco pipeline which is expected to transport gas from the Caspian region to European markets. In May last year a consortium of Nabucco project, based on assessments of procurement and supply services, revised capital expenditure project. In relation with this, the estimated project cost has increased about 60 per cent up to 7.9 billion euros.
The main reason for the project cost is high oil prices and rising demand for steel. At that time, oil prices on world markets hit $130 per barrel.
Another major energy project, which also was under the influence of high energy prices, was the gas pipeline South Stream, which is often seen as a competitive project to Nabucco. In July last year, Energy Minister of Russia Sergei Shmatko said that investment in the Southern stream will total $20 billion. This meant doubling the cost of the project, which according to many experts, could serve as a slowdown in its implementation.
In March 2009, Gazprom deputy head Alexander Medvedev said the expenditures for the project can reduce due to drop in prices on construction materials.
This statement seems quite appropriate. Oil prices today fell to a record level of almost three-fold. Such a deployment of events should lead to unconditionally reduce the costs of such large projects, in particular the Nabucco project, given the time and reason for the revision of its value upwards last year.
However, a consortium of the project, apparently not in a hurry with this. And the reason for this is obvious.
Consider all outstanding matters relating to the implementation of the project including the issue of financing is still open. One can easily understand that to take any decisions regarding changes in the cost of the project was too early.
Construction of Nabucco gas pipeline is scheduled for 2011, the first deliveries will start on it in 2014. And if to believe experts, the recovery of the world economy can be expected by early 2010. The United States Energy Information Administration (EIA) say oil prices will rise to $63 per barrel compared to current $55-$57 per barrel the next year due to expected recovery of world economy. Analysts one of the largest U.S. bank JPMorgan also believe that the price of oil can reach 60 dollars per barrel next year. The average price for U.S. light crude oil WTI will total $57.5 per barrel.
Despite earlier statements by head of Austrian oil company OMV (operator of the project Nabucco) Wolfgang Ruttensdorfeom and by the Managing Director of the Consortium Reinhard Mitchekom that the Nabucco project cost can be lowered due to falling world prices for steel, we can assume that today this possibility is unlikely. Risks associated with the volatile world economic situation may lead to serious consequences and obstacles to the implementation of this project and attracting sufficient funding for its construction.
According to current estimates, the construction of Nabucco gas pipeline requires two million tons of steel, 200,000 pipes and more than 30 compressor units. Participants in the project are Austrian OMV, Hungarian MOL, Bulgarian Bulgargaz, Romanian Transgaz, Turkish Botas and German RWE. About 30 per cent of the total project cost will be invested by shareholders Nabucco Gas Pipeline International and the remaining 70 percent will be paid by loans.
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