RWE and OMV Create Caspian Energy Joint Venture to Transport Gas to Europe

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Researched by Industrial Info Resources (Sugar Land, Texas)--OMV Gas & Power GmbH (Vienna, Austria), and RWE Supply & Trading GmbH (Essen, Germany) have created a firm called Caspian Energy Company Limited (London), which will transport gas from the Caspian region to Europe through pipelines. OMV and RWE will hold equal equity stakes in the joint venture once their ownership is approved by the competition authorities. The owners have expressed their willingness to include qualified partners in the company in future.

Caspian Energy will conduct a detailed feasibility study in 2009 to analyze infrastructure solutions to transport gas resources from the Caspian region to Turkey and Europe. The plan is to examine the possibility of transporting gas through the existing Southern Caucasus gas pipeline or other new pipelines. The gas would then be transported to Europe through Turkey and the Nabucco gas pipeline, which will be an integral part of this Southern Gas Corridor. Once the viability of efficiently sending gas through pipelines is ascertained, Caspian Energy intends to start the development, construction, ownership and operation of gas-transport systems across the Caspian Sea.

The Nabucco gas pipeline will be constructed as part of the Southern Gas Corridor project, and will be built by a consortium of companies that include OMV, RWE, MOL (Budapest, Hungary), Bulgargaz (Sofia, Bulgaria), Transgaz (Medias, Romania) and Botas (Ankara, Turkey). All of the companies will be equal stakeholders in Nabucco, which will run from Turkey to Austria through Bulgaria, Romania and Hungary. The pipeline will be designed to transport 31 billion cubic meters of gas every year beginning in 2012 at the earliest and is expected to deliver gas to Europe in 2013. The project is likely to require 2 million tons of steel, 200,000 pipes and more than 30 compressor units. One-third of the funding for the pipeline will be undertaken by the owners and two-thirds by banks.

OMV is the largest provider of services and solutions in the oil and gas in central Europe. With huge oil and gas reserves and an annual refining capacity of more than 557,000 barrels per day, the company operates in 13 countries worldwide. RWE is a leading producer and distributor of electricity in Germany, the United Kingdom and east-central Europe. It generates power from renewable sources and fossil fuels, and offers various energy-related services.

Establishing Caspian Energy is a strategic initiative to reduce Europe's dependency on Russia for gas by 2013. Earlier this month, Russia shut off gas supplies to Ukraine after a dispute between the countries over pending gas payments. About 80% of Russia's gas supply to Europe passes through Ukraine. As a result, people in at least 18 European countries were adversely affected, with no heat in sub-zero temperatures. The energy crisis left 12 countries in Europe without power.

Russia has demanded that Ukraine pay a transit fee to receive gas in order to end the energy crisis. It also wants international monitors installed to check gas flows through Ukraine. Russia's state-run gas company Gazprom (LSE:GAZP) (Moscow, Russia) and Ukraine are believed to have reached an agreement that will restore gas supplies to Europe.

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