Nothing Nabucco's supporters say -- including grandiose plans to proclaim a "Budapest declaration" at a meeting in Hungary in January -- now makes the project any more likely to happen in the near future.
Nabucco is hamstrung by four different problems.
1. Supply. It isn't making any real progress on finding the gas to fill the pipeline. Forget the other three problems below, this one is seminal, and it isn't going away -- whatever Nabucco's supporters think. The partners say gas from the Shah Deniz field in Azerbaijan will supply a bulk of the gas. But, privately, Nabucco supporters admit that output from the first phase of that field will only supply a maximum of 10bn cm/y to the pipeline. Even that figure is doubtful, because Turkey's economy and gas demand are also growing and the country could soak up Shah Deniz phase 1 gas alone, importing it through the South Caucasus Pipeline. A second phase of Shah Deniz could be more promising -- but let's wait to see how the credit crunch affects the developers' expansion plans in Azerbaijan.
OMV and other Nabucco supporters say additional gas could come from Turkmenistan and Kazakhstan. Not without a pipeline under the Caspian Sea, it can't. And Russia, which wants Central Asian gas for itself, can prevent sub-sea infrastructure from being built in the Caspian. Moreover, Gazprom is now paying European prices for that gas, so there is little incentive for Turkmenistan or Kazakhstan to build an expensive new link to Azerbaijan. Oh, and if Russia doesn't take all of Central Asia's gas, China is willing to.
Other suppliers, say the Nabucco partners, will be Iraq (5bn cm/y), Egypt (2bn cm/y) and, potentially, Iran. But that is pure fantasy. Iraq is the most likely supplier of the three -- but remains a long shot for reasons too embarrassing to mention in Western capitals. Egypt hasn't made a significant gas discovery in several years -- and its energy minister, Sameh Fahmy, says any new gas the country finds must go three ways: a third for domestic consumtion, a third "for our children" (ie, for future domestic needs ) and a third for export. Even if Egypt found enough gas to support more exports, its priority is adding more trains to its LNG plants. As for Iran... It can't even break ground on an LNG plant; the oil majors that were there are leaving; and the prospect of Tehran sanctioning a new pipeline to Turkey, to help bail out the EU, is political dreamland.
2. Turkey. The EU can't come up with an intergovernmental agreement that Turkey is happy with. Ankara wants to take at least 15% of the gas that would pass through its country to help it meet rising domestic needs. The EU wants Turkey to accept a gas transmission fee. It's an impasse that doesn't look promising for Nabucco.
3. Russia. Gazprom, which suffers none of the Nabucco partners' self-doubt, is building a rival pipeline, South Stream, to deliver the same volume of gas to the same markets. The Nabucco partners say the lines aren't rivals and that Europe needs both of them. True, up to a point. Yes, the EU needs all the gas it can get. But Gazprom has successfully turned the heads of governments that once supported Nabucco, persuading them -- with the benefit of facts -- that South Stream has sufficient gas to make it work. Even Austria and OMV now endorse the Gazprom plan. I have my doubts that South Stream will ever come on stream either. But it has things going for it that Nabucco doesn't: energy molecules and unified political backing. By contrast, Nabucco, for all its support from Brussels, doesn't even have the Italians behind it -- Eni is Gazprom's partner in South Stream.
4. Financing. Banks want to see the market and the supply chain before they pull the trigger on financing an energy project. Nabucco has the first, but not, in adequate volumes, the second. The credit crunch exacerbates this problem. So does the unrealistic financing estimate. The partners say Nabucco will cost €7.9bn. Some analysts say it could be double. No-one really knows, because no-one has any idea when, if ever, the project will ever get to a "final investment decision" stage.
Those are formidable obstacles. The kind that not even all the well wishes of Brussels can overcome. No wonder the Russians scorn the project. Gazprom's deputy chairman Alexander Medvedev once memorably described Nabucco to me as "a virtual pipeline".
