OMV CEO: NABUCCO KEY FOR EUROPE'S ENERGY SECURITY

C O N F I D E N T I A L SECTION 01 OF 02 VIENNA 000701

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/20/2017
TAGS: ENRG EPET EINV AU
SUBJECT: OMV CEO: NABUCCO KEY FOR EUROPE'S ENERGY SECURITY

REF: A) 06 VIENNA 3486 B) 06 VIENNA 3417

Classified By: Ambassador Susan R. McCaw for reasons 1.4 (b) and (d).

Summary
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1. (C) During a recent lunch with Ambassador, OMV CEO
Wolfgang Ruttenstorfer emphasized that obtaining a sufficient
supply of Azeri gas is the key for the start-up of Nabucco.
Without Azeri gas, OMV would have to look for other possible
suppliers--Iran and Russia--that would not be good
alternatives. According to Ruttenstorfer, Turkey vetoed the
participation of Gaz de France in the Nabucco project.
Russia views Nabucco as a serious challenger, and, in
Ruttenstorfer's view, part of Moscow's strategy to scuttle
Nabucco involves prying Hungary away from the project. Gas
in northern Iraq could eventually feed into Nabucco, but
Ruttenstorfer stressed that OMV is, for the moment, primarily
interested in commencing oil exploration in the Kurdish
region. Ruttenstorfer reiterated that Iran is not a short or
medium-term option for OMV, because of political and
commercial concerns. However, Ruttenstorfer did not rule out
Iranian participation in Nabucco, if the political situation
in the country changes.


How Much Gas Does Azerbaijan Have?
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2. (C) Ambassador met recently with OMV CEO Wolfgang
Ruttenstorfer to discuss latest developments on the Nabucco
pipeline, business prospects in Iraq, and OMV's commercial
presence in Iran. Ruttenstorfer stressed that the key
question for Nabucco is how much gas Azerbaijan could provide
for southern corridor pipelines. According to Ruttenstorfer,
Nabucco needs 8-10 billion cubic meters (bcm) for the initial
start-up in 2012. Ruttenstorfer said he would soon follow up
on his January visit to Baku to ask Azeri
President Aliev to commit to supply the initial stage of
Nabucco. Without Azeri gas, Nabucco would have to turn to
other possible sources--Iran or Russia--neither of which is a
good alternative. Ruttenstorfer added that he had "nothing
against the Turkey-Greece Interconnector (TGI)," but he noted
that with a capacity of 8 bcm, TGI "was small" compared to
Nabucco's ultimate capacity of 30 bcm. He added that Nabucco
represented a "highway for gas" to reach Europe's markets.


Turkey Vetoes Gaz de France Participation
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3. (C) Concerning Turkey, Ruttenstorfer said reaching a
transit regime for Nabucco remains a challenge, but there are
indications that Turkey is cooperating more closely with its
neighbors on energy issues. Iran and Turkey, according to
Ruttenstorfer, appear to have settled their dispute. Iran is
reportedly selling Turkmen gas to Turkey, and the apparent
quid-pro-quo, according to Ruttenstorfer, is that Turkey is
now allowing Iranian gas to transit through Turkey to Europe.
Ruttenstorfer criticized Ankara's "political decision" to
veto any French participation in Nabucco, as Gaz de France
would have been willing to provide substantial financing for
the project. Ruttenstorfer added that Gaz de France's
participation would have lent the project considerable
political weight within the EU.


Russia Seeking to Scuttle Nabucco
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4. (C) Ruttenstorfer said that he had frequent contact with
Gazprom Vice Chairman Alexander Medvedev, as Medvedev's son
lives in Vienna. Medvedev and other Russian interlocutors
consistently maintain that Russia wants to cooperate with
Nabucco. However, in Ruttenstorfer's opinion, Gazprom views
Nabucco as a serious challenger. Gazprom's biggest fear is
that Nabucco will eventually enable Transcaspian gas to
bypass Russia. Ruttenstorfer opined that Russia's strategy
is to "scare off" investment for Nabucco by threatening to
move forward with its own southern corridor pipeline.
Foreshadowing last week's announcement in Budapest of a
Hungarian agreement with Gazprom, Ruttenstorfer said he
thought that Russian President Putin was clearly targeting
"the Hungarian leadership" in an effort to pry Hungary away
from Nabucco. Ruttenstorfer said OMV had heard rumors that
Russia is dangling the prospects of giving Hungary an
interest in the oil giant Rosneft as a incentive for the GoH
to become less enthusiastic about Nabucco.


Iraqi Gas Could Be Part of Nabucco

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5. (C) Welcoming recent progress on the Iraqi Hydrocarbon
Law, Ruttenstorfer said he had just sent a letter to the
Kurdish Ministry of Energy outlining OMV's interest in
commencing oil exploration in the region. (Note: ref A
reported that OMV had sent a similar letter to the Iraqi Oil
Minister in November. End Note) According to Ruttenstorfer,
OMV is primarily interested in oil exploration, but he noted
that development of gas reserves in the region could be
promising and could provide a spur for Nabucco.


Iran--Only a Long-term Option for Nabucco
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6. (C) Ruttenstorfer reiterated (ref B) that Iran is not a
current option for Nabucco, but he did not rule out Iranian
participation in the long run. In addition to Iran's
political baggage, Ruttenstorfer maintained that Iran is
traditionally a very difficult business partner.
Ruttenstorfer agreed that the imposition of UNSC sanctions
had prompted the Tehran regime to become more active in the
West to portray an image of "business as usual." In this
vein, comments from Iranian officials at a January energy
conference in Vienna had tried to present old agreements with
western companies as new relationships.


7. (C) Ruttenstorfer said that Iranian authorities had only
recently declared OMV's 2004 discovery of oil in the Mehr
Block as "commercially viable." OMV, according to
Ruttenstorfer, has stopped all of its oil exploration in Iran
for the moment.
McCaw