Romania May Extend Govt Guarantees To Finance Nabucco Pipeline

04.07.2011 By Florentina Dragu

Romania may issue government guarantees in the limit of 14 billion lei (EUR1=RON4.1333) in 2011, nearly double on the year, according to the country’s technical memorandum of understanding to a EUR3.6 billion follow-up agreement with the International Monetary Fund.

Romania may issue government guarantees in the limit of 14 billion lei (EUR1=RON4.1333) in 2011, nearly double on the year, according to the country's technical memorandum of understanding to a EUR3.6 billion follow-up agreement with the International Monetary Fund.

Additionally, the general government guarantees ceiling may be adjusted upward by up to RON9.6 billion to help finance the Nabucco pipeline project, the document said.

In 2010, the general government guarantees cap was set at RON7.6 billion.

The Nabucco pipeline, whose construction is estimated at around EUR8 billion, will deliver approximately 31 billion cubic meters of gas annually from the Caspian Sea to Central Europe via Turkey and Romania, bypassing Russia.

Nabucco's shareholders are Austrian oil group OMV, Romania's Transgaz, German RWE, Hungary's MOL, Bulgargaz of Bulgaria and Turkey's Botas.

Nabucco is expected to help European countries break free from Russian influence in the natural gas sector. The project is due for completion in 2014 or 2015.

The partners in the project are required to provide 30% of the financing needs, with the remainder to be procured via loans. Additionally, each shareholder must cover bank guarantees worth EUR2 billion.

In 2010, Bulgaria requested the European Union allow the participants in Nabucco project to leave out these guarantees from their national budgets.

Romania's Transgaz has recently announced it will apply for government guarantees for loans to finance the project.