CEE FOCUS
Quarterly Publication of Constellation Energy Institute

-- Summary --

Southern Corridor: From Infrastructure to Political Geography.

The Nabucco project has, over the last few years, morphed from a concrete pipeline project into the more nebulous idea of a Southern Corridor. Whereas the transportation geography was once quite clear-Caspian to Europe via BTE and Nabucco-it's now much more complex. In addition to the two major projects, Nabucco and South Stream, there are host of smaller projects providing significant volumes to the region. Besides numerous LNG options, the TGI and IGI pipeline projects - connecting Caspian and Middle Eastern gas reserves with Europe through Turkey and Greece - also aim to supply European consumers. The new conceptual take on the Southern Corridor does not provide a concrete approach to major infrastructure projects. Rather, it redefines the Southern Corridor so as to include a wider range of types of projects and potential suppliers in the concept, even if these projects and suppliers do not support a major new supply line. In essence, the Southern Corridor has gone from a piece of physical infrastructure to a new conceptual political geography for the region. While many may see this as a setback for regional energy security, in fact it may be a boon for it, as all of these smaller and much more achievable projects will support energy security. The question thus: Is energy security for CEE possible without Nabucco? See details on page 4.

New Owner in MOL: Unclear Intentions.

At the end of March 2009, OMV sold the entire 21.2% stake it had in MOL to Russian oil company Surgutneftegaz for €1.4bn, which equates to HUF 19,212 per share, almost double of the prevailing market price of HUF 9,940. The complete lack of transparency from Surgutneftegaz will necessarily yield speculation about the intentions of the Russian company. Without knowing who in fact controls the company, one might not know whether the owner's goal is to hinder diversification attempts in the region. For as member of the Nabucco, NETS, Croatian LNG, and Mako basin natural gas projects, MOL is key for Central and Eastern Europe to increase diversification of natural gas sources and transmission routes. Surgutneftegaz should meet basic transparency requirements before its actual intentions are being deliberated by other owners, MOL's management and the relevant authorities. See details on page 6.

EDITORIAL: Green or Efficient?

See details on page 2.

SHORT NEWS from the CEE energy sector.

See details on page 10.

WHAT TO WATCH?

See details on page 14.