Adriatic pipeline to tap into Azeri gas

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^-A ⁺A

Published 15 September 2010

Tags

Azerbaijan, energy security, energy supply, Gas, ITGI, Nabucco, Russia, South Stream, Southern corridor, TAP

The Trans-Adriatic Pipeline (TAP) announced today (15 September) that the Shah Deniz II natural gas field in Azerbaijan is the initial target of gas intended for the project, designed to offer the shortest and most-cost-effective gas supply to Italy and European markets.

In a joint statement, TAP shareholders EGL, Statoil and E.ON Ruhrgas (see 'Background') said their planned pipeline was designed to cater for the volumes of gas from Shah Deniz that will be exported beyond Turkey to Europe.

Recently, Azerbaijan and Turkey signed a deal to ship 11 billion cubic metres of Azeri gas per year to Turkey. Shipments will start in 2017.

TAP shareholders consider Caspian gas to be the initial source of supplies to fill the pipeline, which has an initial capacity of 10 bcm per year.

"The TAP pipeline will be ready when Shah Deniz Phase 2 starts production." Kjetil Tungland, managing director of the Trans-Adriatic Pipeline project, is quoted as saying.

According to the Statoil website, Phase 2 of Shah Deniz gas production is expected to start in 2016. One of TAP's partners, Norway's Statoil, has a 25.5% ownership share in the Shah Deniz gas field.

Shah Deniz is located in the Caspian Sea southeast of Baku and is Azerbaijan's largest gas field.

While peak production from Shah Deniz Phase 1 is projected at 8.6-9 billion cubic metres, gas production will be increased by another 16 billion cubic metres per year during Phase 2.

"The pipeline will not transport any Iranian gas under the current political circumstances," the TAP consortium adds.

Similarly, the Nabucco consortium recently ordered engineering work for two feeder lines from Turkey to Iraq and Georgia, while a third planned feeder line from Turkey to Iran has been put on the back-burner due to political considerations (EurActiv 23/08/10).

For its initial stage, Nabucco is also planning to carry Azeri gas. The volumes of gas from Shah Deniz II are apparently not unlimited, so the competing projects will seemingly have to bid for the country's gas.

Russia has repeatedly warned its European counterparts that different plans to bring gas from Turkmenistan or Azerbaijan are doomed to fail, claiming that the resources of the two Central Asian countries are insufficient (EurActiv 04/11/08).

Russia is also proposing to buy all Azeri gas at attractive prices.

Background:

Up to now, two competing planned gas pipelines, Nabucco and South Stream, have had similar timeframes for beginning and completing construction. They also attract most media attention.

However, there are other pipeline projects, which although with smaller capacities, could see the light of day earlier, as they are seen as more commercially viable.

German gas giant E.On Ruhrgas joined Norway's Statoil and EGL of Switzerland in what they describe as a strategic move to realise the Trans-Adriatic Pipeline Project (TAP). The TAP pipeline, 520km in length, will begin in the Greek city of Thessaloniki and cross Albania before running across the bottom of the Adriatic Sea for 115km to Brindisi in Italy.

The TAP pipeline's planned capacity is 10 billion cubic metres (bcm) and it should become operational by 2016-2017.

Another pipeline project, ITGI (Interconnection Turkey-Greece-Italy) project, is sponsored by Italian energy company Edison (EurActiv 27/04/10). Its officials said it could constitute the "first phase" of the Nabucco project. An Edison representative predicts that Azerbaijan could serve as ITGI's only gas supplier from the area, via Turkey.