Azerbaijan to choose between Nabucco, TAP on commercial terms

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Azerbaijan's choice between two pipeline projects to carry its gas to Europe must focus on obtaining the strongest commercial terms, Industry and Energy Minister Natik Aliyev said on Tuesday (30 April).

The Nabucco West and Trans Adriatic Pipeline (TAP) projects offer different routes to Europe from the Shah Deniz II field in the Caspian Sea.

"There are a lot of factors [when] we evaluate these two projects, but the main now is ... commerciality," Aliyev said after meeting Norway's Minister of Petroleum and Energy Ola Borten Moe in Oslo.

"They [energy companies] have to profit to cover the capital costs ... It is very important for the foreign partners to have the most effective, commercial project for delivering gas from Azerbaijan," he said.

The consortium developing Shah Deniz is led by BP, Norway's Statoil, Azeri firm SOCAR and Total. It aims to select a pipeline project by June.

Statoil is also a partner with TAP, along with Germany's E.ON Ruhrgas and Swiss firm Axpo Holding.

A shift away from Russia

Azeri gas offers Europe a means of reducing its dependence on Russia which currently provides around a quarter of the continent's 500 billion cubic metre per year (bcm/y) annual gas consumption.

Analysts have said Nabucco West would serve the most Russian-reliant regions, in central and southeast Europe, better than TAP.

But they also see advantages in TAP's shareholder structure as it is less state-dominated.

Nabucco West is led by Austria's OMV and includes Bulgaria's BEH, Turkish firm Botas, Hungarian energy company MOL, and Romania's Transgaz.

Production from Shah Deniz II is expected to begin in 2018 or 2019 and rise to 16 bcm per year, with 10 bcm/y earmarked for Europe and 6 bcm/y for Turkey.

Nabucco West would carry gas from the Turkish border through Bulgaria, Romania, Hungary and into Austria, a region which analysts expect to see an 8 bcm/y rise in gas demand by 2030.

TAP, which would run from Turkey through Greece, Albania and into southern Italy, initially aims to have a capacity of 10 bcm/y. Both planned pipelines can be increased to 20 bcm/y in time.

Energy Commissioner Günther Oettinger recently wrote a letter to EU foreign affairs chief Catherine Ashton, saying that the EU needed to avoid a discussion over the relative merits of Nabucco and TAP [more].

EU leaders are scheduled to hold an energy summit on 22 May, and it is difficult to imagine that the pipeline issue would not be discussed.

Timeline: 
  • 22 May: EU summit to discuss energy policies;
  • June: Azerbaijan to make its decision known.
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