Political pipelines 'not cost-effective'

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Pipeline projects with a political design, such as the EU-favoured Nabucco pipeline and the Gazprom-sponsored South Stream, are expensive compared to similar projects based on cost effectiveness, Kjetil Tungland, managing director of the Trans-Adriatic Pipeline (TAP), told EurActiv in an interview.

Tungland, who has been a Statoil official since 1986 and was recently appointed managing director of TAP, a joint project with EGL, Statoil and E.ON Ruhrgas, said that the TAP pipeline has an estimated cost of 1.5 billion euros.

Tungland refrained from citing a price tag for either the Nabucco or South Stream pipes, which are seen as TAP's competitors in a race to win 10 billion cubic metres (bcm) of Azeri gas in a tender early next year.

However, official sources put the cost of Nabucco at 7.9 billion euros, while the cost of South Stream, which is designed to bypass Ukraine under the Black Sea, is seen as much higher, from 19 to 24 billion euros.

The TAP director explained that although Nabucco had a planned capacity of 31 bcm, at this stage, all pipelines competing in the Southern Gas Corridor would be bidding for a limited amount of 10 bcm from the Shah Deniz II field in Azerbaijan.

Gazprom claims that no other sources of gas for Nabucco are available at this stage. The Nabucco consortium took another step forward recently by ordering engineering work for two feeder lines from Turkey to Iraq and Georgia. A third planned feeder line from Turkey to Iran has been put on the back-burner due to political considerations.

In contrast with Nabucco, the TAP project will install a pipeline tailor-made for today;s available volume of 10 bcm, he said, adding that its promoters planned to double its capacity from ten to 20 bcm as more comes on stream in the future.

"Our intention is to do this step-by-step. By catering for the first 10 bcm, we can then upgrade to 20 bcm when new reserves become available," said Tungland, making the case for his project.

The turning point, Tungland explained, will come in April 2011, when the Shah Deniz consortium will select the buyer of the 10 bcm of Azeri gas available for sale.

"As I understand it, they have already started negotiations with potential buyers of gas and have a timetable to short-list potential buyers by the end of this year with a view to signing gas sales agreements in April next year," he said.

The Shah Deniz group consists of BP with a 25.5% share, Statoil with 25.5%, Iran's OIEC with 10%, Total with 10%, Russian-Italian joint venture LukAgip with 10%, Turkey's TPAO with 9% and Azerbaijan's state oil company SOCAR with 10%.

The company which wins this tender will become the backbone of the Southern Gas Corridor, Tungland pointed out.

"That will be the 'cornerstone of the building' and you could say that is what the competition is all about," he said.

To read the interview in full, please click here

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