Race between Nabucco and TAP pipeline hots up

  

Representatives of Nabucco and TAP, the rival pipelines planned to carry gas from the Shah Deniz II offshore field in Azerbaijan, both told EurActiv they were in a better position to obtain the contract. A decision by Azerbaijan is expected in June.

Both pipeline projects appear to be at an advanced stage of preparation. At first sight, they don’t appear as competitors, since Nabucco West - a 1,326-km pipeline with a 122-cm diameter - is planned to take the gas from the Turkish border across Bulgaria to Romania and Hungary to the gas hub of Baumbarten near Vienna. [see map]

TAP, or Trans-Adriatic Pipeline, with a length of 800 km and also with a 122-cm diameter, will take gas from the Turkish border across Greece and Albania, with an offshore section reaching Santa Foca, at the “heel” of the Italian peninsula. [see map]

But apparently the gas which will come upstream from Shah Deniz II in 2017, when both pipelines would be ready to carry it, is enough only to fill one of them. In a more distant future, when gas would be available from other sources such as Iraq or Iran, two pipelines would make sense.

But now it looks like the state-run gas company of Azerbaijan, SOCAR, by deciding which consortium to chose, would eliminate the other candidate.

‘Nabucco is the flagship’

“Nabucco remains the flagship project of the Southern Corridor,” a company spokeswoman, Nayana Jayarajan, told EurActiv.

The Southern corridor refers to various pipeline projects aimed at bringing gas to the EU from sources other than Russia.

>> Read: Europe's southern gas corridor: The great pipeline race

Jayarajan said that the project was at an advanced phase of development, including engineering preparations. Environmental assessments, she said, were already completed in Hungary, and "far advanced" in all other countries.

Nabucco was also quite advanced in terms of the regulatory and legislative framework amongst participating countries, Jayarajan said.

She stressed that the signing of the Cooperation Agreement and the Equity Option and Funding Agreements with the Shah Deniz Consortium last week in Vienna was "a clear mark of the gas producers’ confidence in the project".

Under a deal announced on 10 January, the Nabucco consortium offered the Shah Deniz group a 50% stake if it chooses the pipeline as its European export route.

>> Read: Nabucco to become a real pipeline soon, owners say

The next steps for Nabucco would be the finalisation of the engineering works and the environmental impact assessments, and to align the consortium’s efforts with the Shah Deniz Consortium and TANAP - the proposed Trans-Anatolian Gas Pipeline, a project between Azerbaijan and Turkey for a €5.6-billion pipeline that will span 2,000km across Turkey to Europe.

>> Read: Gas pipeline deal sidelines original Nabucco project

The Nabucco consortium hoped to conclude an open season - the procedure through which clients book transport capacity - before the final investment decision, Jayarajan said.

'TAP is more advanced'

However, the story is different when heard from the mouth of Michael Hoffmann, who represents the TAP pipeline project.

Hoffman told EurActiv that the TAP pipeline project was in a more advanced phase than Nabucco and insisted that media reports that TAP had proposed shares to Azerbaijan after Nabucco was not correct.

>> Read: Afrer Nabucco, TAP too proposes shares to Azerbaijan

“TAP signed a cooperation agreement with the Shah Deniz consortium members in June 2012. TAP then signed a funding and equity agreement with them on 1 August 2012 – Nabucco West signed the same agreements on 18 January 2013.  In addition, TAP agreed and initialled a shareholder agreement with Shah Deniz in November 2012, which outlines how the company is managed with the new shareholders incorporated, including SOCAR,” Hoffman said, concluding: “Nabucco West are less advanced, and don’t think that they have agreed a shareholder agreement.”

Jayarajan said that there would be a shareholder agreement signed between the shareholders of Nabucco and the shareholders of the Shah Deniz consortium after the positive final route decision.

The TAP official also said that negotiations were progressing “extremely well” on the intergovernmental agreement, and that it was “highly likely” that in mid-February, the intergovernmental agreement for TAP will be signed between the three host governments (Greece, Albania and Italy).

Asked if TAP and Nabucco West could co-exist, he said that for the initial phase, 10 billion cubic metres of gas per year (bcm/y) were expected from Shah Deniz. The capacity of Nabucco West allows for a scalable transport between 10 and 23 bcm/y, while TAP is designed to expand transportation capacity from 10 to 20 bcm/y, depending on supply and demand. 

“It therefore looks likely that only one pipeline can be selected in June,” Hoffman said. Asked about risks involved from the privatisation of the Greek gas companies DEPA and DESFA, he was categorical that the issue could not affect TAP.

As cash-strapped Greece is selling many of its state assets, three Russian companies including Gazprom are bidding to acquire the Greek gas companies DEPA and DESFA, out of a total of 17 bidders from 12 countries.

>> Read: Three Russian companies bid for Greece’s gas assets

“TAP will build a new pipeline in Greece so that the privatisation of DESFA / DEPA will not affect us,” Hoffmann said.

Timeline: 
  • June 2013: SOCAR to decide on tender for gas from Shah Deniz II
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