Communication crossfire signals high tension in pipeline race

Shah Deniz II.jpg

Nabucco West and the Trans Adriatic Pipeline (TAP), the two companies competing for Azerbaijani gas projects, have issued simultaneous statements today (29 March) that they have submitted the final package supporting their bids. The Shah Deniz consortium will chose between the two in June.

TAP was the first to release its statement, saying it had submitted a comprehensive transportation bid, known as a decision support package or DSP, to the Shah Deniz consortium.

TAP said the submission responded directly to the eight selection criteria defined by Shah Deniz: commerciality, project deliverability, scalability, operability, financial deliverability, engineering design, alignment and transparency, and public policy considerations. The proposal included hundreds of documents.

A few hours later Nabucco published its own statement announcing that it had submitted a DSP to the Shah Deniz Consortium.

‘The most competitive’

The heads of both projects described their proposal “the most competitive”.

Kjetil Tungland, TAP’s managing director, said: “We are confident that our project has submitted the most compelling offer and in doing so, successfully meets the eight selection criteria set out by The Consortium."

Nabucco’s chief executive officer, Reinhard Mitschek, was quoted as saying: “We are pleased to offer the Shah Deniz the most competitive package to facilitate their final route decision."

Not enough gas

There is only enough gas – which will come upstream from the offshore field Shah Deniz II in 2017, when both pipelines would be ready to carry it – to fill one of them. By deciding which consortium to chose, the Shah Deniz consortium would effectively eliminate the other candidate from exploiting the gas deposits. The decision is expected in June.

The Shah Deniz consortium would also represent 50% of the shareholders of either project. 

A difference between TAP and Nabucco West appears to be that TAP has requested a “Third Party Access exemption” from the European Commission, meaning that the pipeline would not be used by other suppliers, in spite of the EU’s rules for energy liberalisation.

The largest stretch of the TAP pipeline runs across Greece, where Russia is bidding to buy the country’s gas companies DEPA and DEFSA.

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

It is therefore likely that if the Russian company takes over the Greek pipeline network it will make a request to TAP to transport its own gas, turning EU rules to its advantage.

In the meantime, the privatisation of DEPA and DEFSA is reportedly facing serious delays.

Andrey Korolev, chief executive officer of Russian group Sintez, one of the bidding Russian companies, expressed “concern” and “disappointment” regarding the constant delays in the privatisation of DEPA and DESFA gas companies that it has bid for, according to the Greek daily Kathimerini.

Speaking to Oil & Gas Eurasia, a Russian magazine, Korolev referred to pressure from the European Commission and the United States to prevent the Greek energy companies from passing into Russian hands.

Both Nabucco West and TAP 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 Baumgarten 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]

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