One sure winner emerges in southern gas corridor race


Nabucco West and the Trans Adriatic Pipeline (TAP), the two planned projects competing for Azeribaijani gas, have both signed agreements with the Trans-Anatolia Gas Pipeline (TANAP) between Turkey and Azerbaijan.

Nabucco and TAP have issued statements saying they have agreed to cooperate with TANAP, a project estimated at between €5.6-billion that will run 2,000 km, mostly through Turkish territory.

>> Read: Gas pipeline deal sidelines original Nabucco project

On 5 March, Nabucco announced the signing of a deal with TANAP, in which the two parties formally agree to cooperate on the development of the Southern Gas Corridor.

On Thursday (7 March), TAP also announced it had signed a deal with TANAP. Both TAP and TANAP have established a joint working group and have held regular meetings in Ankara in order to further evaluate areas of potential cooperation between the parties.

The Southern Gas Corridor is jargon for the various projects to bring gas from the Azerbaijan offshore Shah Deniz II field to European customers. So far two main contenders have remained in the race: Nabucco West, a smaller version of the original Nabucco pipeline, and TAP (see background).

The deal between TANAP and Nabucco states that the two companies will exchange technical and other strategic information and “cooperate in a manner that will support the development of their respective projects.”

The “strategic information” apparently refers to the fact that the initial Nabucco project was planned as a pipeline coming all the way from Azerbaijan and across Turkey to the EU.

Nabucco lauds its strengths

Christian Dolezal, a Nabucco spokesman, told EURACTIV that his company had a lot of knowledge on the route and “still permits in place”.

“Turkey and Azerbaijan are very experienced pipeline builders. We all depend on each other and need to work together to make this investment worthwhile,” he said.

Dolezal also stressed the advantages he saw in the Nabucco project. In particular, he highlighted that the route, which crosses Bulgaria, Romania and Hungary before reaching the Baumgarten gas hub near Vienna, offered “the best market access”, the “highest connectivity with Balkan countries” as well as storage capacities of 16 billion cubic metres (bcm) along the route.

Existing direct links could supply gas from Bulgarian territory to Macedonia and from Hungarian territory to Serbia and Bosnia and Herzegovina. From Baumgarten, gas can be sent through existing links to the Czech Republic, Germany, Slovenia and Italy. He said the 10 billion cubic metres per year (bcm/y) can be absorbed in the region, and that gas would trigger market development.

TAP arguments

Kjetil Tungland, managing director of TAP, told EURACTIV that TAP can bring gas to Bulgaria via the planned Greece–Bulgaria Interconnector (IGB) or via reverse flow at the interconnection point Kula/Sidirokastro. He said that the latter option has already been used in 2009 to inject natural gas in the Bulgaria-Greece pipeline from the Greek LNG terminal at Revythoussa.”

Tungland also stressed that TAP is “ahead of the game and working closely together with the Shah Deniz consortium”. 

He said in February 2012, TAP was the first pipeline to be preselected by Shah Deniz, as its preferred pipeline route to Italy and to enter into exclusive negotiations with the Shah Deniz Consortium. He added that TAP had also been first, in August 2012, to sign a Funding Agreement with Shah Deniz Consortium partners BP, Socar and Total.

The TAP managing director highlighted the advantages of TAP in terms of market access. He said that its route through Greece, Albania and Italy is “the most strategic option for Europe”, as in his words “it is the shortest, most economical and most direct way for Caspian gas to reach the largest European markets”.

“By connecting to key infrastructure in the region, such as the Ionian Adriatic Pipeline and the Western Balkans Ring, TAP can bring new gas supplies to South-Eastern Europe – Bulgaria, Albania, Bosnia and Herzegovina, Montenegro, Croatia – as well as countries in Central Europe: Switzerland and Austria. Additionally, TAP’s landfall in Italy provides multiple opportunities for transporting natural gas from Italy further west, to France, Germany and even the UK,” Tungland said.

On the issue of storage facilities, Tungland said TAP’s shareholders had an option to build gas storage in Albania, “further enhancing the region’s energy security and help tackle unexpected supply disruptions”.

Third party access

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

Most of the TAP pipeline runs across Greece, where Russia is bidding to buy the country’s gas companies DEPA and DEFSA. Michael Hoffmann from the TAP project recently told EURACTIV that the consortium will build a new pipeline in Greece so that the privatisation of DESFA / DEPA will not affect the project.

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

Conversely, Nabucco West will offer third party access to other suppliers who could book capacities when the ‘open season’ would begin, Dolezal said. He added that his company expected  European and Turkish companies to book capacities. 

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 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 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. By deciding which consortium to chose, the Shah Deniz consortium would eliminate the other candidate. The decision is expected in June.

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

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