Azeri gas
from Shah Deniz II will likely enter Europe via Greece, Albania and Italy
through the TANAP- TAP (Trans Anatolian Pipeline – Trans Adriatic Pipeline)
system of the EU Southern Gas Corridor in 2020.
Phase I
projects 10 billion cubic meters (bcm) per year with the application of 3rd
Party Exemption included. Future interconnections of TAP include the IGB
(Interconnector Greece- Bulgaria) to Bulgaria with 2 bcm/y already contracted
between Azeri state oil company SOCAR and Bulgaria’s Bulgargaz and a potential
expansion up to 5 bcm/y, which is also scheduled to begin in 2020. IAP (Ionian
Adriatic Pipeline) connection to the Western Balkans is also being touted,
however, it is still at in the early stages.
The EU is
also interested in the construction of several interconnectors in South Eastern
Europe, with the aim to feed all neighbouring countries with alternative
options to Russian natural gas sources. The Bulgaria- Romania and Romania-
Hungary Interconnector are projects that can function in reverse flow, a
perspective that serves Romanian gas interests as two offshore gas wells in the
Romanian sector of the Black Sea are likely to come on stream beginning in 2019
and operated by Black Sea Oil & Gas Co.
With all
these pipeline projects on the table, questions ultimately abound about what
will happen after 2020 and beyond the initial 10 bcm.
Over the
last 2-3 years, Azerbaijan has experienced significant financial problems
mainly due to low global energy prices, which seriously affected its economy.
The South Caucasus country has so far failed to diversify its economy, leaving
it highly dependent on oil and gas development.
Shah Deniz
and Absheron field development have, as a result, become more expensive and
exceedingly more difficult for SOCAR, which led the Azeri oil giant to turn to
foreign lending from EIB, EBRD, and the World Bank for the first time.
Azerbaijan’s banking sector was immediately affected and has only this year
started to grant loans again.
For the
energy sector, this has left the Shah Deniz III development beyond 2030 in
question.
Azeri gas
will likely not suffice for Phase II of the Southern Gas Corridor, especially
for the IGB and IAP expansions. The second phase of the TAP with a projected
scalability to 20 bcm/y will require natural gas from other sources. For that
reason, the European Commission has not foreseen the 3rd Party Exemption clause
for Phase II and a discussion has been ongoing for some time about injecting
natural gas from other sources to the TANAP- TAP.
For the
first time, the intention to open the Southern Gas Corridor to every potential
source of natural gas other than Azerbaijan is officially included in the
communiqué of the 4th Ministerial Meeting of the Advisory Council of the
Southern Gas Corridor, held in Baku on February 15:
“We welcome
the interest of potential additional suppliers of natural gas from the Caspian
Basin, Central Asia, the Middle East, the Eastern Mediterranean Basin, and the
Black Sea to use the Southern Gas Corridor to further diversify natural gas
supplies to Europe and to other countries; and encouraging discussions to ship additional
gas supplies to Europe”.
A
discussion on Russian gas giant Gazprom using the Southern Gas Corridor to send
Russian gas to Europe has also been ongoing in Baku. Both sides seem keen to
promote the possibility, even for Phase I of the TAP, however, consent on the
part of the European Commission is needed. Phase II does not have a 3rd Party
Exemption clause, meaning the possibility that Russian gas could be included
cannot be ruled out. We should also not forget that Russia receives 1-2 bcm/y
of Azeri natural gas for the Northern Caucasus republic of Dagestan on the
basis of a bilateral contract between Gazprom and SOCAR, which is renewed on a
yearly basis.
The Trans
Caspian gas pipeline is needed if Turkmen gas is to be considered a viable
option. The underwater pipeline project
that would stretch below the surface of the Caspian Sea has been hampered for
years due to Russia’s objections and the lack of a resolution of the legal
status of the Caspian Sea.
Now that an
overall agreement on the legal status seems to be at hand and Moscow’s
objections also seem to be fading, in November 2017 the EU included in its PCIs
list the Trans Caspian project and announced financing of €1.872 million for a
new study on its realisation. The financing of the study was awarded to White
Stream company, based in Georgia, a company that is aiming to develop another
subsurface pipeline in the Black Sea that would extend from Georgia to Romania.
At the
aforementioned ministerial meeting of the Southern Gas Corridor in Baku,
Turkmenistan sent for the first time its official envoy Yagshigeldi Kakaev, an
advisor to Turkmen President Gurbanguly Berdumukhamedov, who raised the issue
of the Trans Caspian gas pipeline, stating that it should be addressed with
some sense of urgency and saying that it is time to start working on the
project, instead of simply discussing it.
For the
time being, all options are open for Phase II of the Southern Gas Corridor and
all sources of natural gas are invited to join the TANAP-TAP system with the
EU’s blessing.
*Marika Karayianni is
a Caspian energy expert
https://www.neweurope.eu/article/expanded-southern-gas-corridor-comes-2020/