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Shah Deniz consortium choses TAP as gas route to Europe

28 Jun 2013 13:24:42 | esgm

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The consortium developing the Shah Deniz II gas reserves offshore Azerbaijan has chosen the Trans Adriatic Pipeline (TAP) as the supply route to Europe, the pipeline said on Friday.

This opens up the southern corridor, which is set to deliver initially up to 10 billion cubic metres (bcm)/year of Azerbaijani gas. The first gas flows could arrive in Europe in 2019.

The decision also paves the way for the Shah Deniz consortium to make a final investment decision on the full phase II development, estimated to cost more than $40bn (€30.64bn).

TAP - backed by Norwegian gas and oil firm Statoil, German utility E.ON and Swiss energy group Axpo - can carry 20bcm/year from the Turkish border to Italy via Greece and Albania.

The Shah Deniz consortium - British energy supplier BP, French Total and the State Oil Company of the Azerbaijan Republic (SOCAR) - earlier this week eliminated an alternative pipeline project, Nabucco West, which would have flown the gas to Austria (see ESGM 26 June 2013).

TAP will connect with the Trans-Anatolian Pipeline (TANAP), designed to carry 16bcm/year of Caspian gas to the Turkish-Bulgarian border. Turkish buyers will take 6bcm/year and the rest will be shipped onwards to Europe.

The gas flowing through TAP could supply several European countries. SOCAR president Rovnag Abdullayev said the Shah Deniz Consortium plans to work with other European interconnector developers to supply Southeast Europe. Final investment decisions are expected later this year, according to Abdullayev.

The Shah Deniz consortium has already agreed gas sales with companies in Italy and Greece. Negotiations are underway to also sell into Bulgaria, where Shah Deniz plans to make an expression of interest to take pipeline capacity.

There are moves from transmission system operators SNAM and Fluxys to link the Italian market, where TAP ends, with north European gas hubs and to flow the Azerbaijani gas onwards. Fluxys is in talks to take a share in TAP.

The governments of Croatia, Montenegro, Bosnia-Herzegovina and Albania have also signed a memorandum of understanding backing TAP.

"Beyond Shah Deniz, we are confident that Azerbaijan's gas exports will increase dramatically as fields like ACG Deep, Absheron, Umid and Shafag-Asiman are developed, and we see the pipeline route towards Austria as a natural market for this gas," Abdullayev said.

The European Commission said in a statement on the TAP decision that it continues to negotiate with potential gas suppliers in the bigger region to secure more gas volumes.

BP, SOCAR and Total each have options to buy a total 50% share in the TAP project now that it has been chosen as the supply route for Shah Deniz. This is expected to happen soon after the selection, but there has been no announcement so far. Katya Zapletnyuk

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