Status of Southern Gas Corridor pipeline projects in December 2014

Baku, Azerbaijan, Jan. 3

By Aygun Badalova - Trend:

The Southern Gas Corridor is a priority project for the EU. It envisages the transportation of gas from the Caspian region through Georgia and Turkey to Europe.

This large project aims at diversifying the routes and sources of energy supply that will enhance energy security of Europe. The Southern Gas Corridor project will ensure Caspian gas supply to the European markets for the first time in the history.

The European Commission approved the list of "Projects of Common Interest" in October 2013. It included 250 key energy infrastructure projects, including the projects of the Southern Gas Corridor.

In particular, the European Commission has included two routes of gas transportation to the European markets in the list, namely, a supply route to the countries of South-Eastern Europe and Austria, as well as a supply route to Italy across the Adriatic Sea.

The list includes such projects as the Trans-Anatolian gas pipeline (TANAP), the South Caucasus Pipeline expansion project (SCP), the Trans-Caspian gas pipeline, the Trans-Adriatic Pipeline (TAP), the Interconnector Turkey - Greece - Italy (ITGI), a gas pipeline from Bulgaria to Austria via Romania and Hungary.

At the initial stage, the gas to be produced as part of the second phase of development of Azerbaijani gas condensate Shah Deniz field is considered as the main source for the Southern Gas Corridor projects. At a later stage, other sources may join the project.

The gas to be produced as part of the Stage 2 of the field's development will be exported to Turkey and to the European markets by means of expanding the South Caucasus Pipeline and construction of the Trans-Anatolian Gas Pipeline (TANAP) and the Trans-Adriatic Pipeline (TAP).

On December 17, 2013, a final investment decision was made on the Stage 2 of the Shah Deniz offshore gas and condensate field's development. The gas produced at this field will first go to the European market (10 billion cubic meters). Around six billion cubic meters will be annually supplied to Turkey. Azerbaijani gas is expected to be supplied to the European markets in 2019.

Trans-Anatolian gas pipeline (TANAP)

The TANAP project envisages gas transportation from Azerbaijan's Shah Deniz field (as part of the second stage of development) through Turkey up to the country's border with Europe.

The initial capacity of TANAP is expected to reach 16 billion cubic meters of gas per year. Around six billion cubic meters of gas will be delivered to Turkey, and the remaining volume will be supplied to Europe. In the future, the capacity of the pipeline can be increased to 31 billion cubic meters.

The gas will go to Turkey in 2018, and after the construction of the Trans Adriatic Pipeline (TAP), it will reach Europe around early 2020.

It is planned to commission TANAP in 2018. The project's cost is estimated at $10 to $11 billion. Following the completion of a legal registration process, TANAP's shareholders will be as follows: SOCAR - 58 percent, Botas - 30 percent, and BP - 12 percent.

Current status

As part of the project for construction of the TANAP, the Turkish capital of Ankara hosted Oct. 14 the signing of pipeline supply contracts with six Turkish and one Chinese company, which were the winners of a previously announced tender.

The tender's winners were the Mannesmann-Noksel-Erciyas, Umran-Emek, the Toscelik Profil ve Sac Endustrisi, as well as the Chinese contractor Baosteel Europe.

The TANAP consortium made its decision regarding the contractors for the pipeline's construction on Dec. 23. The winners of an earlier announced tender are the Fernas Insaat, the Sicim-Yuksel-Akkord consortium, and Tekfen Holding.

They were invited to the construction of the pipeline's sections running from Georgia's border to Turkish city of Erzurum, from Erzurum to the city of Sivas, and from Sivas to the city of Eskisehir.

Trans Adriatic Pipeline (TAP)

Trans Adriatic Pipeline (TAP) was chosen by the consortium of Azerbaijani Shah Deniz field development as a transportation route to the European markets.

TAP project is designed to transport gas from the Caspian region via Greece, Albania and the Adriatic Sea to southern Italy and further to Western Europe. The total length of the pipeline will be about 870 kilometers.

It will connect with the Trans Anatolian Natural Gas Pipeline (TANAP) near the Turkish-Greek border. The longest part of the TAP will run through Greece, where its length will be 550 kilometers.

TAP also can ensure the gas delivery to several countries in South-Eastern Europe, including Bulgaria, Albania, Bosnia and Herzegovina, Montenegro, Croatia and the others by connecting to the so-called Ionian Adriatic Pipeline (IAP).

The gas can be delivered to Bulgaria through the planned Gas Interconnector Greece-Bulgaria (IGB).

From Italy, which is the final destination of the TAP, the gas can also be subsequently transported to some major European markets, such as Germany, France, UK, Switzerland and Austria.

The construction of the pipeline is expected to start in 2016. TAP's initial capacity will be 10 billion cubic meters of gas per year, with a possibility of expanding up to 20 billion cubic meters per year.

TAP shareholders are BP (20 percent), SOCAR (20 percent), Statoil (20 percent), Fluxys (16 percent), Total (10 percent), E.ON (nine percent) and Axpo (five percent).

Current status

The consortium for TAP's development adopted a resolution Dec. 17, 2013 on the construction of the pipeline. The resolution came immediately after the adoption of a final investment decision on the Shah Deniz field's second stage by the consortium dealing with the field's development.

In April 2014, the consortium for the development of the TAP project was granted permission to build the Albanian section of the pipeline.

In September 2014, the consortium for the project's development was granted a license for construction works in the Greek section of the gas pipeline. The license is valid for 50 years.

At present, the TAP project is at the stage of procurement. In April 2014, a consortium on TAP development restarted the procurement process and the stage of pre-qualification tenders for the supply of goods and services was launched.

The restart of the process covers two main areas - Engineering Procurement Construction, EPC and supply contracts.

Services for engineering, procurement and construction, in particular, include services for construction of onshore and offshore gas pipelines, compressor stations and services for the construction of the receiving terminal.

Contracts for the supply include procurement of steel pipes, SCADA system and pipeline valves.

IGB Pipeline (Greece-Bulgaria Interconnector)

IGB is a gas pipeline, which will allow Bulgaria to receive Azerbaijani gas, in particular the one extracted from the second stage of the Shah Deniz gas condensate field.

IGB is proposed to connect with the Trans Adriatic Pipeline (TAP), which will transport gas within the second stage of Azerbaijani Shah Deniz field development to Europe. The pipeline will be connected to the gas supply systems of Greece and Bulgaria.

Current status

The project is currently at the stage of obtaining a permit to build a pipeline to Greece and Bulgaria.

In January, 2014, a Memorandum of Understanding and Cooperation was signed between TAP and ICGB - the company in charge of the development, financing and construction the IGB. The memorandum aimed at establishing the technical cooperation in order to further develop strategic infrastructure in the region.

The MOUC allows for cooperation between the two companies who work together on a possible interconnection point in the vicinity of Komotini, Greece.

The cooperation of IGB with TAP is currently at the technical level and is at an initial stage. The terms of construction of the IGB pipeline are subject to the finalization of the ongoing permits and exemption procedures, and they are targeted for completion within 2015.

Greek media reported that the final investment decision on the IGB Pipeline will be made in 2015.

In September, the State Oil Company of Azerbaijan (SOCAR) and Bulgaria's Bulgargaz signed a protocol of intentions, which envisages the beginning of negotiations on considering possibilities of earlier supplies of Azerbaijani gas to Bulgaria.

The country plans to start importing 200-300 million cubic meters of gas from Azerbaijan per year from 2016, according to Bulgarian media.

Ionian-Adriatic Pipeline (IAP)

The supposed Ionian-Adriatic Pipeline (IAP) can be connected to the Trans Adriatic Pipeline (TAP) for the transportation of gas to many countries in South-Eastern Europe. IAP project envisages laying of the pipeline in the Western Balkans.

TAP has already signed memorandums of understanding and cooperation with developers of the IAP project, including Plinacro (Croatia), BH-Gas (Bosnia and Herzegovina), Geoplin Plinovodi (Slovenia), as well as with the governments of Montenegro and Albania.

A TAP-IAP joint working group has been established. It regularly holds meetings to align the schedules of both pipeline projects and technical issues of interconnection. Possible terms of realization of this project have not yet been announced.

Trans-Caspian gas pipeline

The project for laying a 300-kilometers-long gas pipeline through the Caspian Sea to the coast of Azerbaijan is the best option for delivering Turkmen energy resources to the European market. Further, Turkmen hydrocarbons can be delivered to Turkey which borders European countries.

The Trans-Caspian project can be implemented as part of the Southern Gas Corridor project promoted by the European Union. The design capacity of the Trans-Caspian pipeline depends on the demand for the Turkmen gas in Europe.

Current status

There are no direct negotiations on the implementation of the Trans-Caspian gas pipeline project. Negotiations have been held since 2011 between the main interested sides - EU, Azerbaijan and Turkmenistan.

Turkmenistan believes that the consent of the countries the territory of which is covered by the project (Turkmenistan and Azerbaijan) is sufficient for laying pipes under the Caspian Sea, the legal status of which hasn't been determined yet.

Azerbaijan is ready to offer its territory, transit opportunities and infrastructure for the implementation of this project.

It is expected that the work on conducting the environmental impact assessment will be carried out in 2015.

Turkmenistan has expressed readiness to supply up to 40 billion cubic meters of gas to Europe per year. Some 10 billion cubic meters of this volume can be provided by the Petronas company which operates in the Turkmen sector of the Caspian Sea, while the remaining volume can be provided with the East-West pipeline that is under construction in the country. The 800-kilometers-long gas pipeline runs from the Galkynysh field to the Caspian Sea coast.

A framework agreement on cooperation in delivering Turkmen natural gas to Turkey and further to Europe was signed between the governments of Turkmenistan and Turkey following the high-level talks in Ashgabat in July 2013.

AGRI (Azerbaijan-Georgia-Romania Interconnector) project

AGRI project envisages the transportation of Azerbaijani gas to the Black Sea coast of Georgia via the gas pipelines. Azerbaijani gas delivered to Georgia's Black Sea coast will be liquefied at a special terminal and following this, it will be delivered to a terminal at Romanian port of Constanta with tankers.

Further, it will be brought to the gaseous state and sent via the country's gas infrastructure for meeting the demands of Romania and other European countries.

The cost of the project will vary from 1.2 billion euros to 4.5 billion euros, according to the preliminary estimations. The project's cost will depend on the capacity of terminals that can be equal to 2-8 billion cubic meters of gas per year.

The participants of the AGRI project are the State Oil Company of Azerbaijan (SOCAR), Georgia's Oil and Gas Corporation, as well as MVM (Hungary) and Romgaz (Romania) companies.

The sides established SC AGRI LNG Project Company SRL joint venture in February 2011 for the implementation of the project.

Project status

British Penspen engineering company presented the final version of the AGRI project's feasibility study to the shareholders in early December. The presentation of the final version of the feasibility study was held during the meeting of the Board of Directors of AGRI LNG Project Company SRL.

The final version of the feasibility study was reviewed by the participants of the Board of Directors, following which it was recommended for the consideration of the general meeting of the shareholders scheduled for Jan.-Feb. 2015.

The project's feasibility study will allow to determine an economically suitable site for constructing a liquefied gas terminal on the Black Sea coast of Georgia. Subsequently, the volume of investments for implementing the planned work on Georgia's territory will be determined based on this document.

Turkmenistan shows great interest in this project. In order to provide this project with Turkmen gas, it is necessary to construct a separate gas pipeline branch under the Caspian Sea to the Azerbaijani coast, or to deliver the liquefied gas by tankers through the sea.

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Aygun Badalova is Trend Agency's staff journalist, follow her on Twitter: @AygunBadalova

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