Lack of gas supply contracts hinders Southern Gas Corridor projects

Oil&Gas Materials 17 August 2011 11:47 (UTC +04:00)

Azerbaijan, Baku, Aug. 17 / Trend A.Badalova /

The lack of contracts for gas supply continues to be a major problem in implementing the Southern Gas Corridor project, Energy Analyst at the leading consulting company HIS, Zoe Grainge believes.

"Supply contracts are the main problem for all these pipelines, but especially for Nabucco, because of its capacity and length", Grainge told Trend in an e-mail.

The Southern Corridor is a priority EU energy project which will diversify energy supply routes and sources, and increase EU energy security. The Southern Corridor includes the Nabucco gas pipeline, Trans Adriatic Pipeline (TAP), White Stream, and ITGI (Turkey-Greece-Italy pipeline).

The Nabucco Pipeline Project length is 3,900 kilometers. It will transport gas from the Caspian region and the Middle East to the EU. Maximum pipeline capacity will reach 31 billion cubic meters per year.

The capacity of the Trans Adriatic Pipeline will be 10 billion cubic meters a year, with room for expansion to 20 billion cubic meters. ITGI's planned capacity is 11.8 billion cubic meters per year.

Grainge said that the prerequisite for developing any of the proposed Southern Corridor Gas pipelines is an agreement between Turkey and Azerbaijan on transit fees. The lack of a transit agreement prevents Azerbaijan from implementing any ambitious plans to supply gas to Europe, she said.
A transit agreement should be concluded with Turkey to transport Azerbaijani gas - in particular gas from the Shah Deniz field to Europe via Turkish territory.

Gas which is to be produced under the Shah-Deniz-2 project is considered the main source for the Southern Gas Corridor project. Under the Shah-Deniz-2 project, Azerbaijan plans to ship gas to Europe at a volume of 10 billion cubic meters.

She said that the scheduled starting dates for each pipeline under the Southern Gas Corridor are academic.

"Once Azerbaijan has chosen its preferred pipeline consortium, final investment decisions for that pipeline will take place. The other pipelines might not come through", Grainge said.
Last week, the State Oil Company of the Azerbaijan Republic (SOCAR), as leader of the Shah Deniz Export Negotiating Team, announced that a request for the proposal (RFP) and a request for information (RFI) have been issued to the three main prospective EU pipeline groups for transit of Shah Deniz gas to Europe. These are IGI Poseidon, the Trans-Adriatic Pipeline, and Nabucco, SOCAR said.

Pipeline groups have been requested to provide a consortium with information required to evaluate projects and to make decisions on an export solution. The submission request date, which would include tariff offers, associated terms and conditions, as well as detailed information on wider aspects of the projects, has been set for Oct. 1, 2011.