Azerbaijani gas - only real alternative for Europe in coming years

Azerbaijani gas - only real alternative for Europe in coming years

Baku, Azerbaijan, June 3

By Elena Kosolapova - Trend:

Azerbaijani gas will be the only real alternative to Russian gas supplies for Europe in the coming years, Principal Analyst at the Petroleum Sector Risk Group, IHS Energy Andrew Neff told Trend.

Neff said that Europe extremely requires new gas sources both for political/diversification reasons (alternative to Russian gas) and commercial/economic reasons (Europe's declining production).

It means that even if the demand growth is relatively flat in Europe, the need for imports will increase, he said.

"Increased Azerbaijani gas from Shah Deniz-2 (and other fields in the future, like Absheron and Umid) will be key sources of new gas imports for Europe," he said.

Neff said that it is unlikely for other countries to start supplying gas to Europe in the coming years. In particular, he said that Iranian gas is unlikely to enter the Southern Gas Corridor in the short term even if the sanctions are lifted, since there are many problems to solve.

"Iranian gas exports to Europe are further off, and at this point I don't see much likelihood in the near term for Iran to play much role in the Southern Gas Corridor - several years down the road, if sanctions are lifted and if there is investment in gas production and if there is space in the new pipeline infrastructure across Turkey to carry Iranian gas supplies as well...that's a lot of "ifs"," Neff said.

The Southern Gas Corridor is one of the priority energy projects for the EU. It envisages the transportation of gas from the Caspian Sea region to the European countries through Georgia and Turkey.

At the initial stage, the gas to be produced as part of the Stage 2 of development of Azerbaijan's Shah Deniz field is considered as the main source for the Southern Gas Corridor projects. Other sources can also connect to this project at a later stage.

As part of the Stage 2 of the Shah Deniz development, gas will be exported to Turkey and European markets by expanding the South Caucasus Pipeline and the construction of Trans-Anatolian Natural Gas Pipeline and Trans-Adriatic Pipeline.

Moreover, Neff believes that it is a bit too speculative to think that the West will lift sanctions on Iran in the near term.

He also does not envision any Turkmen gas reaching Europe by 2020, or any time soon after that in spite of recent optimistic statements of EU high officials.

Neff noted that even if completion of construction of the East-West pipeline across Turkmenistan gives it the ability to export gas to the west, it still requires construction of a trans-Caspian interconnector. The construction work seems to be several years off still, the expert believes.

Meanwhile, according to the expert, even then, eventual Turkmen gas exports being sent west across the Caspian and via Azerbaijan are unlikely to go any further west than Turkey, as Turkey's own rising gas demand will likely absorb those Turkmen gas exports before they reach continental Europe.

Neff believes that a transit agreement to send Turkmen gas via Azerbaijan to Turkey would likely have the Azerbaijani government seeking to ensure that more of Azerbaijan's own gas is sent onward from Turkey to Europe as part of that deal.

"Azerbaijan will thus become more important to Europe as a gas supplier," Neff said.

Meanwhile Russian gas supplies will remain very important for Europe considering its volumes and percentage, he said.

The Southern Gas Corridor is one of the priority energy projects for the EU. It envisages the transportation of gas from the Caspian Sea region to the European countries through Georgia and Turkey.
At the initial stage, the gas to be produced as part of the Stage 2 of development of Azerbaijan's Shah Deniz field is considered as the main source for the Southern Gas Corridor projects. Other sources can also connect to this project at a later stage.
As part of the Stage 2 of the Shah Deniz development, gas will be exported to Turkey and European markets by expanding the South Caucasus Pipeline and the construction of Trans-Anatolian Natural Gas Pipeline and Trans-Adriatic Pipeline.

Edited by S.I.

Follow the author on Twitter: @E_Kosolapova

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