How can Azerbaijan boost its gas supplies to Europe?

Baku, Azerbaijan, Feb.22

Trend:

The Trans Adriatic Pipeline (TAP), which is a part of the larger Southern Gas Corridor (SGC) project, will become a welcome addition as it would signify diversification of suppliers for Europe, Dr. Katja Yafimava, a senior research fellow on the Oxford Institute for Energy Studies Natural Gas Research Programme, told Azernews.

“I believe the TAP, the European part of the SGC, will be built and gas from Azerbaijan's major Shah Deniz field will start flowing to Europe sometime in 2020, i.e. close to what was planned. In any event it would be a welcome addition as it would signify diversification of suppliers for Europe,” she said.

Commenting on the possibilities of connecting Iran to the Southern Gas Corridor project, Yafimava noted that there won’t be large supplies of gas to Europe from Iran in the near future.

“I don't believe there will be any significant exports from Iran to Europe via the SGC at least until 2030, there might be some very small volumes in the second half of the 2020s, but even for those volumes political and commercial reality is not supportive,” she explained.

On February 15, European Commission Vice-President for Energy Union Maros Sefcovic said that the EU is ready to discuss the possibility of connecting Iran to the Southern Gas Corridor. He also noted that the EU continues to seek ways to connect Turkmenistan to the Southern Gas Corridor project at a press conference in Baku following the Fourth Ministerial Meeting of the Southern Gas Corridor Advisory Council.

For Turkmen gas to reach Europe the legal status of the Caspian Sea would need to be resolved, according to the expert.

“Despite some recent progress in the talks on this matter (in late 2017) between all littoral states, one should not underestimate many remaining difficulties. Without that it is impossible to build the Trans Caspian pipeline, and there is very little the EU can do about it. All in all even if the legal status will be settled, the Trans Caspian pipeline - and exports of Turkmen gas through it - won't materialize at least until the mid 2020s. Also, importantly, economics (prices) is not supportive for Turkmen exports to Europe,” she stressed.

There are different scenarios for Europe gas demand, but if it might not be rising significantly, import requirements will be certainly rising, according to the expert.

There are various potential sources for gas for the SGC beyond Azerbaijan - e.g. Turkmenistan, Iran, Iraq - although each of those have their sets of serious problems (legal, political, commercial, and in many cases hard security problems) neither of which are either easy or quick to solve, she emphasized.

“So I would say that the prospects for the SGC - apart from the Azerbaijani Shah Deniz 2 gas that will be coming as from 2020 - are not great in the 2020s. Their gas could reach Europe in the 2030s, but by that time the European gas requirements might be significantly lower if its decarbonization policies are successful,” Yafimava said.

Speaking of the Turkish Stream project, the second string intended to bring gas to southern Europe, she stressed that it is not a rival as it would not displace any other supplier's gas.

“If Turkish Stream manages to utilize the SGC infrastructure (e.g. TAP) the 2020s, it is only because there would be free space in that pipeline as there are unlikely to be other suppliers (apart from Azerbaijan with its 10 bcm of gas from SD2) able to provide gas in the early 2020s to fill the rest of the TAP's total capacity which is 20 bcm,” the expert noted.

Howard Rogers, another expert at the Oxford Institute for Energy Studies Natural Gas Research Programme, believes that the exact volumes of Azerbaijani gas, which will be transported via the Southern Gas Corridor (SGC) to Europe, depend on a number of factors.

At present, from a European perspective, the question on how much of Azerbaijani gas will make it to Europe depends on many aspects including the performance of older Azerbaijani fields operated by SOCAR, as well as the growth in gas consumption in Azerbaijan and Turkey,” he said.

The expert further stressed that Turkey's willingness to import more Russian gas and hence allow more Azerbaijani gas to flow to Europe could affect the export volumes.

“The prospects of gas supplies from Iraq to Turkey, which look highly uncertain at the moment, as well as progress on gas projects in Azerbaijan in addition to Shah Deniz-2 (e.g. Absheron and ACG associated gas) are also of high importance in this regard,” he noted.

The Southern Gas Corridor, worth $41.5 billion, is considered as one of the priority energy projects for the EU, which strives for diversification of gas supplies. The project envisages the transportation of gas from the Caspian region to the European countries through Georgia and Turkey.

At the initial stage, the gas to be produced as part of 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 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.

The first gas within the Shah Deniz-2 project will be delivered to Turkey in 2018, and to Europe in 2019.

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