German Economy Ministry talks on loan guarantee for Southern Gas Corridor (Exclusive)

Baku, Azerbaijan, March 10

By Leman Zeynalova – Trend:

A public financial loan guarantee (so-UFK financial loan) for the Southern Gas Corridor project, which envisages transportation of Azerbaijani gas to Europe is intended to support the German federal government's efforts to diversify the supply of gas by sources and transport routes, a source in Germany’s Federal Ministry of Economics and Energy told Trend.

The source pointed out that the state guarantee has not yet been adopted, implementation work is still on-going.

“The Southern Gas Corridor project makes a significant contribution to securing gas supply in Germany and Europe. The project also involves many multilateral development banks, such as the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB),” noted the source.

The source in German ministry said that the project has been extensively studied for its environmental, social and human rights impacts.

“Independent reports have come to the conclusion that the applicable international standards are met. The audits of multilateral development banks have confirmed the eligibility of the project as well as its compatibility with environmental and social standards,” said the source.

Further details of the project cannot be provided as they are business and trade secrets of the companies involved, added the source.

It was earlier reported that German government intends to provide loan guarantee of $1.5 billion (1.2 billion euros) to Azerbaijani state-owned enterprise through a German bank for ensuring gas supply from Azerbaijan.

Since January 1, 2016, German Uniper had a spin-off with German E.ON company which was one of the nine European companies that signed an agreement with Shah Deniz consortium in September 2013 on purchasing Azerbaijani gas.

The gas trading business is now in the responsibility of Uniper.

The Shah Deniz consortium announced on September 19, 2013 that 25-year sales agreements have been concluded for just over 10 billion cubic meters a year of gas to be produced from the Shah Deniz field in Azerbaijan as a result of the development of Stage 2 of the Shah Deniz project.

The contracts on the purchase of Azerbaijani gas from the second phase of Shah Deniz field development (Shah Deniz-2 project) were signed with Shell, Bulgar gas, Gas Natural Fenosa, EON, Gaz de France, Hera, Enel, Axpo, DEPA.

The Shah Deniz Stage 2 project is set to bring gas directly from Azerbaijan to Europe for the first time, opening up the Southern Gas Corridor.

In total 16 billion cubic meters a year of Shah Deniz Stage 2 gas will be delivered through more than 3500 kilometers of pipelines through Azerbaijan, Georgia, Turkey, Greece, Bulgaria, Albania and under the Adriatic Sea to Italy.

The Southern Gas Corridor, worth over $40 billion, is considered as one of the priority energy projects for the EU, which strives for diversification of gas sources. The project envisages the transportation of gas from the Caspian region to the European countries through Georgia and Turkey.

At an initial stage, the gas to be produced in 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 Shah Deniz Stage 2, the gas will be exported to Turkey and European markets by expanding the South Caucasus Pipeline and the construction of Trans-Anatolian Natural Gas Pipeline (TANAP) and Trans Adriatic Pipeline (TAP).

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Follow the author on Twitter: @Lyaman_Zeyn

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