SGC to bring new breath to European gas market

Baku, Azerbaijan, June 1

Trend:

Both the Sangachal terminal launch and the upcoming inauguration of TANAP, later in June, constitute noteworthy steps towards the timely implementation of the Southern Gas Corridor pipe network, energy analyst Mariana Liakopoulou said in an interview with Azernews.

However, it is not that the project has faced zero hindrances, since 1999, when the first drillings took place in the Shah Deniz contract area, according to the expert.

“We all remember the security challenges for SCP as a result of the 2008 South Ossetian conflict, the wrangling among SOCAR, BOTAS and TPAO, that held back TANAP’s shareholders’ agreement for a couple of months, back in 2012, and the 2015 prolongation by the EC and the Greek, Albanian and Italian regulatory authorities of the validity period of TAP’s exemption from EU’s third-party access rules due to a delay in the pipeline’s scheduled completion timeframe,” she said.

But, overall, beginning of the SGC’s operations is not likely to miss its 2020 deadline, when deliveries from SD2 will have reached their plateau level of 16bcm (6bcm contracted for the Turkish market and 10bcn for European buyers), Liakopoulou noted.

“The importance of the SCG for Europe lies in its contribution to the pursued gas-supply diversification and long-term energy security, a core pillar of the envisioned Energy Union strategy aiming at building a fully integrated intra-EU gas market,” she said.

“Latest approval of loan packages by the EIB, EU’s lending arm, and the EBRD for TAP and TANAP, despite the unfolding fossil fuel divestment campaign, that brought about a motion by the Green MEPs against the inclusion of new gas infrastructure in the PCI list, reaffirm Europe’s determination to move the project forward by providing the much-needed external financing to complement the Azerbaijani State Oil Fund’s spending,” the expert noted.

Unique chance for Azerbaijani gas supplies

As for Azerbaijan itself, the SGC serves as the gas value chain through which the country will have the chance to export significant gas amounts to markets beyond Georgia and Turkey, according to Liakopoulou.

“It will also enable SOCAR’s energy partnerships with member-states traditionally over-reliant on a single gas supplier, like Bulgaria, as well as with ill-gasified candidate countries, like Albania. Let’s not forget that TAP was chosen as the third segment of the SGC in 2013 because of its notably shorter and cost-effective (in comparison with other discussed projects, such as Nabucco) length, which allows Europe to utilize reverse flows towards multiple existing and proposed directions (Kula-Sidirokastro, Interconnector Greece-Bulgaria, Ionian-Adriatic Pipeline, Trans Austria Gas Pipeline),” she added.

Furthermore, its underground storage facilities ensure a secure and reliable gas supply in case of future energy shortages, like the ones experienced by the EU during the 2006 and 2009 Russia-Ukraine gas disputes, according to the expert.

“As the initiator, and currently the only supplier of the SGC, Azerbaijan automatically becomes involved in a broader effort to speed up the gasification of the EU-hopeful Western Balkans and treat gas market integration issues in Southeast Asian (SE) and Central and Eastern Europe (CEE) markets, including through the considered Greece-Ukraine Vertical Gas Corridor, starting from TAP’s connection to the IGB line on the border between Greece and Bulgaria,” she said.

Liakopoulou went on to say that notwithstanding being a major interstate gas system, the SGC’s initial 10bcm capacity represents no more than a rather symbolic 2 percent of the EU’s total gas consumption.

“It should be reminded that TANAP’s capacity is scalable up to 23-31BCM/a by 2023-2026, while TAP is also expected to double supplies, as soon as it branches off in the Balkans via IGB and IAP. Against the backdrop of an upward EU gas demand trend, declining domestic production in view of Groningen phase-out by 2022, and in order for the investing companies’ netback margin to increase, it is vital to have a full SGC,” she said.

Investment decisions for two additional compressors as part of TAP, and for another five as part of TANAP, will have to be taken, so that the aforementioned throughput is achieved, according to the expert.

“Azerbaijan could possibly add some extra 10BCM to the route by 2025, as by that time the country will have managed to essentially up indigenous gas output either from already producing fields, like Umid, or from currently developed fields, like Absheron. Nevertheless, EU’s fundamental vision on the fourth/southern gas corridor, worked out since the start of the 21st century, has to do with a wider number of suppliers from the Caspian and the Middle East,” she added.

Additional sources for SGC

Speaking of other gas-rich countries’ possible participation in the project, Liakopoulou noted that Turkmenistan is the first country that undoubtedly comes to mind when talking about prospective SGC contributors.

“For one thing, the country has the reserves in place and ready for delivery following completion of the East-West pipeline in 2015. But the lack of the SGC’s eastward extension link, namely the Trans Caspian Gas Pipeline (TCGP), renders this plan presently unfeasible, although still not abandoned by the EU, who will fund the project’s study under its 2017 CEF energy call,” she said.

Optimism, mainly exuded by Russia, regarding the settlement of the Caspian legal status within 2018, a development that will facilitate bilateral or trilateral cooperation on projects like TCGP without the need for consent of all five littoral states, creates new hope for Turkmenistan’s gas exports to Europe, according to the expert.

“Furthermore, the August 2017 rapprochement between Presidents Ilham Aliyev and Gurbanguly Berdimuhamedov could lead to the two countries at some point finding common ground on their Serdar/Kyapaz quarrel, which has also prevented TCGP progress to this day,” she stressed.

Still, commercial viability remains a cause of concern after nearly over twenty years of deliberations on the pipeline materialization, according to Liakopoulou.

“Finally, the construction of White Stream, that will connect to the Bulgaria-Romania-Hungary-Austria (BRUA) pipeline on the European territory, is highly likely to be set as a prerequisite, in order for Ashgabat to agree to send gas through both strings of TCGP,” she added.

The expert pointed out that Iran’s willingness to negotiate its accession to the SGC had been repeatedly demonstrated after the 2015 nuclear deal conclusion.

“Its participation would entail either construction of a 1,800km pipeline from South Pars to the Iranian-Turkish border for direct transportation of domestic supplies through TANAP or further gas swap transactions with Turkmenistan, projected to grow in spite of an ongoing bilateral gas debt tiff. However, the U.S. exit from the JCPOA will discourage investments in new energy infrastructure projects and upstream activity in Iran, possibly bringing negative implications for Iran’s SGC ambitions,” she said.

Liakopoulou further noted that Kazakhstan and Uzbekistan are thought of as two more supplier alternatives for the SGC.

“The former could seek to attract investment interest in a 600km-long onshore line from Tengiz field up to Turkmenbashi seaport, although the government has prioritized response to domestic gas demand, especially in the poorly interconnected Astana and Central and Northern regions, prior to any large-scale export projects. The latter’s highly sulfurous gas constitutes a deterring factor due to processing costs,” she said.

No matter which of the above suppliers will get to find a place on the SGC, it is evident that a great deal of new infrastructure has yet to be built in the east of Azerbaijan, a fact that begs the question as to the exact number of bidders for TAP’s remaining 10bcm through the open season auctions, in two years’ time, according to the expert.

New hub for Europe

In conclusion, Liakopoulou said that at a moment when gas LTCs are dying out in Europe, and while the Commission is trying to handle a monopoly abuse case in relation to its dominant gas supplier and gain transparency and liquidity for its markets, the term of regional gas trading hubs has been excessively used with reference to an array of SE countries.

“Caspian shipments via the SGC network, along with U.S. LNG imports via the planned Alexandroupolis FSRU in northern Greece, the export versions of the Eastern Mediterranean supplies (East Med pipeline, Israel-Turkey pipeline, Egypt LNG exports) and even the Russian-devised southern supply corridor via Turkish Stream (towards Greece and Italy or Bulgaria and the Balkans), all constitute interconnections and entry points that could set into operation a hub between Greece and Turkey determining spot prices,” she said.

Even though it is too early to speak of hub aspirations, one should recognize SGC’s conducive role for an impeding proper implementation of the Energy Union precepts concerning obligatory access of SE and CEE member-states and Energy Community parties to at least three different sources of gas, the expert concluded.

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.

Subscribe to Trend in Google News! Subscribe
Chinese bridge at Pangong Tso nears completion, show satellite images
Chinese bridge at Pangong Tso nears completion, show satellite images
Beijing city raises vigilance as local COVID cases tick higher before Olympics
Beijing city raises vigilance as local COVID cases tick higher before Olympics
India should adopt risk-based approach not blanket bans to contain Covid - WHO India head
India should adopt risk-based approach not blanket bans to contain Covid - WHO India head
Loading Bars
Latest
ITFC extends US $15 Million Line of Financing Facility to Uzbek Industrial and Construction Bank
ITFC extends US$ 15 Million Line of Trade Financing Facility to Invest Finance Bank
Switzerland recognises Georgian Covid-19 certificates
Economy min: Facilitating banking transactions part of Iran-Russia agreements
Turkey expects coronavirus cases to peak in February
Number of COVID-19 cases in Kazakhstan tops 1,100,000
Chinese bridge at Pangong Tso nears completion, show satellite images
Beijing city raises vigilance as local COVID cases tick higher before Olympics
Over 300 mln COVID-19 cases confirmed all over world, WHO says
U.S., UK launch talks to resolve steel, aluminum dispute
India should adopt risk-based approach not blanket bans to contain Covid - WHO India head
Turkey, UAE sign FX swap deal worth $5 billion
Covid-hit microfinance industry in India seeks higher credit guarantee scheme
Excellent Iran-Russia ties serving strategic goals - Iranian president
Turkey soon to leave currency volatility behind: Erdogan
Cryptocurrency Bill in India unlikely to be introduced in upcoming Budget session
Head of EU delegation expresses condolences to Azerbaijan on occasion of January 20 tragedy
First Vice-President Mehriban Aliyeva shares post on her official Instagram page in connection with 32nd anniversary of January 20 tragedy (PHOTO)
Azerbaijan commemorates 32nd anniversary of 1990 'Black January' tragedy
Organization of Turkic States makes post in connection with January 20 tragedy
UK shares experience in mine action with Azerbaijan - Ambassador
Azerbaijan adheres to start of delimitation of border with Armenia process without any conditions - minister
PM Johnson drops COVID rules in England
President Ilham Aliyev makes Facebook post on occasion of anniversary of January 20 tragedy (PHOTO)
Afghanistan opens gates of Kamal Khan Dam allowing water into drought-hit Iran
Azerbaijan hosts auction for commissioning mineral deposits
Russia allows tomato imports from several Turkmen enterprises
Azerbaijan to showcase its non-oil products at int’l exhibitions
Price indexes of financial, construction sectors at Uzbek stock exchange fall
Uzbekneftegaz creates new unit to handle partnerships with world's largest financial institutions
Money transfers from Georgia to Azerbaijan increase
Kazakhstan’s December compliance to OPEC+ deal unveiled
Chinese company discloses volume of cargo containers sent to Uzbekistan in 2021
Georgia's Imereti Agrozone receives investment proposals
No apparent crude export impact from civil unrest in Kazakhstan - EIA
Baku refinery increases oil output
Uz-Kor Gas Chemical company opens tender for supply of protective equipment
Gas consumption grows in Azerbaijan
Activities of military units stationed in Azerbaijan's liberated territories inspected (PHOTO)
Azerbaijani FM rejects unfounded allegations of Armenian representative at OSCE forum (PHOTO)
SOCAR boosts oil and gas exports
Iranian Ministry of Roads, Urban Development reveals data on activities of ports
Iran’s Bahar Azadi gold coin rising in price
Azerbaijan significantly increases gas production
Kazakhstan discloses cargo traffic via Aktau port for 2021
U.S. mortgage interest rates climb for 4th straight week
Azerbaijan provides lump-sum allowance to families of January 20 tragedy martyrs, victims
Azerbaijan announces increase in freight traffic by all modes of transport
MP: Pecresse's illegal Karabakh trip gives rise to legal responsibility
Azerbaijan announces priorities as chair of OSCE Forum for Security Co-operation
Georgia’s domestic electricity production up in 2021
SOCAR increases oil production y-o-y
Uzbek Central bank shares data on number of bank cards used in 2021
Azerbaijan's traffic police to check citizens going on trips to liberated lands - ministry
Kazakhstan unveils trade indicators with largest trade partners in EU
Cargo transportation through Iran’s Mashhad Airport soars
Azerbaijan discloses number of people involved in self-employment program in 2021
Private sector is actively involved in construction of administrative center in Turkmenistan
Azerbaijan shares data on number of vaccinated citizens
Iran declares amount of loans issued for housing, construction sector
Transportation of oil from Kazakh Aktau port to Azerbaijan unveiled
Azerbaijan's ANAMA shares information on mine incident in Azerbaijan's Goranboy region
Iran beats new record on gas consumption
Azerbaijan confirms 1,151 more COVID-19 cases, 543 recoveries
Azerbaijan's Azerishig talks appeals of businesses for electric supply in liberated areas
Uzbekistan's UzAuto Motors faces semiconductors shortage
Turkmen plant produces significant volume of urea fertilizer
Azerbaijan, Ukraine discuss prospects for transport cooperation
Azerbaijani servicemen take part in parachute training in Turkey (PHOTO)
Germany surpasses 100,000 daily COVID-19 cases for first time
Azerbaijani citizens allowed to visit liberated Aghdam, Shusha once a year - ministry
Iran reveals COVID-19 data for January 19
Azerbaijani MFA issues statement on occasion of January 20 - National Mourning Day
IRICA shares data on import of COVID-19 vaccine to Iran
Uzbekistan Airways to conduct regular flights to Russia's Ufa
Turkmen state concern increases natural gas production in 2021
Indian Vijay Mallya can be evicted from London home over unpaid loan, UK court orders
Iran sees increase in passenger transportation via railways
Russia documents 33,899 daily COVID-19 cases, highest number since November 27
Salaries of employees of presidium, office of Azerbaijan National Academy of Sciences up
Turkmenistan increases volume of loans issued to economic entities
Azerbaijan reduces electricity exports to Georgia
Azerbaijan's ANAMA creates new operational groups
Azerbaijan hands over several prisoners to Iran
Chamber of Commerce talks steps Iran could take to boost trade turnover with Russia
Investigation will show whether Nazarbayev was involved in unrests in Kazakhstan - MFA
Kazakhstan's Minister of Defense appointed
Veyseloglu Group of Companies presented its retail index for 2021
Ethylene output up in Azerbaijan
Georgia's motor oil imports drop, one of possible reasons made public
Revenues from compulsory state social insurance grow in Azerbaijan - minister
Azerbaijan blocks betting payment method in bookmakers using bank cards
Georgia continues path to sustainable growth – World Bank
Azerbaijan boosts gasoline, diesel production
Azerbaijan records growth in nominal GDP
Azerbaijan increases salaries of employees of some organizations financed from state budget
Georgia retains its macroeconomic stability – minister
Iran to improve economic ties with neighboring countries - official
UK inflation rises to highest in nearly 30 years
New minister of health appointed in Azerbaijan
All news