BAKU, Azerbaijan, Jan. 8
By Leman Zeynalova - Trend:
Southern Gas Corridor (SGC) project initiated by Azerbaijan, is one of the priority projects for the European Union (EU). It envisages transportation of gas from the Caspian Sea region to European countries through Georgia and Turkey.
This large-scale project is aimed at diversification of energy supply routes and sources, thereby contributing to strengthening Europe’s energy security. SGC project will for the first time in the history ensure the supply of Caspian gas resources to European markets.
On December 17, 2013, a final investment decision was made on the Stage 2 of the Shah Deniz offshore gas and condensate field's development. The gas produced at this field will first go to the European market (10 billion cubic meters annually). Around six billion cubic meters will be annually supplied to Turkey.
In October 2019, the European Commission adopted the fourth list of Projects of Common Interest (PCI), where it kept the Southern Gas Corridor project. In particular, the list includes projects such as the expansion of the South Caucasus Pipeline, the Trans-Anatolian Pipeline (TANAP), the Trans-Adriatic Pipeline (TAP) and the Trans-Caspian Pipeline.
On July 19, 2019, Romanian government has approved a Memorandum of Understanding between the Ministry of Energy, Transgaz and the Southern Gas Corridor Consultative Council on the potential of cooperation in the use of gas transport infrastructure offered by the Romania-Bulgaria Interconnector and Bulgaria-Romania-Hungary-Austria pipeline (BRUA) in the forthcoming enlargement stages of the Southern Gas Corridor in the Balkans and Central Europe.
The interconnector between Romania and Bulgaria, as well as the BRUA project, will ensure the integration of natural gas sources from the Caspian and Mediterranean basins, the Middle East or Central Asia, with the markets in Central and Western Europe.
The BRUA project ensures bi-directional transmission capacities of 1.5 bcma in the Bulgaria direction and 4.4 bcma in the Hungary direction.
The cost of the Southern Gas Corridor project is currently estimated at $40 billion.
Southern Gas Corridor CJSC has inked two agreements with the Asian Development Bank (ADB). One of the agreements envisages a guarantee for attracting $524.5 million, which was fully utilized by the CJSC. The second agreement for allocation of $500 million worth loan was annulled as a result of project cost reduction.
Moreover, Azerbaijan ensured early repayment of $160 million worth of funds, utilized as part of a guaranteed credit line worth $750 million allocated by the Multilateral Investment Guarantee Agency (MIGA).
In addition, Azerbaijan terminated negotiations with German Hermes on allocation of $1.5 billion loan under Untied Loan Guarantee (UFK) scheme and the European Investment Bank (EIB) for allocation of $500 million.
The official launching ceremony of the Southern Gas Corridor took place at Azerbaijan's Sangachal terminal on May 29, 2018.
Azerbaijan began the first commercial gas supplies to Turkey as part of the Southern Gas Corridor on June 30, 2018.
Southern Gas Corridor CJSC is expected to invest around $181 million in the Southern Gas Corridor project in 2020.
As of early December 2019, Southern Gas Corridor CJSC has invested about $9.9 billion in the Southern Gas Corridor projects using its revenues from the projects, authorized capital and borrowings.
Since early 2019, the company has spent nearly $400 million to finance its share in the Southern Gas Corridor projects. It was planned to spend additional $6 million by the end of 2019
Ernst & Young Holdings (CIS) B.V. has been selected as the independent auditor of the consolidated financial statement of Azerbaijan’s Southern Gas Corridor CJSC. The audit will be conducted for a period from January 1, 2019 to December 31, 2021 for each yearly financial statement.
Trans-Anatolian Natural Gas Pipeline (TANAP)
TANAP project envisages transportation of gas from Stage 2 of Azerbaijan’s Shah Deniz field from Georgian-Turkish border to Turkey’s western border. The total cost of TANAP turned out to be lower than $7 billion.
The initial capacity of TANAP is expected to stand at 16 billion cubic meters of gas per year, with possibility of expanding to 31 billion cubic meters per year in the future. Around 6 billion cubic meters of gas will be delivered to Turkey, while the rest of the volume will be supplied to Europe.
TANAP shareholders are as follows: Southern Gas Corridor CJSC – 51 percent, SOCAR Turkey Enerji – 7 percent, BOTAS – 30 percent and BP – 12 percent.
SOCAR Turkey Enerji AS, a subsidiary of Azerbaijan’s state oil company SOCAR in Turkey, became the owner of a 7 percent stake in TANAP project. The corresponding deal was completed at the end of March 2018.
Line fill began in the TANAP pipeline across Turkey in late January 2018.
A ceremony to launch Phase 0 of TANAP took place June 12, 2018 in the Turkish city of Eskisehir. First commercial gas deliveries to Turkey commenced on June 30, 2018.
Project status
Test deliveries as part of the Phase 1 along the gas pipeline began on April 15, 2019, and on July 1, the pipeline was ready for gas supplies to Europe. The opening ceremony of TANAP’s connecting with Europe took place on Nov. 30, 2019 in Ipsala town (Edirne province, Turkey).
In this area, near the Greek border, TANAP is connected to the Trans Adriatic Pipeline (TAP), through which natural gas from Azerbaijan will flow to European countries.
The volume of gas transportation to Turkey via TANAP from the beginning of commercial gas supplies on June 30, 2018 until the end of October 2019 reached 3.08 billion cubic meters.
The design capacity is 31 billion cubic meters of gas per year, and the initial capacity of the pipeline is 16 billion cubic meters per year. At the moment, only two compressor stations have been built, which are enough to deliver gas to Turkey and Europe in the indicated volume.
For expansion, it is necessary to add several additional compressor stations in order to achieve throughput of 24 billion cubic meters per year. To achieve capacity of 31 billion cubic meters, a total of seven compressor stations will be required.
It is expected that gas imports to Turkey through the TANAP will reach the full planned capacity of 6 billion cubic meters per year after June 2020.
Trans Adriatic Pipeline (TAP)
TAP project envisages transportation of gas from Azerbaijan's Shah Deniz Stage 2 to the EU countries. TAP will be 878 kilometers in length (Greece 550 kilometers, Albania 215 kilometers, Adriatic Sea 105 kilometers, and Italy 8 kilometers).
The initial capacity of TAP will be 10 billion cubic meters per year with the possibility of expanding to 20 billion cubic meters.
TAP’s shareholding is comprised of BP (20 percent), Azerbaijan’s state oil company SOCAR (20 percent), Snam S.p.A. (20 percent), Fluxys (19 percent), Enagás (16 percent) and Axpo (5 percent).
TAP can also ensure gas supply to several countries in South-East Europe, including Bulgaria, Albania, Bosnia and Herzegovina, Montenegro, Croatia and other countries by connecting to the Ionian Adriatic Pipeline (IAP).
Bulgaria can receive gas via the Interconnector Greece-Bulgaria (IGB).
Some large European markets, such as Germany, France, UK, Switzerland and Austria can receive gas from Italy, which is the end point of TAP.
Project status
In terms of overall progress, TAP is 90.7 percent complete. More than 99 percent of pipes have already been laid among Greece, Albania and Italy. Land restoration along the TAP route is also 99 percent complete. The labor costs as part of the project amounted to more than 46 million man-hours.
At the end of August 2019, the TAP AG consortium completed construction of a microtunnel on the San Foca beach in the Italian region of Apulia.
Construction of the Greek section of the TAP was completed in November 2019. On Nov. 25, the TAP AG consortium began filling a two-kilometer section of the gas pipeline in Greece between the Evros river and the compressor station in Kipoi village with gas.
Construction work was successfully completed at the TAP compressor station in Kipoi in November.
The TAP contractor continues work over compressor stations before putting the pipeline into operation. At the Fier compressor station in Albania, construction work is substantially complete. Pre-commissioning and completion activities are ongoing.
Finally, the construction work on the metering station at Bilisht town, Albania (near the Greek border) is complete and mechanical completion is under review, the focus here is on the final completions and commissioning work. After completing the construction activities, TAP teams will be focused on pre-commissioning activities in all three stations.
First gas deliveries to Europe via TAP will start in the last quarter of 2020.
TAP AG launched a market test on July 1 to allow natural gas shippers to express interest, and in a later phase, potentially secure access to new, long-term capacity in TAP, thereby enabling the future expansion of the pipeline capacity.
TAP’s market test is structured in 2 main phases: non-binding phase started July 1, 2019, and the binding phase, which is expected to start earliest in the second quarter of 2020.
On Sept. 30, 2019, TAP launched the public consultation on certain provisions of the following draft Interconnection Agreements:
Interconnection Agreement with TANAP Doğalgaz İletim A.Ş.
Interconnection Agreement with ICGB AD
Interconnection Agreement with DESFA S.A.
Interconnection Agreement with Snam Rete Gas S.p.A
On Nov. 29, the TAP consortium successfully completed the public consultation of the relevant provisions of the Interconnection Agreements with adjacent transmission system operators (TSOs).
TAP and the adjacent TSOs will provide responses to the comments received and submit a public consultation report to the relevant National Regulatory Authorities for information. TAP will also publish a report comprising the responses to the non-confidential comments on its website.
The TAP has been designed to be expanded from 10 to 20 billion cubic meters per year capacity of gas delivery from Turkish/Greek border to Italy.
The following modifications are required for the expansion:
- Additional compressors/coolers/filters/meters in GCS00
- New compressor station to be installed in GCS01
- New compressor station to be installed in ACS02
- Additional compressors/coolers/filters/meters in ACS03
- New filters/heaters/control valves/meters in PRT (Pipeline Receiving Terminal).
No modifications are required to pipeline sections between compressor stations.
Increasing the capacity of the TAP from 10 billion cubic meters per year to 20 billion cubic meters will require more than 1 billion euros of investments.
Baku-Tbilisi-Erzurum (South Caucasus Pipeline)
The length of the Baku-Tbilisi-Erzurum pipeline is more than 700 kilometers. This gas pipeline transports the gas produced at the Shah Deniz gas condensate field in the Azerbaijani sector of the Caspian Sea. The gas is supplied to Georgia and Turkey.
Capital expenditure for the South Caucasus gas pipeline (Baku-Tbilisi-Erzurum) and for the expanded South Caucasus gas pipeline amounted to over $28 million in the third quarter of 2019.
Operating expenditure on the above mentioned projects for the reporting period totaled about $33 million.
The total throughput capacity of the South Caucasus gas pipeline and the expanded South Caucasus gas pipeline in the third quarter of 2019 amounted to about 28 million cubic meters of gas per day.
The South Caucasus Pipeline Company, which owns the pipeline, has the following shareholders: BP (28.8 percent), TPAO (19 percent), AzSCP (10 percent), SGC Midstream (6.7 percent), PETRONAS (15.5 percent), LUKOIL (10 percent) and NICO (10 percent).
Project status
From January through November 2019, Azerbaijan exported over 9.3 billion cubic meters of gas via the Baku-Tbilisi-Erzurum pipeline, which is 20.3 percent more compared to the same period of 2018, according to Azerbaijan’s State Statistical Committee.
Presently, a part of the gas from the total production is supplied to Turkey, Georgia and to the pumping stations of the Baku-Tbilisi-Ceyhan oil pipeline, and a part is delivered to Azerbaijan from the Sangachal terminal by BP.
Baku-Tbilisi-Erzurum accounted for 38.2 percent of the total gas transported by Azerbaijan. The figure rose by 2.5 percent for the year.
Interconnector Greece-Bulgaria (IGB)
IGB is a gas pipeline, which will allow Bulgaria to receive Azerbaijani gas, in particular, the gas produced from Azerbaijan's Shah Deniz 2 gas and condensate field. IGB is expected to be connected to TAP via which gas from the Shah Deniz field will be delivered to the European markets.
The pipeline’s length will be 182 kilometers.
In the first stage, the pipeline capacity will be 3 billion cubic meters of gas, of which 2.7 billion cubic meters will be offered for long-term market, the remaining share of 0.3 billion cubic meters for short-term market.
In a second phase, depending on the evolution of the market, the capacity of the pipeline can be increased to 5.3 billion cubic meters of gas thanks to the addition of a compression station: 4.5 billion cubic meters of gas will be offered for long-term market and 0.5 billion cubic meters will be offered for short-term market.
Bulgarian Energy Holding EAD (BEH EAD) holds 50 percent of this project, while the remaining 50 percent is owned by Greek DEPA and Italian Edison.
In January 2014, the Trans Adriatic Pipeline AG (TAP) and Interconnector Greece-Bulgaria (ICGB) signed a Memorandum of Understanding and Cooperation (MOUC) aimed at establishing the technical cooperation in order to further develop strategic infrastructure in the region.
The total investment cost of the project is estimated at around 240 million euros (excluding VAT), of which 220 million euros account for capital expenditures.
Bulgarian government has approved the state guarantee in the amount of 110 million euros for the project. ICGB AD company has received up to 45 million euros, under the European Energy Program for Recovery.
Project status
Bulgaria and Greece signed an agreement on final investment decision for IGB in December 2015.
Bulgaria’s Ministry of Regional Development and Public Works issued a permit for construction of the Interconnector Greece-Bulgaria (IGB) on Bulgaria’s territory in September 2017. The permit was issued for construction on the territory of Stara Zagora, Haskovo and Kardzhali districts.
Key agreements were signed on the Interconnector Greece-Bulgaria (IGB) project during the High Level Group Meeting on the Central and South Eastern Europe Connectivity (CESEC) on June 29, 2018 in Sofia, Bulgaria.
Bulgaria and Greece signed a political declaration for construction of the Interconnector Greece-Bulgaria in July 2018.
Following the decision of the European Commission on the Exemption of Interconnector Greece Bulgaria (IGB) from the requirements regarding third party access, tariff regulation and ownership unbundling, on August 8 the National Regulators of Greece and Bulgaria adopted an official Joint Exemption decision for IGB.
ICGB AD nominated the National Archaeological Institute with museum for contractor of a public procurement procedure for archaeological studies of archaeological sites found along the route of the gas interconnector Greece-Bulgaria in August 2018.
The European Commission found Bulgarian and Greek plans to support the construction and operation of a natural gas interconnector to be in line with EU State aid rules in November 2018.
On Nov.27, 2018, the offers of the participants in the procedure for selection of a consultant for construction supervision for construction of gas interconnector Greece-Bulgaria were opened. Within the deadline three offers were submitted from the following companies: ESM Ltd., EKO BUL CONTROL joint venture and GAS EXPERT 2018 joint venture.
An administrative contract for direct grant awarding was signed between the Project Company ICGB AD and the Managing Authority of the Operational Program "Innovation and Competitiveness" 2014-2020 for the project "Construction of Gas Interconnector Greece-Bulgaria” amounting to 39 million euros in December 2018.
The foundation laying ceremony of the IGB was held on May 22, 2019 in Bulgaria.
On Oct. 10, 2019, key agreements were signed for the construction of the IGB. Bulgarian Energy Minister Temenuzhka Petkova and her Greek counterpart Konstantinos Hatzidakis signed an intergovernmental agreement between the two countries that will stabilize the tax regime for the operation of the pipeline over the next 25 years.
An agreement was signed between the Bulgarian BEH company and the European Investment Bank (EIB) to provide a loan of 109 million euros for the project under a state guarantee from Bulgaria.
In addition, contracts were signed with Greek subcontractors Corinth Pipeworks S.A. and Avax S.A. During the official ceremony, contracts were also signed with suppliers who reserved capacities in the pipeline.
Also, long-term contracts were signed with Bulgargaz, DEPA S.A. and Edison companies, which will provide gas transportation services, including gas through the Southern Gas Corridor, to the Bulgarian market.
The shareholders of the project company, BEH and IGI Poseidon, signed an updated agreement, which adopted the final IGB business plan and the final budget for the construction of the gas pipeline. They also signed a decision approved by the ICGB General Assembly to increase the project company’s capital by 42.4 million euros.
In February 2019, Greek Minister of Environment and Energy Giorgos Stathakis issued a permit for the construction of the IGB in Greece.
In March 2019, the TIBEI consortium was selected as owner’s engineer for the construction of the IGB.
In April 2019, the European Commission approved the allocation of 33 million euros for the construction of the IGB.
In April 2019, the EKO BUL CONTROL joint venture, which includes three legal entities: ECOENGINEERING LTD, BUL STROY CONTROL ENGINEERING and CONTROL ENGINEERING, was selected the contractors for the supervision of the construction of the IGB.
In May 2019, Corinth Pipeworks SA was selected as a contractor for the engineering, procurement and construction (EPC) of linear pipes for the IGB.
In May 2019, J&P Avax S.A. was selected as the contractor for the EPC of the IGB.
On July 19, 2019, the Greek Regulatory Authority for Energy (RAE) granted ICGB AD, the IGB construction company, a license for an independent natural gas transportation system. The license applies to the Greek part of the IGB and its validity period is 50 years. Thus, the ICGB obtained all the necessary licenses to begin the construction of the IGB.
From September 30 to November 29, 2019, public consultations were held on an agreement on the IGB section in Komotini (Greece).
On October 11, 2019, the national energy regulators of Greece and Bulgaria made a joint decision on the approval of the Tariff Code and the rules for the operation of the IGB. Thanks to this decision, the ICGB AD project company successfully completed the next stage of the certification process as an independent gas transportation operator.
In November 2019, excavation work began on the first two kilometers of the IGB.
In December 2019, the Bulgarian parliament ratified a loan agreement signed in October 2019 between the European Investment Bank (EIB) and the Bulgarian Energy Holding (BEH EAD) to finance the construction of the IGB.
By the end of January 2020, the construction of temporary structures at each working site along the entire pipeline route in the Bulgarian and Greek territories should be completed.
A plan for phased supply of pipes is being developed in accordance with the construction schedule, and temporary sites for their storage will be allocated. The commercial operation of the IGB is scheduled for the second half of 2020.
Ionian Adriatic Pipeline (IAP)
Ionian Adriatic Pipeline can be connected to the Trans Adriatic Pipeline (TAP) to transport gas to many countries in South-East Europe.
The pipeline with total length of 516 kilometers will stretch from Albania through Montenegro, and Bosnia and Herzegovina, to split in Croatia.
The capacity of the pipeline will amount to five billion cubic meters of gas per year.
TAP has already signed memorandums of understanding and cooperation with the developers of this project, in particular with companies of Plinacro (Croatia), BH-Gas (Bosnia and Herzegovina), Geoplin Plinovodi (Slovenia), as well as with the governments of Montenegro and Albania.
There has been created a TAP-IAP joint working group that gathers regularly to synchronize the timing of both pipeline projects and coordinate the technical issues of interconnection. In particular, Croatia expects to receive approximately 2.5 billion cubic meters of gas per year through the IAP.
Project status
Possible time of implementation of the project hasn’t been announced yet.
A Memorandum of Understanding (MoU) on the Ionian Adriatic Pipeline (IAP) was signed in August 2016 by Albania, Bosnia and Herzegovina, Croatia, Montenegro and SOCAR.
In September 2016 it was announced that SOCAR will be a technical consultant in IAP project.
Western Balkans Investment Framework (WBIF) allocated 2.5 million euros worth grant for IAP in February 2017.
The work on setting up a company for implementation of the IAP project is expected to be completed in 2020.
Implementation of Terms of Reference for the Ionian-Adriatic Pipeline (IAP) project started. The Terms of Reference have been agreed upon among stakeholders in April 2018, and the implementation started in May 2018.
Albania, Bosnia, Croatia and Montenegro are planning to finalize the preliminary design of the IAP, which provides for the transportation of Azerbaijani gas to Southeast Europe, by September 2020.
Trans-Caspian Gas Pipeline
Turkmenistan is studying the possibility of delivering its energy resources to the European market. To this end, it promotes the project for construction of the Trans-Caspian Gas Pipeline to the coast of Azerbaijan, from where the Turkmen gas can be delivered to Turkey and further to Europe.
The Trans-Caspian Gas Pipeline project may be implemented as part of the Southern Gas Corridor.
Recently, Turkmenistan, Azerbaijan, Turkey, Georgia and EU have intensified the talks on the implementation of the Trans-Caspian Gas Pipeline project.
Project status
Currently, there are no direct agreements on the implementation of the Trans-Caspian Gas Pipeline project. The talks on this project have been going on since 2011 between the major interested parties: EU, Azerbaijan and Turkmenistan.
Turkmenistan has expressed its readiness to supply 40 billion cubic meters annually to Europe, 10 billion cubic meters of which can be provided by the Petronas company, which operates in the Turkmen sector of the Caspian Sea. The remaining volume can be provided by the 800-km East-West pipeline, which originates from the Galkynysh field and finishes off the coast of the Caspian Sea.
In April 2015, a declaration on development of energy cooperation was signed in Ashgabat following the multilateral talks on the Trans-Caspian Gas Pipeline project between Turkmenistan, Azerbaijan, Turkey and the EU.
Moreover, in order to consider the complex of organizational, legal, commercial, technical and other issues related to gas supply from Turkmenistan to Europe, the parties agreed to create a working group at the level of deputy ministers in charge of energy issues of Turkmenistan, Azerbaijan, Turkey and the EU.
Islamic Development Bank is ready to study the possibility of supporting the Trans-Caspian Gas Pipeline project.
In June 2018, Georgia and the European Commission agreed to jointly finance the commercial engineering of the project.
The European Commission is conducting technical discussions with Turkmenistan to find out how and under what conditions Turkmen gas can be supplied to the EU, and also maintains close ties with Azerbaijan on this issue.
However, any possible version of the Trans-Caspian pipeline project should be built and financed by private companies.
Recently, the European Commission proposed that Turkmenistan develop a feasibility study for Turkmen gas supplies. The EU companies need the necessary guarantees from Turkmenistan for serious participation in this project.
Azerbaijan-Georgia-Romania Interconnector (AGRI)
AGRI project envisages transportation of Azerbaijani gas to the Black Sea coast of Georgia via gas pipelines. Azerbaijani gas delivered to Georgia's Black Sea coast will be liquefied at a special terminal and following this, it will be delivered in tankers to a terminal at the Romanian port of Constanta.
Further, it will be brought to the gaseous state and sent via Romanian gas infrastructure for meeting the demands of Romania and other European countries.
The project’s cost is estimated at 1.2-4.5 billion euros depending on the terminals’ capacity, which can vary between 2 and 8 billion cubic meters of gas per year.
The participants of the AGRI project are SOCAR, Georgia's Oil and Gas Corporation, as well as MVM (Hungary) and Romgaz (Romania). The parties established the SC AGRI LNG Project Company SRL with the purpose of developing the Feasibility Study.
Project status
Azerbaijan, Georgia and Romania signed on June 24, 2015 a joint declaration on supporting the development of the Azerbaijan-Georgia-Romania Interconnector project.
British Penspen engineering company presented to shareholders of AGRI the final version of the feasibility study (FS) of the project in late 2015.
Turkmenistan is highly interested in the Azerbaijan-Georgia-Romania Interconnector project. To supply this project with Turkmen gas, it is necessary to build a separate gas pipeline along the Caspian seabed to the coast of Azerbaijan or to deliver liquefied gas through the sea via tankers.
It is expected that the AGRI gas pipelines system project (Azerbaijan-Georgia-Romania Interconnector), which provides for the transportation of Azerbaijani gas to Europe, will be implemented after 2024-2026.
Presently, the shareholders of the AGRI LNG project company are discussing issues related to the further development and implementation of the AGRI project, presumably after 2024-2026, when the second stage of development of Azerbaijan’s Shah Deniz field and other fields will be completed.
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