Main goal - Access to Caspian gas

Main goal - Access to Caspian gas

Less time has left by Oct. 1, the date by which the participants of pipeline projects of the Southern Gas Corridor should submit to Azerbaijan their tariff proposals, conditions and terms of construction and other details. It is noteworthy that the participants in three major projects, which are designed to transport Azerbaijani gas to Europe - Nabucco, Trans Adriatic Pipeline (TAP) and the Interconnector Turkey-Greece-Italy (ITGI) - have made life-affirming statements about their own advantages and competitiveness and were intensive in the preparatory activities within their planned actions.


Nabucco p ipeline project is the most viable route to transport gas from the Caspian basin from both logistic and economic points of view. The Nabucco consortium intends to offer an attractive and competitive set of conditions for gas to be transported from Azerbaijan to Europe, Nabucco Gas Pipeline International GmbH Managing Director Reinhard Mitschek told. "We will on the one hand comply with the requirements for the start up phase of operations and on the other hand we will offer a concept allowing a growth opportunity for all parties," he said. "We can confirm that we are in concrete negotiations with the SD consortium, Mitschek added.

Nabucco Pipeline Consortium has announced the activities to be conducted by the start of construction of the pipeline, which is expected in 2013. The Nabucco Gas Pipeline International GmbH's report on the current status of the project says that one of the important steps in the near future will be the launch of the "Open Season" capacity marketing process. The important steps also include start of the tendering process for the procurement of line pipe and related material supplies. In April 2010, the Consortium announced the start of prequalification process for potential vendors of materials and construction works. Currently, the Consortium is negotiating with 45 pre-qualified suppliers. Several days ago, Nabucco Gas Pipeline International GmbH has appointed the British RPS Energy as Consultant on unexploded ordnance (UXO) risk assessments, Nabucco Gas Pipeline International GmbH reported on its official website.

Nabucco, in length of 3,900 km, envisages gas supplies from the Caspian region and the Middle East to the EU countries. Participants of the project are Austrian OMV, Hungarian MOL, Bulgarian Bulgargaz, Romanian Transgaz, Turkish Botas and German RWE companies. Each of participants has equal share to the amount of 16.67 percent. The project's construction is planned to start in 2013. The pipeline's maximum capacity will hit 31 billion cubic meters per year.

Economic obstacles facing the implementation of the Nabucco project were often linked with its political role as a project that will reduce Europe's dependence on Russian gas. However, these difficulties are obvious, and according to most experts, the main problem is still the lack of gas supply sources, as a result of which, the pipeline with a capacity of 31 billion cubic meters gas per year only will get 10 billion cubic meters from the Shah Deniz-2 field - the volume that Azerbaijan is ready to provide to any buyer. Accordingly, a question arises on who will pay the fees for pumping gas, that is, in fact, it means to pay waste if there are not other exporters.

Iran, as a resource base, has been removed from the agenda because of obvious reasons, Iraqi Kurdistan, with the government of which a shareholder of Nabucco, the German RWE has signed a cooperation agreement, also seems an unconvincing partner, given the contradiction with official Baghdad and the general instability in the country. In addition, in case of participation of the Iraqi gas in the Nabucco project, it will be necessary to build an additional 500 km pipeline from the north of Iraq to Turkey, which increases the total cost. The option involving Turkmen gas is very attractive, but here the costs increase because of the necessity to construct a pipeline in length of 300 kilometers from Turkmenistan to Azerbaijan via the sea. Possibly Russia can have objections to its construction, given the unsettled status of the Caspian Sea.

Of course, there is still time by 2017, when the Shah Deniz-2 will receive the first gas, and the question to connect other sources to the project can be resolved, but there are risks.

Of the three projects, Nabucco is the longest and expensive in construction costs. The initial project cost was estimated at 7.9 billion euros. Today, taking into account the possibility of increasing the length of the pipeline and increase of commodity prices (the price of iron ore used to manufacture steel pipes for the last year has raised by 50%), this figure is revised in order to be increased. The costs, estimated by British BP, total 14 billion euros, with which the official representatives of the Nabucco consortium do not agree.


The TAP Project (Trans Adriatic Pipeline) will be ready to present its proposals to Shah Deniz gas field development consortium by the deadline, Lisa Givert, Head of Communications at TAP Project said. She said TAP's tariff proposal will be submitted by the 1st of October. "We remain confident that we will have a very competitive tariff to offer the consortium," said Givert.

In August, Trans Adriatic Pipeline Consortium (TAP) officially announced the extension in the length of the pipeline. Additional 300 km of the planned pipeline to Greece increased the total length of the TAP to about 800 kilometers. Earlier the project consortium stated its decision to double the length of the planned gas pipeline in the Greek section, which will make it possible to create new jobs and provide investments in amount of more one billion euros for Greece in the period of severe financial crisis in the country.

The initial pipeline capacity will be 10 billion cubic meters per year, with the possibility of increasing to 20 billion cubic meters. According to recent data, the length of the pipeline will be 800 km and project cost - 1.6 billion euros. TAP's shareholders are EGL of Switzerland (42.5%), Norway's Statoil (42.5%) and E.ON Ruhrgas of Germany (15%).

"Given the relative strength and experience of TAP's shareholders in delivering on and offshore pipelines, we feel that TAP is in a unique position to be able to offer Shah Deniz and the Azerbaijan Government the confidence to complete the pipeline on time, on budget and to the quality they expect," said Givert.


Aug. 11, 2011, in Sofia, the contract for the Front End Engineering Design (FEED) and Environmental Impact Assessment (EIA) was signed between ICGB AD and the Consortium Penspen Ltd. - C&M Engineering S.A. By signing this contract the project "Interconnector Greece - Bulgaria (IGB)" enters into a decisive phase.

The planned capacity of ITGI pipeline is 12 billion cubic meters per year, with a length of 800 km, the cost of construction - 2.5 billion euro. Shareholders are Italian Edison and Greek Depa.

ITGI gas pipeline (Turkey-Greece-Italy) has a better chance of realization among the Southern Gas Corridor projects, because it includes the existing infrastructure, Professor of International Relations at the American University of Paris Terence Murphy said, adding that ITGI is best on an existing network that supplies modest volumes to Italy and Greece.

The main obstacle to the ITGI project can become a problem to attract funds. The severe financial situation in Greece and partly in Italy will anyway influence the decision of investors (IFIs) to provide cheap loans to shareholders of ITGI - Greek DEPA and Italian Edison.


It is not entirely clear how the gas will be delivered from Shah Deniz-2 to Greece via TAP and ITGI project, but apparently there are plans to use an internal system of pipelines in Turkey, which is capable of pumping up to 10-11 billion cubic meters per year. Nabucco Consortium intends to build its own pipeline, but it is not clear whether from Azerbaijan or the Georgian-Turkish border. Indeed, each of the three projects has their own strengths and weaknesses. The main advantage of Nabucco is that this is a complete turnkey project with multiple sources of supply of natural gas and the optimum capacity, given the increasing European demand for natural gas. Two other projects - TAP and ITGI - have are three times less capacity and therefore, only one source of gas supply. In fact, they can be regarded as a phase of the Nabucco project in a separate execution.

There is an idea to ​​combine some of these projects into one. This has been stated by some European and American high-ranking politicians and officials. The effectiveness and success of the Southern Gas Corridor project can be achieved through joint implementation, White Stream Pipeline Consortium Chairman Roberto Pirani believes. "Complementarity among all Southern Corridor projects is the key for an efficient and successful implementation of all projects, to the benefit of all parties," Pirani said.

EU officials in their statements make it clear that their main goal is to get an access to the Caspian hydrocarbon resources, so they will support not only Nabucco, but also other projects if they ultimately prove to be more viable. It is clear that we will witness important decisions taken for the implementation of the Southern Gas Corridor in autumn.

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