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Southern Gas Corridor – a time for new shareholders

Analysis Materials 13 July 2012 16:20 (UTC +04:00)
One of the most important steps begins in the implementation of the project Southern Gas Corridor - the emergence of new shareholders of pipeline projects. It applies to the TANAP project as well as Nabucco West and TAP on delivery of Azerbaijani gas from the western border of Turkey to Europe.
Southern Gas Corridor – a time for new shareholders

Azerbaijan, Baku, July 13 /Trend/

Azer Ahmedbeyli, Trend analytical centre expert.

One of the most important steps begins in the implementation of the project Southern Gas Corridor - the emergence of new shareholders of pipeline projects. It applies to the TANAP project as well as Nabucco West and TAP on delivery of Azerbaijani gas from the western border of Turkey to Europe.

BP has plans to acquire a significant stake in the TAP project (Trans Adriatic Pipeline), vice president of BP on Shah Deniz Alistair Cooke said in an interview with Dow Jones Newswires in late June. BP, in principle, has completed negotiations for joining the project and assistance in securing funding in the near future, Cook said. He noted that the agreement on joining the TAP project will be signed in the coming weeks.

However he noted that the decision to invest in this project does not prejudge the results of the final selection of a route for transporting gas to Europe. The decision to invest in the TAP project is largely a reflection of its success to move forward, rather than a signal of what kind of projects will be selected in the end, he said.

In fact at first glance, the decision of one of the major shareholders of the consortium Shah Deniz seems logical. BP and Statoil, the two largest shareholders of Shah Deniz, having a 25.5 per cent stake in the consortium have joined forces as the shareholders of TAP project, where Statoil owns 42.5 per cent of the shares. All the major multinational companies are competitors by default, but BP and Statoil historically unites a lot, especially long term cooperation in the development of the North Sea shelf. Both companies have a combined 51 per cent stake in the consortium of Shah Deniz. Therefore, such a decision of BP does not seem surprising of course, given the commercial component of the negotiations with the other shareholders of TAP.

On the other hand the statement made by BP may remind someone the British version of SEEP (pipes in South-Eastern Europe) project suggested at the time, did not leave anything to remember it by except the name and just quietly disappeared. In other words, the statement of BP on participation in TAP is an attempt to spur a competitor - a project such as Nabucco West, to become more active in progress and may be more compliant in the negotiation of the equity participation of new shareholders. Moreover, not BP alone, but for example SOCAR and Total can participate.

A third possible option would be investment in the future. That is after choosing one project, to choose the other one after two to three years and when the additional gas from other sources will be known, it would be by the way, the best option in terms of diversification of export routes of Caspian gas.

However, the situation with BP's shareholding in TAP will become clear in a few weeks, Alistair Cooke promised.

Meanwhile, ​​other statements of direct or indirect support for these or other projects were made.

The Turkish Minister of Energy and Natural Resources Taner Yildiz said in an interview with the Haber newspaper the day after a BP representative's statement, that the Trans-Anatolia gas pipeline (TANAP), designed to transport Azerbaijani gas to Europe through Turkey, will be connected to the Nabucco West project.

Does this mean that Turkey supports the Nabucco West implementation?

The State Oil Company of Azerbaijan (SOCAR) still showed a maximum of diplomacy by not announcing its preferences. This is testified by the last statement of company head Rovnag Abdullayev. He reconfirmed the idea voiced earlier that the partners on Shah Deniz will buy a significant stake in the project which will be chosen as the final one for the gas export to Europe.

Abdullayev said that this share will be so significant as far as possible to be able to make decisions. He also said that SOCAR will divide its share of 80 per cent in the TANAP pipeline with other members of Shah Deniz consortium.

He also stressed that if BP wants to join the TAP project it should coordinate the decisions with the other consortium members to avoid conflicts of interest.

Managing director of Nabucco Gas Pipeline International GmbH Reinhard Mitschek said that the Nabucco West consortium is negotiating with the German firm Bayerngas. It is likely to conclude an agreement with it in the near future. "I do not rule out other European players in the market will be interested to become shareholders of the project in the future," he said, adding that partners of Shah Deniz may also be interested in it. BP, Statoil and Total were named as potential candidates.

After signing the intergovernmental agreement on the construction of the Trans-Anatolia gas pipeline, the competition around the final decision on the route of Caspian gas to Europe will strengthen. The appearance of new shareholders in the autumn will be perceived as a factor strengthening the position of one or other project.

About 80 per cent of shares in the TANAP project are owned by SOCAR, giving it the opportunity to negotiate with all interested parties, without infringing its interests.

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