Shah Deniz picks TAP as next export route to Europe

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The long and intense competition to be selected for the first phase of the Southern Gas Corridor gas pipeline route into Europe from Azerbaijan is over. On 28th June, at a meeting in Baku, the Shah Deniz Consortium (SDC) announced it had selected the Trans-Adriatic Pipeline (TAP) – rather than Nabucco West – to deliver gas from Shah Deniz 2 to customers in Greece, Italy and elsewhere in south-eastern Europe.

The decision keeps the consortium on track for a final investment decision on the Shah Deniz 2 project later this year. The Shah Deniz co-venturers are: BP, operator (25.5%), Statoil (25.5%), the State Oil Company of the Azerbaijan Republic (SOCAR, 10%), Total (10%), Lukoil (10%), NICO (10%) and TPAO (9%).

The Shah Deniz Stage 2 project will bring gas from the Caspian Sea to markets in Turkey and Europe. It is expected to add a further 16 Bcm/year of gas production to the 9 Bcm/year from Shah Deniz Stage 1. With its associated pipelines, the project will cost over $40 billion. Initially the Southern Corridor will deliver up to 10 Bcm/year of Shah Deniz gas to European markets.

Map showing the route of the gas pipeline to deliver gas from Shah Deniz 2 from Turkey through to Italy

THE TRANS-ADRIATIC PIPELINE ROUTE – TAP will connect with the TANAP near the Turkish-Greek border at Kipoi, cross Greece and Albania and the Adriatic Sea, before coming ashore in Italy. (Source: TAP)

Rovnag Abdullayev, president of SOCAR, said: “Implementation of the Southern Gas Corridor will be made possible through development of the South Caucasus Pipeline Expansion, the Trans-Anatolian Pipeline (TANAP) and the Trans-Adriatic Pipeline (TAP).”

Holding out hope for Nabucco West: He added that the SDC has plans to work with European interconnector projects to deliver gas to multiple countries across south-eastern Europe. He also held out hope that Nabucco West could be developed in the future for further supplies of gas from the Caspian.

“Beyond Shah Deniz, we are confident that Azerbaijan’s gas exports will increase dramatically as fields like ACG Deep, Absheron, Umid and Shafag-Asiman are developed, and we see the pipeline route towards Austria as a natural market for this gas. The development planning of both pipeline routes lays the foundation for future growth and we appreciate the support of the European Commission throughout this process.”

The selection of TAP to complete the first phase of the Southern Corridor followed an intensive evaluation period during which experts from the SDC evaluated the routes using a broad range of selection criteria. These included: commerciality, project deliverability, financial deliverability, engineering design, alignment and transparency, safe and efficient operability, scalability and public policy considerations.

The 870 km long TAP will connect with the TANAP near the Turkish-Greek border at Kipoi, cross Greece and Albania and the Adriatic Sea, before coming ashore in southern Italy.

TAP’s shareholders are Axpo of Switzerland (42.5%), Statoil (42.5%) and E.ON (15%). SDC members BP, SOCAR and Total each have options to purchase shares in TAP which if exercised in full would give them a total ownership of 50% of TAP. It is expected that the options will be exercised following the selection of TAP by the SDC. Currently, BP, SOCAR and Total are participating in the funding of the development of the TAP project.

Gas sales: The SDC has agreed terms with a number of companies in Italy and Greece for its gas sales. Negotiations are still under way for gas sales in Bulgaria, and Shah Deniz plans to make an expression of interest to take pipeline capacity to that country.

Furthermore, Shah Deniz said it supports the inter-governmental memorandum of understanding of May 2013 supporting the realisation of TAP and the Ionian-Adriatic Pipeline (IAP), signed by Croatia, Montenegro, Bosnia & Herzegovina and Albania and subsequently recognised by the Adriatic and Ionic Council.

The Stage 2 development of the Shah Deniz field, which lies 70 km offshore in the Azerbaijan sector of the Caspian Sea, is expected to include two new bridge-linked production platforms; 26 subsea wells to be drilled with 2 semi-submersible rigs; 500 km of subsea pipelines laid at depths down to 550 metres; a 16 Bcm/year upgrade for the South Caucasus Pipeline (SCP); and expansion of the Sangachal terminal in Baku.

(Photo courtesy of BP)