Balkan pipe dreams
BAKU – The European market is a priority for Azerbaijan’s gas because it offers competitive prices, Vice President of State Oil Company of the Azerbaijan Republic (SOCAR) Elshad Nassirov told New Europe in an interview in Baku. But he stressed that whichever pipeline project is selected – the Trans-Adriatic Pipeline (TAP) or the reconfigured Nabucco West - to transport Azeri gas to Europe must also supply the Balkan countries.
On the sidelines of the Crans Montana Forum in Azerbaijan ‘Addressing a Changing World! Which Energy for Which World?’ on 29 June, Nassirov said SOCAR’s condition in the Shah Deniz consortium developing the second phase of the field is finally shared with by the State Oil Company of the Azerbaijan Republic’s partners within Shah Deniz. “Our condition and demand was whichever route we go we have to make sure that the Balkan countries are offered our gas,” he said. For instance, the idea behind the initial Nabucco, Nabucco Classic, was to transport gas from Baku to Baumgarten in Austria. It planned to supply little or no gas to Bulgaria and no gas to the nearby countries of Albania, Greece, Montenegro, FYROM, Croatia and Bosnia-Herzegovina. He explained that was one of the reasons that Nabucco Classic didn’t work It didn’t satisfy the Shah Deniz investors.
Balkan countries may be small markets but the combination of the small markets is the diversification of demand and is the guarantee of continuous demand and off-take of gas, Nassirov said, adding that the Southern Gas Corridor would pass in close vicinity anyway. “So, of course it is very easy to sign a contract for supply of gas from here [Azerbaijan] to Baumgarten and you know that in Baumgarten they will buy 10bn cubic metres. But the difference will be from this absence of headache will be the difference in netback – the transportation from Bulgaria or Greece to Baumgarten which will be saving,” he said.
The SOCAR Vice President said the European market “is a must” for SOCAR. “Without entering the European Market we will never be able to compare the prices with other markets. The European market is driven by economic laws of competition. It’s driven by demand and supply routes. So in the European market we don’t need to negotiate much. They are ready-made pricing mechanisms. But if we have additional gas and if Russia needs gas, of course we will be able to sell to them as well,” Nassirov said. Russia already purchases 2bn cubic metres of Azeri gas per year.
From the 16bn cubic metres from the second phase of the Shah Deniz field 10bn cubic metres will go the west beyond Turkey and 6bn cubic metres will be sold to Turkey. “This is the Turkish take for this deal,” he said. On 26 June, Turkey and Azerbaijan signed a contract for the construction of the Trans-Anatolian gas pipeline (TANAP) which will bring the Azeri gas to Turkish-Bulgarian border.
Turkish EU Minister Egemen Bagis has said that “those who want to take natural gas through Turkey will be able to build their own pipelines starting from the Turkish-Bulgarian border to meet their demands".
Nassirov told New Europe that the Southern Gas Corridor is not competing with Russia’s South Stream project. “The difference between South Stream and Southern Corridor is that South Corridor brings additional volumes. South Stream is aimed at avoiding the Ukrainian transit and all the problems of Gazprom relating to that transit. There will not be much additional gas - it will be gas which used to delivered through Ukraine. Our gas will be entering the needs of the Balkan countries above the need for the Russian gas because the gas volumes and gas contracts are long term,” he said. “Even if we bring additional gas, if you – in Greece – or if they – in Bulgaria – have the long-term contracts for take-or-pay obligations for Gazprom gas, nobody will buy our gas in this case. So we don’t see any threat of competition for Gazprom because we will not be competing with their volumes. We will be, let’s say, offering our gas with a very good demand for our gas for the volumes to above the Russian supply. So everybody will be happy and satisfied: The sheep, the wolves and the shepherds and I don’t know who is who in this,” he said.
Asked if the Chinese market was an option for Azerbaijan’s gas supplies, Nassirov said “China is too far away. The difference between Russia, Europe and China is that Russia is 250 kilometres from Baku from Sangachal [the biggest Azeri oil and gas terminal]. No need to construct any additional infrastructure. Europe is a must for us and we ready to construct the pipeline, to finance billions of dollars there. China is far away and to get into China we have to spend billions but Chinese market is not driven by the open market competition,” he said.
Asked if SOCAR like Russia’s Gazprom was looking at downstream investments in Europe, Nassirov said, “If there are good conditions for that, yes, we can think about it. We are increasing the gas network in Georgia, maybe we will do that in Turkey but if we are offered comfortable or affordable condition for our work, of course we can accept that proposal,” he said.
Regarding energy co-operation between the European Commission and Azerbaijan, Nassirov said he does not foresee any problems, unlike Russia. “We have accepted the energy charter so you will not have any problems with us so if you don’t create any problems we can co-operate and work together,” he said. He noted that SOCAR tries to avoid politics and instead has adopted a market approach. “We would prefer to stay away from these, let’s say, fears of Russian domination because we don’t share the views that our gas will be competing with somebody because of our gas somebody will threaten someone’s relations with somebody. If there is need for our gas we will supply it – that’s it,” he said. “In 1920 because of our oil Bolsheviks occupied our country so we don’t want to repeat that mistake.”