Time to Act on Diversifying EU Gas Supplies
SWITZERLAND-BAAR - Europe’s ambition to diversify gas resources has never been closer to materialising. In 2013, the Shah Deniz Consortium is set to select the pipeline that will bring much-needed gas from the Caspian basin, thus unlocking fresh supplies both for Central Europe as well as South Eastern Europe – a region that is currently dependent on a single gas supplier.
As the competition between the two remaining pipeline projects progresses, it has become increasingly evident that technical and financial maturity are key considerations in the final selection. The Trans Adriatic Pipeline (TAP) is the only project that can realise the Southern Gas Corridor quickly, efficiently and economically, so that Caspian gas can reach Europe before this opportunity has passed.
In Pole Position
The progress registered by TAP throughout the past year speaks for itself. So let us take a step back, look at the bigger picture and recap a few milestones that marked the last nine months.
In February 2012, the Trans Adriatic Pipeline was the first project to be preselected by Shah Deniz and enter exclusive negotiations with the Consortium. This demonstrated TAP was the most technically and commercially advanced project.
Second, in June 2012, Azerbaijan and Turkey signed the necessary Intergovernmental Agreement and Host Government Agreement to implement the Trans Anatolian Gas Pipeline (TANAP). This pipeline will bring Caspian gas from the eastern to the western Turkish border, offering a stable transit route across the country. TAP has been designed in a way to be able to seamlessly connect to TANAP.
Third, in August 2012, Shah Deniz partners BP, Socar and Total signed a funding agreement with TAP’s shareholders, underpinning, once again, their confidence in the project’s technical and financial advantages. The fact that TAP has a stable, engaged shareholder base comprising world-leading energy companies and offers the only self-financed proposal that does not require government funding, can be seen as important factors in the equation.
Finally, in September 2012, the governments of Italy, Greece and Albania – the three countries through which TAP will pass – confirmed their political support for the project by signing a Memorandum of Understanding (MoU) in New York. This endorsement kicked off the negotiations for concluding a full scale intergovernmental agreement (IGA) on TAP to be concluded early next year.
All the pieces are falling into place for the Trans Adriatic Pipeline. TAP offers a realistic, pragmatic and cost-effective solution, with strong political and financial support.
Ready for the Next Stage
The Shah Deniz II project will entail one of the largest energy investments in the Caspian region. Its shareholders have confirmed that the development timetable and ambitious plans remain on track. After 2018, the 10 billion cubic metres (bcm) of gas available in the first phase are expected to be followed by extra supplies from Azerbaijan, further enhancing Europe’s energy security.
A scalable pipeline, TAP can easily accommodate these additional volumes. By installing two additional compressors along the route, the Trans Adriatic Pipeline can double its capacity to 20 bcm plus, at minimal cost. Not only will this bring new gas resources to the markets in South Eastern Europe – via key infrastructure such as the Ionian Adriatic Pipeline and the Western Balkan Ring – TAP will also diversify supplies in Central Europe. After reaching Italy – the second biggest economy in Europe – Caspian gas can flow further to countries like Germany and France. Offering a long-term, secure and reliable infrastructure from producers to consumers, TAP is ready for implementation.
As even more supplies become available in the Caspian basin in the next decades, additional pipelines will be necessary for bringing all these resources to Europe. Yet, at this stage, given current forecasts, only 10 bcm of gas are available on stream and the sole project ready to realise the Southern Gas Corridor route is TAP.
Once our pipeline is selected by the summer of 2013 – as we hope it will be – and the resolution to construct is reached, TAP’s construction will be launched in late 2014/early 2015. By 2018, the Trans Adriatic Pipeline will be ready to receive the Shah Deniz gas flowing through Turkey.
All in all, we remain confident that the Trans Adriatic Pipeline is the strongest contender in the competition, offering the most robust gas transport solution for Europe. Now is the time to take the decisions for making the Southern Gas Corridor a reality as TAP enters 2013 with new energy, commitment and optimism.