Exclusive interview of Trend with head of TANAP consortium Saltuk Duzyol
Status of TANAP project
As you may recall, we held our inauguration ceremony last year for Phase 0. We started delivering gas to Turkey commercially in June 2018. Till now, we have delivered approximately 2.5 billion cubic meters of gas to Turkey, to Turkish customers. Phase 1, the section, which we construct for delivering gas to Europe, was also mechanically completed by 2018.
Starting from April 15 of this year, we started line filling the section which is required to deliver gas to Europe. As of today, only 85 kilometers of TANAP are left without line filling. I think we will linefill this remaining section till June 12 of this year and we will be completely ready for commercial gas deliveries to Europe by July 1 of this year. For the moment, 99.7 percent of the project is complete. The whole pipeline has already been tested. It is up and running, except for the remaining 85 kilometers, which is also mechanically complete, only waiting for hot commissioning with gas. Hopefully, we will be ready by July 1 and we’ll start commercial deliveries to Europe after the completion of TAP.
When I talk about the pipeline, I mean the whole system, including surface facilities, compressor stations, metering stations, pig stations and block valve stations. It is a huge project.
Offshore section is also complete and linefilled. According to the project schedule, our plan was to complete everything by July 1 of this year.
Current and future gas deliveries via TANAP
There is a ramp up period. For the first year we were expected to deliver 2 billion cubic meters of gas contractually. But till now, we’ve delivered approximately 2.5 billion cubic meters to Turkey. According to the ramp up period, in the second year our commitment is to deliver 4 billion cubic meters to Turkey. So, it will reach a total amount of 6 billion cubic meters for Turkey and we will reach the plateau period. There is a similar ramp up period for delivering gas to Europe. But in total, when we reach the plateau period for each side, for Turkey and Europe, we will have delivered 16 billion cubic meters. TANAP’s reaching 16 billion cubic meters of capacity totally depends on TAP project’s readiness. Frankly speaking, we can deliver 16 billion cubic meters of gas as of today. We are ready. But according to the sale and purchase agreement between the parties, between the sellers and buyers, there is a ramp up period, because the customer needs vary year-by-year. So it is a totally commercial agreement, in which we are not involved as TANAP project. TANAP is a transmission business, we are not trading gas. Trading is a business of our buyers and sellers. For the moment we are able to deliver 16 billion cubic meters of gas right away.
Prospects for increasing TANAP’s transportation capacity
Frankly speaking, our design capacity is 31 billion cubic meters of gas per annum. But we are currently investing in 16 billion cubic meters of transportation capacity. We have built only two compressor stations for the moment, which are sufficient for delivery of gas to Turkey and Europe in the said amount. But when it comes to expansion, we will have to add some additional compressor units to be able to reach a capacity of 24 billion cubic meters per annum. We will have to add two more compressor stations and to be able to reach 31 billion cubic meters we will need seven compressor stations in total.
If an expansion is foreseen by the investors to increase TANAP’s transportation capacity to 24 billion cubic meters first and then to 31 billion cubic meters, then of course, we will have to hold some new tenders, new procurements for this capacity expansion. But first, we need to have upstream developments to be realized. If the investors have the appetite to invest in additional production capacities in Azerbaijan, of course, TANAP will have a chance to expand its existing transportation capacity. But for the moment we only have some tenders and contracts for the operation period. We have signed more than 57 contracts till now for the operation period. We are talking about a transportation agreement for 15 years. TANAP has liabilities against its shareholders and shippers. It has to be able to fulfill its operation to the highest standard possible in the market place.
TANAP’s benefits for Turkey
Turkey is realizing such kind of projects for quite a long time in close collaboration with Azerbaijan. This started with Baku-Tbilisi-Ceyhan oil pipeline project, continued with Baku-Tbilisi-Erzurum gas pipeline project. Turkey is using Azerbaijani gas since 2007 under the contract, which was signed in 2001 for 6.6 billion cubic meters. After the realization of TANAP, Turkey will be using per year 12.6 billion cubic meters of Azerbaijani gas. Azerbaijan’s portion in the total gas consumption of Turkey is increasing in recent years. Turkey with TANAP project will contribute to supply security and diversity a lot. TANAP will definitely bring some supply flexibility to Turkish network, because using TANAP system BOTAS will be able to transport huge volumes of Azerbaijani gas directly to consumption centers, which are to the west of Eskisehir, which is the off-take point of Turkey. Currently, 66 percent of the total consumption accounts for the west of Eskisehir in Turkey, which means flexibility from the operational point of view. Apart from that Turkey will gain significant tax revenues from TANAP project. During the investment stage TANAP also provided a lot of jobs for Turkish people. At the peak level, more than 13,000 people were involved in the project. Turkey has some ambitions to become a gas corridor and an energy hub in the region. TANAP will contribute to the greatest extent possible to achieve this final goal.
Indeed, we have spent more or less $7 billion to realize the project. When we took the final investment decision, the initial estimated cost was $11.7 billion. So there has been also a huge cost saving equivalent of $4.8 billion. And there is still some room for additional cost savings.
It was a successful project, which was delivered under budget and on time.
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