Azernews.Az

A new route has been proposed to transport gas produced from Azerbaijan’s giant Shahdaniz field in the Caspian Sea to European markets, a source at the BP head office said.

The pipeline route -- the fourth one offered so far -- is to cross countries in southeastern Europe, including Bulgaria, Romania, Hungary and Croatia, the source at BP, the Shahdaniz project operator, told the Baku-based APA news agency on condition of anonymity.

"We have carried out some engineering and project design work regarding this option, and believe that markets are available to sell gas in the countries that could be crossed by this pipeline, including Romania and Bulgaria," the source said.

Three options for gas exports during the second stage of Shahdaniz development, which is due to begin in 2017, are under consideration – the Nabucco pipeline, Interconnector Turkey-Greece-Italy (ITGI) and Trans Adriatic Pipeline (TAP). The projects are part of the European Union-backed Southern Corridor aiming to diversify energy supply routes and sources for European nations.

The BP source said the three pipeline projects are expected to submit their proposals by October 1 to the Shahdaniz shareholders, notably, Azerbaijani state energy firm Socar, which is holding talks on the issue. But it said prospects for gas exports via the fourth route would be reviewed as well.

"This project has been under discussion for 12 months, and representatives of the other projects are aware of that."

Just like the three routes discussed so far, the latest proposals envision transporting gas through Turkey and using its domestic pipelines.

The BP source said the newly proposed project has three main advantages. First, it will come at a low cost, because the proposed pipeline would be shorter than the other ones and doesn’t have to be laid under the sea. This means that gas prices will be more competitive. Secondly, the European Commission supports diversification of gas supply sources in the territory to be crossed by the conduit. Thirdly, gas supplier Azerbaijan is interested in this alternative, as it will reach its goal of supplying gas to southeastern Europe countries, while the latter will accomplish their objective of importing Azerbaijani gas. In other words, there will be vast opportunities to enforce the agreements the resource-rich South Caucasus republic has signed with these countries.

The source said the fourth option came to the forefront as Shahdaniz partners are seeking the cheapest possible route for gas exports to Europe.

The second stage of tapping the Shahdaniz field envisages transporting 10 billion cubic meters of gas per year initially, and all three Southern Corridor pipeline routes negotiated thus far allow to transport this volume to consumers.

"But we should take into account that the Shahdaniz 2 project is very expensive, costing approximately $20 billion. Therefore, the Shahdaniz consortium’s job is to make gas exports as cheap as possible. And since the fourth option could be less expensive than the other ones, economic figures on the sale of 10 billion cubic meters of gas to Europe could be more attractive," the source concluded.

According to the BP source, two issues should be balanced regarding the new project. First, the project should be inexpensive for gas sales to be economically viable. Second, there should be an option to increase throughput capacity of the proposed pipeline in the future.

"For the time being, we need a pipeline with annual capacity of 10 billion cubic meters of gas. But it should be built in a way that allows to bring the volume to 20-30bn cubic meters, if the demand is there."

The BP source did not detail economic and technical indicators of the new project, explaining that the fourth gas export alternative has yet to be comprehensively worked upon. Nonetheless, the pipeline is expected to be no longer than 1,000 km, and its construction would cost less in comparison with other proposed conduits. Details of the project, such as countries that would also join the project and potential shareholders, are being considered.

The source said the new pipeline could be built by the Shahdaniz project partners themselves.

"BP does not rule this out. If a proposal is made, we would want this. We were involved in the construction of such pipelines as Baku-Tbilisi-Ceyhan (BTC) and South Caucasus Pipeline (SCP) [a section of the Baku-Tbilisi-Erzurum (BTE) pipeline stretching to Turkey], and are experienced in this area."

The Shahdaniz field holds estimated reserves of 1.2 trillion cubic meters of gas.

Shahdaniz shareholders are: BP (25.5 percent), Statoil (25.5 percent), NICO (10 percent), Total (10 percent), Lukoil (10 percent), TPAO (9 percent) and Socar (10 percent).