Shah Deniz deal levels playing field between Nabucco, TAP
Nabucco shareholders have signed a Co-operation Agreement and an
Equity Option & Funding Agreement with Azerbaijan's Shah Deniz
Phase 2 project, which levels the playing field once again between
Nabucco and the Trans-Adriatic Pipeline (TAP), competing to carry
Caspian gas to Europe, Trend news agency reported referring to the
New Europe.
"The agreement signed between the Nabucco shareholders and the Shah
Deniz partners is similar to an earlier agreement signed between
Shah Deniz partners and the TAP shareholders," Julian Lee, Senior
Energy Analyst at the Centre for Global Energy Studies (CGES) told
New Europe. "The agreement with Nabucco levels the playing field
once again between the two lines competing to carry Azerbaijan's
gas from Turkey's western border into Europe. Without the
agreement, Nabucco would have been at a huge disadvantage to TAP;
the agreement has allowed it to catch up," Lee added.
The Nabucco agreements signed on January 18 envisage close
co-operation to align the time schedule and project development of
Nabucco West and Shah Deniz Stage 2 projects, joint funding of the
costs of Nabucco West's further development up to Shah Deniz's
European pipeline selection decision, and granting to Azerbaijani
state oil and gas company SOCAR, British Petroleum, Norway's
Statoil and France's Total options to take up to a total of 50%
equity in the project and to participate in a new NIC shareholder
structure, following a positive selection of the Nabucco West
pipeline by the Shah Deniz Consortium, Nabucco said in a press
release.
In August 2012, TAP and the partners on the Shah Deniz field
development, signed an agreement to secure funding for the TAP
project. The agreement also includes an option for the Shah Deniz
shareholders to take up to 50% equity in TAP.
But this January, Nabucco caught up with its competitor. The
Nabucco shareholders called the agreements a "milestone" in the
development of the project. "The shareholders welcome this
agreement, and fully support the ongoing co-operation with Shah
Deniz II. Nabucco is a multi-sourcing and scalable project further
contributing to supply and transport diversification integrating
the southern corridor into the European gas grid. Upstream and
midstream projects are both integral parts of the value chain for
Azeri gas and we are confident that Nabucco provides a win-win
scenario for all parties involved," Nabucco Steering Committee
Chairman Hans-Peter Floren said.
Nabucco Gas Pipeline International CEO Reinhard Mitschek hailed the
conclusion of the agreements. "Nabucco has been in close
negotiations with the Shah Deniz partners since the designation in
June 2012 of Nabucco West as the Central European delivery option.
Today's important achievement is a clear indicator of the potential
success of this process and of the commerciality and
competitiveness of Nabucco West in offering convincing business
opportunities in the promising market area of South East Europe and
Central Europe," Mitschek said.
Nabucco Gas Pipeline International CFO Frank Siebert called these
agreements an essential step forward. "The signing of the equity
option and funding agreement, in particular, is a mark of the
producers' confidence in Nabucco West. This goes a long way towards
mitigating risk for our investors and allows us to move forward on
a sound and stable financial footing. We look forward to working
with the Shah Deniz partners and remain confident that Nabucco West
can provide the best option for all parties," Siebert said.
Nabucco West plans to take Caspian region gas from the
Turkish-Bulgarian border via Bulgaria, Romania and Hungary to the
Central European Gas Hub at Baumgarten. Nabucco shareholders are
Austria's OMV, Hungary's FGSZ, Romania's Transgaz, Bulgarian Energy
Holding, Turkey's Botas and Germany's RWE. It is the shareholders
who are responsible for the negotiation of gas contracts.
TAP project is designed to transport gas from the Caspian region
via Greece and Albania and across the Adriatic Sea to southern
Italy and further into Western Europe. TAP's initial pipeline
capacity will be 10 billion cubic metres per year, but it can
expand to 20 billion cubic metres per year. TAP's shareholders are
Swiss AXPO, Norway's Statoil and Germany's E.ON Ruhrgas.
The Southern Gas Corridor is one of the EU's priority energy
projects aimed at diversifying the routes and sources of energy
supply, thereby reducing the 27-country's bloc reliance on
Russia.
The consortium of Azerbaijani Shah Deniz gas field development
plans to make its selection on the gas supply route to European
markets between Nabucco West and TAP in 2013.
Asked if the 10 billion cubic metres from Shah Deniz would be
enough to fill Nabucco, a senior consultant of the project told New
Europe that "one of Nabucco's great advantages making it an
extremely competitive project is that it is scalable between 10 and
23 billion cubic metres per year to adapt to market offer and
demand".