Azernews.Az

By Aynur Jafarova

The commercial component will play an important role in the selection of a final route for transportation of Azerbaijani gas to Europe, General Director of the Russian National Energy Institute Sergei Pravosudov has said, referring to the two options under consideration -- Nabucco West and Trans Adriatic Pipeline (TAP).

Pravosudov said several factors will be taken into account while choosing between the two pipeline projects and the commercial side of the issue will be one of the main factors.

"The facts as to which countries are ready to buy Azerbaijani gas and who is willing to pay the highest price will be taken into account," Pravosudov said.

Earlier, Vice President of Azerbaijani state energy company SOCAR Elshad Nasirov said in his recent press interview that a final investment decision on the second stage of developing Azerbaijan's Shah Deniz field in the Caspian Sea is expected to be made by October and a final decision on the gas transportation route to Europe will be made by the end of June 2013.

Experts believe that the selected route must be the most commercially viable and the selected market should be able to offer the exporters long-term security of demand for a period of at least 20-25 years.

Gas to be extracted within Shah Deniz Phase 2 will be exported to Turkey in the amount of 6 billion cubic meters per year while 10 billion cubic meters is to be supplied to European markets.

Experts believe the initial advantage of Nabucco West is higher gas prices in the Balkan markets caused by the complete dependence on a single gas supplier.

The Balkan countries may be small markets if viewed separately, but in combination they could guarantee a solid market, says Farhad Mammadov, Director of the Center for Strategic Studies under the President of Azerbaijan.

Nabucco West is a short-cut version of the Nabucco project, which envisages construction of a pipeline from the Turkish-Bulgarian border to Austria. Designated capacity of the project is up to 31 billion cubic meters per year.

TAP is designed to transport natural gas from the Shah Deniz field via Greece and Albania and across the Adriatic Sea to southern Italy and further into western Europe. The project is designed to expand transportation capacity from 10 to 20 billion cubic meters per year, depending on supply and demand.

The advantages of the TAP project are the higher gas price on the Italian hub by 20 percent compared with the price in western Europe as well as significant financial potential. TAP's shareholders are major global, European and regional players that would increase the pipeline's commercial viability. Furthermore, TAP would be able to guarantee access of Azerbaijani gas to the western Balkans.

Nabucco and TAP are both part of the Southern Gas Corridor, a planned series of links aiming to reduce European countries' dependence on Russian energy.

As for competition between the Southern Gas Corridor and the Russian South Stream project, Pravosudov believes that both of these projects will be implemented. In his opinion, these projects are different, especially from the point of view of the claimed gas supplies.

The design capacity of South Stream is up to 63 billion cubic meters of gas per year whereas the planned volume of Azerbaijani gas transportation to Europe is 10 billion cubic meters.

Pravosudov believes that Europe needs these 10 billion cubic meters of gas to diversify its gas supply sources and to reduce dependence on Russian supplies.

According to the expert, the construction of the South Stream pipeline will not prevent the realization of the Southern Gas Corridor.

Elshad Nasirov also said that the Southern Gas Corridor and the South Stream projects are absolutely different.

"Southern Gas Corridor is the creation of a new transportation route, plus new volumes of alternative sources of gas are involved. With South Stream it's only a new way to transport the same volumes of gas produced by the same region and the same producer," Nasirov said.

The South Stream project includes the construction of a gas pipeline across the Black Sea to the South and Central European countries.