Azernews.Az

By Gulgiz Dadashova

The consortium developing Azerbaijan's giant Shah Deniz gas field in the Caspian Sea on June 28 announced that the Trans Adriatic Pipeline (TAP) has been selected to transport Shah Deniz gas to Europe.

TAP left behind the rival Nabucco West project. As is reported, Shah Deniz is expected to make its final investment decision by December 2013 and TAP is expected to make its final investment decision until then.

The TAP pipeline will collect Azerbaijani gas on the border of Greece and Turkey and carry it across Greece and Albania before reaching southern Italy, stretching 870 kilometers. Construction of TAP is expected to start in 2015.

Commenting on the Shah Deniz Consortium's (SDC) decision, BP's Vice President for Shah Deniz development Al Cook said that the TAP and Nabucco West projects had a big difference between them in terms of the cost of gas and its delivery.

According to him, more than 10 options had been considered while choosing a route for four years. The decision was made on the basis of eight criteria and as a result, shareholders of the Azerbaijani gas condensate Shah Deniz field development arrived at a decision.

According to Cook, it will be possible to rapidly supply gas to the TAP participating countries via the Trans-Anatolian and Trans-Adriatic gas pipelines. Work on an interconnector is underway, which will ensure gas supplies to other European countries.

"We are now working on the Shah Deniz-2 project," he said. "The investment amount is projected to reach $40 billion. This is a very important decision that will lay groundwork for the development of other fields."

Cook said negotiations on the purchase of gas with Italy and Greece are almost complete. Besides these countries, talks on the construction of the Interconnector Greece-Bulgaria (IGB) are underway with Bulgaria, which also plans to be linked to TAP.

This decision was another step towards delivering Azerbaijani gas to the heart of Europe, as the Shah Deniz project provides for the implementation of projects both in the Caspian region and beyond.

Azerbaijan owns large gas reserves and plans to develop new fields -- Umid, Absheron, Shafag-Asiman and Babek -- along with Shah Deniz. This, in turn, will allow not only realizing the TAP project, but also providing access to the countries of Eastern Europe.

President of Azerbaijan's energy company SOCAR Rovnag Abdullayev has said there are no political risks involved in the supply of Azerbaijani gas to Europe.

"No one is safe from the risks and the Karabakh issue [between Azerbaijan and Armenia] remains unresolved. But Azerbaijan is a peaceful country, is in favor of good neighborly relations, and I do not think there will be risks. We do not see any political risk in this direction," Abdullayev said.

BP Azerbaijan head Gordon Birrell told media that the transportation of Azerbaijani oil to world markets has been ensured for 15 years. There have been no political risks and interventions during this period.

"The same applies to the first phase of the Shah Deniz field development," Birrell said.

Meanwhile, European officials welcomed the SDC decision.

Charge D`Affaires of the EU Delegation to Azerbaijan Toralf Pilz said that the decision on the gas transit route to Europe greatly contributes to the development of the Southern Gas Corridor project.

"This decision is of great significance to the development of the Southern Gas Corridor project," Pilz said, noting the importance of Caspian gas supplies via the chosen route to Southern and Eastern Europe.

UK Prime Minister's Trade Envoy for Azerbaijan Charles Hendry also believes that Azerbaijan's energy resources will increasingly play a vital role in the European and world economy in the years to come. Hendry said in a statement that Azerbaijan "has been playing a central role in unlocking those resources for the benefit of all".

Hendry said the SDC decision is an important step in ensuring the EU energy security, offering both diversification of gas supplies and routes.

"This announcement should be seen as a successful demonstration of the EU's policy of seeking energy diversification and should be welcomed and supported by all member states. The UK will continue to support this aim and the Southern Corridor project," Hendry said.

According to him, while this announcement marks a key stage in the realization of the Southern Corridor, there is still some way to go.

"This is an extremely complicated project, involving multiple countries and companies. The UK stands ready to support the continued progress of the Southern Corridor and the Shah Deniz 2 development and we look forward to the Shah Deniz Consortium's SDC announcing their final investment decision later this year," Hendry said.

Senior European Gas & Power research analyst for Wood Mackenzie Massimo Di-Odoardo said that the SDC decision has been driven by commercial considerations, including the financial robustness of the pipeline consortia and expected prices in target markets.

"The shorter TAP option will have been able to propose a more attractive tariff, overcoming long-held strategic support for the Nabucco project," Di-Odoardo said.

According to Wood Mackenzie's report, TAP should also enable Azerbaijani gas to reach beyond the Italian market.

"There are plans to build reverse flow capacity in northern Italy, linking to other countries in northern Europe. Moreover, TAP will also target offtake points in Greece and Albania, as well as connections to other markets, including Bulgaria and the Balkan region," Di-Odoardo said.