PRIORITY PROJECTS

We have only a year from now when the main stage of works to take Azerbaijani gas to Europe is complete by the middle of 2018.

The development of Shah Deniz Stage II is therefore important, since the export is virtually impossible without sufficient volumes of gas. Incidentally, this part of works is almost done.

Earlier this month, President Ilham Aliyev took part at the ceremony of shipping one of the two upper platforms of the gas production platforms for the Shah Deniz Stage II.

"We could not imagine this several years ago, especially when the contract for the Shah Deniz field was signed. 90% of the construction staff consisted of our nationals. Over the years, a great human resource potential has developed. This will definitely strengthen the energy and economic potential of our country," said Mr. Aliyev.

Seven platforms have already been fabricated for the Azeri-Chirag-Gunashli (ACG) and Shah Deniz fields, but all of them were mostly assembled abroad and later delivered to Baku as large blocks. However, two platforms for the Shah Deniz Stage II were fabricated 100% on construction sites near Baku. In general, the scope of works under the Shah Deniz Stage II project and the expansion of the South Caucasus Gas Pipeline from Baku to the Georgian-Turkish border are nearly complete – 93 and 85 per cent, respectively.

The works on other components of the Southern Gas Corridor (SGC) project, which will provide an access for Azerbaijani gas to Europe, are progressing well. In particular, the construction of the Trans-Anatolian Gas Pipeline (TANAP) connecting the east and west of Turkey is 72% complete. At the beginning of next year, the pipeline will be tested with gas with the commissioning phase planned for mid-2018.

A relatively problematic component of SGC route is the Trans Adriatic Pipeline (TAP), but its completion is approaching the equator too. "The existing level of TAP development is 42%. According to the plan, it should have been 45% by now. I would like to underline this aspect of the project implementation. It is publicly known that great efforts are being made to discourage the TAP project, with organized groups and environmental issues being put forward as a pretext. According to our data, these actions are well backed up financially. I mean these groups are organized artificially, without any grounds. But we know the reasons: to stop the project or to delay its implementation. Nevertheless, the implementation of TAP lags behind the plan by only 3%. Therefore, I am confident that there will be no problems in the implementation of this project," said President Aliyev at a gala evening on the occasion of the 99th anniversary of the Azerbaijani Democratic Republic.

It is not the first time Azerbaijan is facing certain political groups opposed to the implementation of energy projects. Even at the signing of the Contract of the Century for the development of ACG fields in 1994, there was active propaganda that the agreement would not work under the conditions of unsettled political status of the Caspian Sea, and investments invested by foreign companies would be wasted. But if the young Azerbaijan Republic could cope with external pressure at the dawn of its independence, then it is pointless to hinder the ongoing processes in a country, which has already established itself on the political map of the world and has managed to become the region's leader with more than one transnational project left behind. We still remember the obstacles during the implementation of the Baku-Tbilisi-Ceyhan pipeline project, which provided access for large volumes of Azerbaijani oil to the world market. At that time, the arguments were similar – environmental risks, etc. But the project was implemented in compliance with all the strictest environmental standards and for the last ten years there was not a single case that could cause environmental damages.

"Over these years we have managed to create a diversified oil and gas transportation network. The Baku-Tbilisi-Ceyhan and Baku-Supsa oil pipelines play special roles in this achievement. For ten years, the Baku-Tbilisi-Erzurum gas pipeline has been in operation. These are historical projects. Without these projects and without investments made in these projects, we would not be able to export our energy resources anywhere. Because we live in a closed territory and do not have access to the open seas and oceans. Therefore, the oil and gas pipelines supply our energy resources to foreign markets. The economic partnership is not enough in this case. The regional cooperation is also necessary. Together with our partners, we have established such cooperation and continue strengthening it. The oil and gas projects of Azerbaijan are also the guarantors of security, stability and development in the region, as tens of thousands of people have been employed in these projects. The development in this area is accelerating in the countries implementing these projects together with us. Of course, this has a very positive effect on relations between our countries," said President of Azerbaijan at the opening ceremony of the Caspian Oil & Gas Exhibition.

Thanks to these projects, Azerbaijan provided not only new sources of energy, but also new routes for the delivery of energy resources to the world markets. As to the diversification of sources and delivery routes, the projects implemented by Azerbaijan are of ultimate importance for both the regional countries and Europe. In particular, the introduction of the Southern Gas Corridor increases the role of Azerbaijan as a country ensuring the energy security of Europe.

"The advantage of Azerbaijan's projects is that both routes and sources are diversified. After all, today the main market for us is the European market, and the new sources are of great importance for Europe too. Of course, the routes are important. But when we talk about principal energy security and energy diversification, we first of all mean new sources. The only new source for European countries is Azerbaijan, since all other sources have been supplying Europe with natural gas for many years. And most importantly, our state has a strong political will, financial resources for joint project implementation together with partners of the Southern Gas Corridor. By the way, if the state of Azerbaijan did not invest in the implementation of SGC components, then no investor would," said Ilham Aliyev.

The foreign partners do appreciate Azerbaijan's efforts in this direction. In particular, the U.S. is providing political support to our projects besides the EU, which is primarily interested in the supply of Azerbaijani gas. Two messages of President Donald Trump received on the occasion of the Republic Day, as well as the holding of the oil and gas exhibition show that the political course of the United States remains unchanged.

"The U.S. strongly supports the Southern Gas Corridor and welcomes the efforts of Azerbaijan and its international partners aimed at completing the establishment of this corridor. I appreciate the important role that Azerbaijan plays in strengthening global energy security, including the development and export of energy resources in the Caspian region. I support and welcome Azerbaijan's efforts in the field of economic diversification and reforms, and I also wish to study other spheres of cooperation serving the well-being of our peoples. Today, when you continue to reform the economic, administrative and judicial spheres, the U.S. is ready to work with you.

I highly appreciate the partnership established over the past 25 years between the United States of America and Azerbaijan, and I wish a sustainable development of this partnership," said Mr. Trump in his message to President Aliyev.

These messages demonstrate the importance given to Azerbaijan by one of the global power centers. Our states have suffered from a certain degree of tensions during the last years of Barack Obama's presidency. But the Trump administration approaches this issue from a pragmatic point of view. For Donald Trump, practically all matters are valuable as long as they are economically viable. Even during his pre-election campaign, Mr. Trump made statements about providing Europe with alternative sources of energy resources and was aware of Azerbaijan's role in this matter.

Maroš Šefčovič, EC Vice-President for Energy Union, disclosed this issue in a broader context in his address to the exhibition participants. "Azerbaijan is one of the most important partners in Europe and strives to achieve its goals through the implementation of the Southern Gas Corridor, the creation of favorable conditions for the strategic diversification of the EU's energy sources, makes an important contribution to maintaining geopolitical balance and stability in Europe. Today, we are absolutely sure that until 2020, Azerbaijani gas will reach Europe," said Šefčovič.

The delivery of Azerbaijani gas to the Balkan countries, some of which are not gasified at all, is especially important. In particular, the Prime Minister of Montenegro Duško Marković said that his government was ready to do everything for the successful implementation of the TAP project. "In fact, this is the only way to gasify Montenegro, so the government is ready to do everything to successfully implement this project, supporting the idea of ​​SOCAR, Azerbaijan to connect the Caspian and Adriatic seas," said Mr. Marković, noting that TAP will serve as a ground to start the construction of the Ionian-Adriatic Pipeline (IAP).

It should be noted that SGC is not limited to supplying gas from the Shah Deniz field, but it also opens the way for accelerating the development of other gas structures of Azerbaijan. It is expected to start production of natural gas at the Absheron field by 2020. This will be followed by gas production at the deep-seated strata of the Azeri-Chirag-Gunashli block in 2026. In the following years, it is also planned to develop the fields of Babek, Garabagh, Nakhchivan, Shafag-Asiman and others, which in general will increase the export potential of Azerbaijan to 40 billion cubic meters of gas per year by 2030. Thus, the consulting company SyEnergy suggests Azerbaijan to engage in the market of liquefied natural gas (LNG) more actively. According to the Director of SyEnergy, Claudio Steuer, it is possible to build an LNG terminal in Ceyhan and along the Erzurum-Ceyhan gas pipeline. The third stage of development of the Shah Deniz field can be declared as a source of gas. In this case, the investments in the construction of the pipeline and terminal will amount to about $5 billion and another $20-30 billion, respectively, depending on relevant capacities. The same project can ensure the delivery of natural gas to any region of he world with the highest demand and prices.

Incidentally, SGC provides access to Europe for not only Azerbaijani gas, but also the gas volumes from other sources. First of all, there is a huge potential to connect the gas lines coming from Turkmenistan, Kazakhstan, Iran, and Iraq to SGC. According to the former British Minister of State for Energy Charles Hendry, the issue of gas deliveries from the eastern coast of the Caspian remains unsolved due to the unsettled legal status of the sea. But to get the Turkmen gas, Europe could offer Ashgabat a particularly attractive deal. According to Hendry, the EU is constantly talking about the diversification of routes and sources of gas, but it is also necessary to promise the suppliers in the Caspian region a stable demand for gas, as well as to use the financing of gas supply projects and to keep low rates.

Claudio Steuer offered an interesting idea for the transportation of Turkmen gas at the Caspian Oil & Gas conference. SyEnergy proposes the use of sea transportation of compressed gas inside the Caspian basin. "Since the use of the seabed for pipeline construction is a very sensitive issue for Russia and Iran, it is possible to ship the compressed gas from Turkmenistan and Kazakhstan by tankers to Azerbaijan with subsequent injection into SGC," said Steuer.

This method of transportation is much cheaper than transportation of LNG, and eventually will allow Azerbaijan to become a full-fledged gas hub. According to Steuer, Azerbaijan has the necessary components of a gas hub except the transit: "You have gas production, there are capacities for gas storage and processing, a network of local sales is widely developed, and gas exports are actively promoted. The only thing that is not enough to become a full-fledged gas hub for the region is transit. Arrangements for the supply of Turkmen and Kazakh gas to Europe will make it possible to fill this gap."

Thus, the launch of SGC promotes the supply of gas to Europe from alternative sources. And if currently we are talking only about Azerbaijan, then the working capacity of the SGC system will attract attention of producers on the eastern coast of the Caspian as well. If the Baku-Tbilisi-Ceyhan oil pipeline was initially used to transport the Azerbaijani oil only, it is transporting considerable volumes of Turkmen and Kazakh oil now. The status of the Caspian cannot prevent interregional cooperation based solely on economic benefits.

REMARKS

“Our state has a strong political will, financial resources for joint project implementation together with partners of the Southern Gas Corridor. By the way, if the state of Azerbaijan did not invest in the implementation of SGC components, then no investor would.”

Ilham Aliyev, President of Azerbaijan

“The U.S. strongly supports the Southern Gas Corridor and welcomes the efforts of Azerbaijan and its international partners aimed at completing the establishment of this corridor. I appreciate the important role that Azerbaijan plays in strengthening global energy security, including the development and export of energy resources in the Caspian region.”

Donald Trump, President of the United States of America