STAGE OF CHOICE

Azerbaijan needs to intensify work on the issue of gas supplies to Europe - and the decision should be taken as soon as possible so that it yields the desired effect. Such was the opinion of experts and representatives of leading pipeline companies pronounced at the Caspian Oil & Gas Conference in Baku. And here's why. According to the head of the EU office in Azerbaijan, Roland Kobia, if in 2000 gas did not come to Europe via the Suez Canal, in 2010, 35 billion cubic metres of gas were delivered to the EU. "That is why Azerbaijan now needs to take active steps to supply gas to the European region, while there are opportunities for that," Kobia said.

Large amounts

No one doubts today that Azerbaijan is ready to become a major gas supplier to Europe in the coming years. The volume of gas production in the country in 2015 is projected at 20 billion cubic metres, excluding the gas injected into the reservoirs, the vice-president of SOCAR (State Oil Company of Azerbaijan, SOCAR), Xosbaxt Yusifzada, said.

And this is while exploration work is continuing on the Abseron and Umid structures and it is planned to explore the Babak structure with projected reserves of 400 billion cubic metres of gas and 80 million tonnes of condensate, and the Safaq-Asiman structure. New rigs will be built for the timely completion of this work.

There is enough gas for large-scale exports. However, so far, according to SOCAR head Rovnaq Abdullayev, on an instruction from the president, the company is preparing a long-term (30-50 years) outlook for gas needs in Azerbaijan, taking into account the further development of the country's economy, but these figures will not have a significant impact on export potential, of course. "We believe that some amount of gas should be left as a reserve, and in this context, the Umid deposit will be taken into account," the SOCAR president said, adding that these plans will not affect the timing of the start of gas production from this structure. "The drilling of new wells from the Umid-1 platform will continue. Currently, drilling operations in this field are being conducted together with NobelOil, which has a stake in the project. In view of the preparation of the country's gas balance, the question of signing a contract for the development of this field and export of gas remains open," Abdullayev said.

But then again - Azerbaijan has Sah Daniz. Gas production in Phase 2 is scheduled for 2017, and its annual output will amount to 16 billion cubic metres, of which 6 billion will be annually supplied to Turkey and the rest - to Europe. According to BP, in 2030 the share of Europe's gas imports will be 80 per cent of its total consumption. In addition, by that time Turkey's demand for gas will be about 50 billion cubic metres. All this opens up great opportunities for Azerbaijan, and especially for Phase 2 of the Shah Daniz project.

But for the time being, the project has to address three important issues: the choice of the export route, the amount and sources of investment, and the creation of a transportation system.

Although there is some certainty about the second component, the president of BP-Azerbaijan, Rashid Javanshir, said that total investment in the production and delivery of Azerbaijani gas to Europe under Phase 2 is estimated at $ 40-45 billion.

"The cost of work in Azerbaijan and Georgia on the extraction and transportation of gas from the Sah Daniz field in Phase-2 will be $ 25 billion. In addition, an investment of about $ 15 billion will be needed to ensure the delivery of gas to Europe. Thus, the total investment required for ensuring production of gas from Phase 2 and shipping it to Europe could be $ 40-45 billion," Javanshir said.

Transit route

As for the route, as has been repeatedly written and said, the process is still under way. The agenda includes three routes: Nabucco-West, SEEP, and TAP. At present, it is known that a consortium of companies on Nabucco-West will launch an open season process. During this process, gas traders reserve volumes of gas they will buy, and after that, the general technical details of the project are defined. "The capacity of the pipeline will certainly be more than 20 billion cubic metres despite the fact that initially, 10-16 billion was planned," the managing director of Nabucco Gas Pipeline International GmbH, Reinhard Mitschek, said. According to Mitschek, the new pipeline capacity will mean lower initial investment costs and small investments by stakeholders. Mitschek believes that the consortium could provide funding for the project with the help of international financial institutions such as the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD), the European Energy Programme for Recovery (EEPR) and at the expense of export financing and commercial banks.

In any case, it is expected that the consortium on the Sah Daniz project will make its choice between Nabucco-West and SEEP in the near future. After that, the struggle will continue between the winner gas pipeline and the Trans-Adriatic Pipeline (TAP). 

The managing director of TAP, Kjetil Tungland, said in Baku that it will be ready in time for the transportation of gas from the second stage of the Sah Daniz field in 2018, if the first volumes in this project are produced in 2017. According to him, to this end, TAP will begin the construction of the pipeline no later than 2014 or 2015. As an advantage of TAP, Tungland noted that only two compressor stations can be used for the transportation of 10 billion cubic metres of gas from Sah Daniz II. "With two additional compressor stations, we can expand the capacity of the gas pipeline to 20 billion cubic metres," he said.

Meanwhile, the eliminated project ITGI (Interconnector Turkey-Greece-Italy) has not lost hope to obtain the right to transport Azerbaijani gas. For example, the consortium for the construction of ITGI has submitted its new proposals for consideration, IGI Poseidon CEO Elio Ruggeri said. "The Sah Daniz consortium agreed to consider our new proposals. If they are rejected after consideration, we will continue to seek alternative sources of gas for this project," he said.

Regarding the establishment of a direct transportation system to export gas from Azerbaijan, a project is being developed to build a $ 7-billion-euro Trans-Anatolian Pipeline. In the first stage, the throughput capacity of TANAP will be 16 billion cubic metres a year, and taking into account the forecasts for the production of 50 billion cubic metres of gas per year in Azerbaijan in 2025, the throughput capacity of the pipeline will increase to 24 billion cubic metres a year.

In conclusion, let's return to the question of time, which was mentioned above: most likely, the settlement of issues of establishing the export of Azerbaijani gas to Europe will be accelerated in the near future. Yes, we have favourable conditions, a good geographical location and an impeccable business reputation. But real buyers need to get real goods at the required time, and therefore, we need to hurry up in order not to be late. After all, the buyer, as is known, is always right ...