FINISHING TOUCH

The ceremony to launch the construction of the Trans Adriatic Pipeline (TAP), held in Thessaloniki, Greece, dispelled all, even theoretical suspicions about the possibility of the failure of the implementation of the Southern Gas Corridor.

For Europe, it means gas coming from a new source along a new route. This route will enable the delivery of Azerbaijani as well as Caspian and Middle Eastern gas in the future.

"The Southern Gas Corridor project demonstrates that the creation of integrated energy infrastructure linking Caspian resources to European consumers is technically possible, economically viable, and politically beneficial for all parties involved," Maros Sefcovic, vice-president of the European Commission for Energy Union, said during the TAP groundbreaking ceremony. He noted that the SGC is the biggest infrastructure project of our time. At the same time, he expressed hope that after the launch of TAP in 2020 it will be possible to expand its capacity beyond the initial 10bn cubic metres within a short period of time.

According to US Secretary of State John Kerry, the SGC "will give Europe new hope and opportunities in terms of diversification". In an address read out by US Department of State Special Envoy and Coordinator for International Energy Affairs Amos Hochstein, Kerry said that the USA is committed to supporting new gas routes that promote diversification and energy security in Europe, including the SGC and the Greece-Bulgaria Interconnector (IGB).

Greek Prime Minister Alexis Tsipras pointed out that the construction of TAP coincided with a crucial moment for the Greek economy and contributed to its successful recovery. "TAP will help Greece try on the role of an important energy hub. It is also important that the project implementation involves Greek companies, and up to 8,000 jobs will open during the construction process. The pipeline also promotes regional cooperation. Therefore, in addition to economic significance, it is also of geo-strategic significance," Tsipras said.

Before Greece, Turkey will try on the role of energy hub. According to Turkish Energy Minister Berat Albayrak, the construction of the Trans Adriatic and Trans Anatolian (TANAP) pipelines means the start of the construction of a new stable energy market in the region.

Greece and Italy have begun physical work to build the TAP. Given that work on TANAP and the South Caucasus gas pipeline (from Baku to the Georgian-Turkish border) has long entered an active phase, one can forecast a timely completion of all components needed to deliver Azerbaijani gas to Europe starting from the year 2020.

Naturally, the volumes of Azerbaijani gas supplies are not comparable to those from traditional suppliers, first of all Russia.

But for Europe, it is primarily important to ensure the delivery of gas to its market from a new source. The SGC system being created also makes it possible to involve new sources in the future.

For example, the capacity of the TANAP gas pipeline can be doubled to 32bn cubic metres, while Azerbaijan will be using it to transport 16bn cubic metres only.

TAP possesses the same capacity enhancement potential. Trend news agency has quoted TAP consortium Managing Director Ian Bradshaw as saying that "our project provides for the possibility of doubling the throughput capacity to 20bn cubic metres per year by installing two additional compressor stations and modernizing the original compressor stations".

Turkmenistan is said to be the prime potential supplier. According to Turkmen Oil and Gas Minister Myratgeldi Meredov, Turkmenistan has great prospects for partnership with the EU regarding Turkmen gas supplies. He noted that the country had already completed the construction of the East-West gas pipeline. "This pipeline, which brings together almost all Turkmen major fields into a unified gas transportation system, makes it possible to supply gas to the east and in the future to the west, and this will further enhance guarantees for the security and reliability of energy supplies to international markets," the Turkmen minister said.

According to Azerbaijani Energy Minister Natiq Aliyev, although Turkmenistan has great potential to expand gas exports, there still are many issues, mainly with the construction of a trans-Caspian gas pipeline. "I regard as realistic exports of Turkmen gas to the west. Turkmenistan has no objection against that, but on the condition that it sells gas on its border. This raises many questions. Our position is that we create an opportunity for every country to supply its gas via the SGC to Europe. We even agree - as long as there is a long-term agreement with third countries - to make investments to increase the throughput capacity of the corridor - in order to increase the capacity of gas pipelines that are part of it and to build additional gas compressor stations," Natiq Aliyev told ANS TV.

But the potential resource base of the SGC is not limited to Turkmenistan. It is necessary to take into account the possibility of the expansion of gas exports from Azerbaijan, whose potential is not confined to the Shah Deniz field - one should not discount the Abseron, Umid and Babak fields, the deepwater layers of the Azeri-Chirag-Guneshli block, etc. Overall, SOCAR experts believe that chances are significantly higher for the discovery in the future of gas fields than oil fields, which has to do with geological peculiarities.

Finally, the possibility of Middle Eastern gas being transported through the SGC system has big prospects. Initially, consideration was given to the possibility of Iraqi gas exports, but now we are talking about Iranian gas in the light of the lifting of sanctions, and even Israeli gas, which has been discovered in the shelf of that country.

The fact that there is a very big variety of alternatives actually plays into Europe's hands as it affects the price factor and rids it of the option of using gas as a means of political pressure.

The SGC accessing southern Europe is of particular importance - in this region, countries are almost 100 per cent dependent on one source - supplies by Russia's Gazprom.

The EU has for many years been trying to reduce the consumption of Russian gas, strenuously trying to prevent new projects related to Russian gas supplies. It was under pressure from the EU that the South Stream project was shut down, which aimed for the delivery of Russian gas to Bulgaria and on to Southern and Central European countries, that the political rift in the Turkish-Russian relationship led to the freezing of Turkish Stream, and that Brussels is actively fighting against the Nord Stream 2 project, which provides for gas supply to Germany.

It is clear that all new projects proposed by Gazprom also emerge amid political confrontation with Ukraine, as the bulk of the gas transit to Eastern Europe runs through that country. Russia is doing its best to rid itself of using the gas infrastructure of Kiev, which turned from partner to enemy overnight.

It is amid these circumstances that the EU is blocking all Gazprom initiatives for new routes and creating maximum opportunities for other projects capable of bringing new sources of gas to the European continent. 

This is not about Azerbaijani gas only but also about the possibility of liquefied gas supplies from the United States. The EU's "big brother" is advocating, even perhaps more than the Europeans are, possibilities of diversification and free competition in the European gas market. "I'm talking about market competition, where Russian gas competes with everyone. And ultimately, if you are buying 100 per cent from one source, but you have the ability to buy from others, that's fine. But right now several countries in Europe have no choice. How do you negotiate price and supply terms if you have no choice?" US Department of State Special Envoy and Coordinator for International Energy Affairs Amos Hochstein told Interfax news agency.

The Department of State representative also concedes that he sees "no future without Russia as one of the largest gas suppliers to the European market". But at the same, Hochstein urges the Europeans to oppose new Russian pipeline projects such as Nord Stream 2. "Building a 12- billion-dollar new pipeline when existing infrastructure is already in place and gas prices are at an all-time low means the commercial application of how you monetise it is suspect. The pipeline through Ukraine works well. Instead of creating new infrastructure to move gas from Ukraine to Germany, creating a situation where 80 per cent or more of Russian gas delivered into Europe goes into Germany only doesn't make a lot of sense from an energy security perspective or from an economic security perspective," Hochstein says.

However, he actively supports the SGC project, because it is "bringing Europe gas it has never had access to" and therefore developing competition. "I think Europe should have LNG terminals that could feed into the Trans Adriatic Pipeline so it competes with Caspian gas. I'm all for a maximum number of gas supply possibilities, for competition and, accordingly, affordable prices," Hochstein stresses.

Given prospects for a global increase in gas consumption (gas will be very actively squeezing coal out of global energy balance), as well as possibilities of Europe as the largest consumer of gas, everyone will find room in this market. A different matter is to secure space as soon as possible, especially as all kinds of conditions are created for this. It is not for nothing that the TAP project, as a component of the SGC, received preferences under the Third Energy Package for both the construction and operation periods. Given these opportunities, Azerbaijan is quite in a position to prove itself as a reliable and predictable gas supplier to Europe. Especially as Europe knows about Azerbaijani oil firsthand.