CLOSER TO EUROPE

November marked a landmark event for the Trans-Anatolian Gas Pipeline (TANAP) project, designed to supply Azerbaijani gas to the Turkish and European markets. TANAP, also known as the Energy Silk Road, was a historic step towards making Turkey a new energy hub.

An initiative to implement the project was first put forward back in November 2011 at the 3rd Black Sea Energy and Economic Forum in Istanbul. On November 21, 2018, on the banks of the Meric River on the Turkish-Greek border, TANAP was connected to the Trans-Adriatic Pipeline (TAP), which is the last, fourth component of the Southern Gas Corridor (SGC) project.

Finally, on November 30, 2019, in Ipsala, the presidents of Azerbaijan and Turkey, Ilham Aliyev and Recep Tayyip Erdogan, solemnly launched the second, final phase of TANAP. Thus, the leaders of the two countries confirmed the completeness of the 1850 km infrastructure for gas supplies to Europe.

This section of the Trans-Anatolian gas pipeline connects the city of Eskisehir in Turkey to the Turkish-Greek border. Before that a test injection of Azerbaijani gas into this section of the pipe took place on April 15, 2019 to verify its readiness for commission. On June 15, gas from the Shah Deniz field via TANAP reached the Turkish-Greek border.

Initial throughput of TANAP is designed to transport at least 16 billion cubic meters of natural gas (10bcm for Europe and 6bcm for the western regions of Turkey). In the future, the annual capacity of the pipeline will be increased to 24bcm and then to 31bcm. Shareholders of the TANAP project are SOCAR (51%), SOCAR Turkiye Enerji (7%), BOTAS (30%), BP (12%). The pipeline will bring TANAP shareholders $1.45 billion in revenues annually, of which 58% will be the share of Azerbaijan. It is also expected that due to the operation of the gas pipeline, Turkey will cover 12% of its gas demand.

Azerbaijani gas from Stage 2 Project has been successfully supplied to the Turkish market since June 30, 2018. As of the end of October, about 3.18mcm of gas have already been transported. According to SOCAR, in 2019 TANAP deliveries reached 3bcm, and since 2020 they will double to 6bcm.

Waiting for TAP

"In recent years, we have completed all the tasks in the fields of energy and transportation. We commissioned the Baku-Tbilisi-Ceyhan oil pipeline and the Baku-Tbilisi-Erzurum gas pipeline in an extremely difficult geopolitical situation. TANAP is a historical project too and it is already in operation. We have to wait only a year until the completion of the Southern Gas Corridor. We will successfully complete this project too, if God permits," Azerbaijani President Ilham Aliyev said.

Indeed, in order to ensure full-scale operation of SGC, it remains only to wait for the completion of the TAP gas pipeline to ensure the flow Azerbaijani gas to Europe, and more specifically to Italy, through Greece, Albania and the Adriatic Sea. Thus, this will increase the influence of Azerbaijan and Turkey in the region. Moreover, with the implementation of the Southern Gas Corridor project, Azerbaijan will become an important player in the European gas market. Being an alternative to Russian gas, in terms of route and sources of supply, SGC's European segment—the 4.5 billion euros worth Trans-Adriatic gas pipeline is one of the priority energy projects for the EU. At initial stage, it will ensure the transportation of 10bcm of gas annually from Shah Deniz Stage 2 to the EU countries. The total length of TAP is 878 km, of which 550 km pass through the northern part of Greece, 215 km through the territory of Albania, 105 km through the Adriatic Sea and 8 km through Italy. The project's shareholders are BP (20%), SOCAR (20%), Snam (20%), Fluxys (19%), Enagas (16%) and Axpo (5%).

According to TAP AG consortium, as of the end of October 2019, the Trans-Adriatic Pipeline project is 90.5% complete. "TAP is a priority for the current Italian government. Gas may reach Italy in the third quarter of 2020," TAP Managing Director Luca Scippati said.

Deputy Minister of Infrastructure and Energy of Albania, Ilir Beita, said that in his country the construction of both the land and marine segments of the TAP has already been completed. "The construction of compressor stations is also complete. In general, only small projects related to TAP project remain incomplete on our territory. We do everything to complete the construction of the Albanian section of the pipeline within the established schedule," Beita said.

He also mentioned that Albania will not purchase gas as part of the first phase of the TAP project. "Should a decision is made to expand the project (from 10 to 20bcm annually, R+), Albania has already expressed a desire to acquire gas as part of the second phase of TAP. By that time, the annual gas consumption in Albania will reach 1.2bcm," Beita added.

Azerbaijani government also believes that with the completion of the TAP, the Southern Gas Corridor will start full-scale in 2020. Speaking on November 21 at the event Contract of the Century: Successful Activities for 25 Years held in Washington, Azerbaijani Energy Minister Parviz Shahbazov said that the secret of successful implementation of the SGC project is strategic partnership with foreign companies and continued US support. "Strong political support from the US has played an instrumental role in the implementation of the global energy project, the Southern Gas Corridor. As President Donald Trump noted, SGC is the pinnacle of our energy cooperation. Full launch of this project next year will be another milestone of our cooperation," P. Shahbazov said.

With a total project cost of $40 billion, the total costs of the Azerbaijani side represented by Janub Gaz Dehlizi (CQD) CJSC reached $9.87b versus the planned amount of $10.1b, as of the beginning of September 2019, while in 2019 CQD investment under the project will be approximately $900 million.

IGB: Deep Into Europe

The prospects for the Southern Gas Corridor look more promising than ever, especially if we consider the construction of interconnectors in Europe, through which it will be possible to deliver Azerbaijani gas supplied via TAP to customers. In particular, this concerns the Greece-Bulgaria gas pipeline (Interconnector Greece-Bulgaria, IGB). IGB is one of seven priority projects to ensure the security and competitiveness of the energy market in the European Union. The project is also important in terms of diversifying gas sources and supplies for Bulgaria and Southeast Europe. It is part of the Vertical Gas Corridor (VGC), which will connect the gas networks of Bulgaria, Greece, Romania and Hungary. The operator also considers its extension to Ukraine, Moldova and Serbia.

IGB will connect Bulgaria with the Trans-Adriatic Gas Pipeline (TAP) making it possible to deliver Azerbaijani gas to the country. The length of the gas pipeline between Bulgaria and Greece is 182 km, of which 150 km pass through the territory of Bulgaria. Its technical capacity at the initial stage will be 3bc per year, and in the future, it can be brought up to 5.5bcm. The total project cost is estimated at 220 million euros.

Bulgarian government expects that the IGB will make it possible to receive Azerbaijani gas from the Shah Deniz field already in 2020. "No later than next year, Bulgaria will be able to receive LNG from the USA, Qatar, Cyprus, Egypt, as well as natural gas from Azerbaijan. Next year, we will be able to tell the Bulgarians you have no dependence, and you can get gas from anywhere," Bulgarian Prime Minister Boyko Borisov said during an inspection of construction works on the IGB.

In Bulgaria, Azerbaijani gas is considered as one of the possible sources for distribution through the Balkan gas hub to ensure diversification of supplies and competition in the European energy market. By the way, under the contract for the supply of natural gas signed between Bulgargaz and SOCAR, Bulgaria will annually receive 1bcm of natural gas from Stage 2 of the Shahdeniz field development from 2020.

Claims for Azerbaijani gas

The list of clients ready to receive natural gas from Azerbaijan through the SGC is constantly growing. Ukraine is one of them. "Azerbaijan is becoming an increasingly strong player, including in terms of energy. Ukraine would like to participate in the Southern Gas Corridor project," Ambassador of Ukraine to Azerbaijan, Vladislav Kanevsky, said.

According to the Ukrainian side, with the commissioning of the TAP and IGB pipelines, it will be possible to transport Azerbaijani gas to Southeast Europe. With the addition of Romania to the SGC project, Kiev will have the opportunity to receive Azerbaijani energy along the route Bulgaria-Romania-Ukraine. Romania has already confirmed its readiness to provide guaranteed capacities for the supply of gas through the Trans-Balkan gas pipeline to the Romania-Ukraine border (4.1mcm daily from January 1, 2020). As specified by the General Director of Operator GTS of Ukraine (OGTSU) LLC, Sergey Makogon, this means about 1.5bcm per year. According to Makogon, this is a sufficient amount at current stage because there is still no significant free gas resource in this region.

"There is no free resource of gas in these regions. Active work is underway to expand gas pipelines. Representatives of Greece announced the expansion of the LNG terminal, the completion of 90% of the TAP pipeline, which will deliver Caspian gas to Greece, from where it can be taken to Bulgaria, and then to Ukraine," Makogon said.

Meanwhile, Kiev is trying to solve the issue of diversifying gas supplies, for example, by purchasing LNG from the US. On August 13, 2019, Ukraine, Poland and the US signed a memorandum of cooperation in gas sector. It provides for the development of US LNG supplies to Poland and Ukraine, the use of Ukrainian underground gas storages and the development of the country's gas infrastructure.

The increasing demand for Azerbaijani gas throughout Europe is a positive factor for the national economy. Apparently, in the long term natural gas will top the list of the most demanded types of fuel in the world. TANAP project will be the key to turning the region into one of the leading transit hubs.