PIPE TAKING ROOT

Despite the news about the coronavirus pandemic literally flooding the information space of the planet, uninterrupted gas supplies to foreign markets remains a relevant issue for our region. It is planned to launch the operation of the Southern Gas Corridor (SCG), which provides the European market with alternative Azerbaijani gas, in the near future.

Future of gas supplies to the Balkans

The completion of the Southern Gas Corridor contributes to the creation of a network of smaller pipelines around it, which should supply Caspian gas to the countries of the Balkan Peninsula and Central Europe. In other words, the construction of the SGC, as well as its final commissioning, had and in the foreseeable future will have an exceptional impact on the establishment of the gas pipeline system on the Balkan Peninsula and adjacent regions.

Among the regional gas pipelines, which are considered as the main suppliers of gas from SGC to local markets, are the Ionian-Adriatic Gas Pipeline (IAP), Bulgaria-Romania-Hungary-Austria (BRUA) pipeline and the Trans-Balkan gas pipeline. In addition, several interconnector gas lines have been designed and constructed to ensure a more balanced gas consumption system and mitigate the risks of the reduced gas supply due to various political and economic reasons.

During a round table discussion on energy security at the Munich Security Conference in February 2020, Azerbaijani President Ilham Aliyev stated that the three of the four segments of the Southern Gas Corridor (Shah Deniz Stage II, South Caucasus Pipeline, TANAP and TAP pipelines) had already been completed. With the end of the last stage, the Trans-Adriatic Gas Pipeline (TAP) by the end of 2020, the system will work in full force. President Aliyev noted that “the three Balkan countries of Bosnia and Herzegovina, Montenegro and Croatia have already signed a memorandum of understanding with Azerbaijan to join the project in the second phase, to ensure the construction of the Ionian-Adriatic pipeline on the territory of these countries as well." Thus, official Baku made it clear that the IAP is seen as an integral part of the second phase of SGC.

It is important to note that Azerbaijan expects full support of the European Commission for the implementation of this stage of the project as soon as it is included in the list of the common interests of the EU. As a guarantee, Baku will provide the infrastructure with the necessary volumes of gas.

At the sixth ministerial meeting of the Advisory Council on the Southern Gas Corridor held on February 28 in Baku, Azerbaijani Energy Minister Parviz Shahbazov said that "there are many promising gas fields in Azerbaijan and there will be enough gas for the second phase of the Southern Gas Corridor." In addition to Shah Deniz, the Absheron, Shafag-Asiman, Karabakh and Umid fields are considered as additional sources.

Earlier in 2019, at the meeting with his Albanian counterpart Ilir Meta, Croatian President Kolinda Grabar-Kitarovic called the connection of the Ionian-Adriatic gas pipeline with the Trans-Adriatic strategically important solution for Croatia and Albania.

It is known that the capacity of the Balkan’s own gas market is not so great and theoretically, Azerbaijani fields could well satisfy the region’s needs in the medium term. So, according to data for 2016, the total gas consumption by all countries of the Balkan Peninsula amounted to 26.6 billion cubic meters (bcm) annually. According to estimates, by 2030 the total gas consumption in these countries may reach 30-32 bcm.

Considering the growth of export opportunities of Azerbaijan, the EU and regional countries consider Baku as a promising gas supplier. Large European companies operating as the main developers of gas fields in Azerbaijan largely contribute to the ongoing process. The EU is interested in their long-term effective presence in the Caspian Sea, as well as in making European countries the main beneficiaries of gas supplies to the Balkan states.

BRUA = Modified Nabucco West

Another important component for the delivery of Caspian gas to Europe is the BRUA project, which can be considered a short version of Nabucco West (its European part). If you compare the routes of the rejected Nabucco West and BRUA, you can easily verify their identity, which confirms the desire of the project initiators to achieve actual resuscitation of Nabucco West with the support of Brussels.

Back in February 2019, in an interview with Trend, Romanian Deputy Energy Minister Julian-Robert Tudorashe said that Romania intends to propose the Southern Gas Corridor consortium to sign a memorandum of understanding for connecting the RO-BG (Romania - Bulgaria) interconnector and the Bulgaria-Romania-Hungary-Austria pipeline with the SGC. Moreover, the Romanian side did not indicate specific dates for the signing of agreement, making it clear that it will take at the later stages of the SGC development.

On the other hand, this is going to be a very short version of the Nabucco West, since the throughput of BRUA after the completion of the first stage will be 1.75 bcm of gas to Hungary and 1.5 bcm to Bulgaria annually. After the completion of the second stage, this indicator will reach 4.4 and 1.5, respectively.

By the way, the BRUA gas pipeline is part of the Three Seas Initiative (TSI) project promoted by the EU. Th objective is to ensure more efficient economic development of regions between the Baltic, Black and Adriatic Seas. In addition, for Romania itself, the implementation of TSI allows the development of Romanian energy economy. Since gas exploration is underway in the Black Sea, it is planned to extend (300 km) the BRUA gas pipeline to the sea coast .

On March 3, 2020, during the sixth meeting of the SGC Advisory Council in Baku, the Deputy Minister of Economy, Energy and Business Environment of Romania, Niculae Havrilet, stated that Bucharest was considering providing access to the Southern Gas Corridor.

SOCAR in the Balkans

The participation of the Azerbaijani State Oil Company SOCAR in the implementation of gas projects is an important factor in the effective energy cooperation between Azerbaijan and the Balkan Peninsula.

For example, Romania, Bulgaria, Albania, Macedonia at various times concluded various agreements with SOCAR to ensure the development of their own gas distribution networks. They also continue negotiations on the exploration work in coastal regions, which strengthens the presence of Azerbaijan in the energy sector of the Balkan countries. The development of the gas station network under the SOCAR brand also contributes to this.

Back in January 2019, Adrian Volintiro, General Director of the Romanian company Romgaz, discussed the prospects for cooperation with representatives of SOCAR in Baku. In particular, SOCAR representatives announced the interest of SOCAR in exploration and production of gas on the Black Sea in partnership with Romgaz. Romgaz expressed its intention to cooperate with SOCAR in onshore gas production projects in Azerbaijan and offshore fields of the Caspian Sea.

At the beginning of 2020, SOCAR operated 41 gas stations in 19 regions of Romania.

In December 2019, representatives of the chambers of commerce of Northern Macedonia and Bulgaria took the initiative to build a gas pipeline connecting the Macedonian city of Strumica with the neighboring Bulgarian city of Petrich. The initiative was presented to the Prime Minister of Northern Macedonia Zoran Zaev, as well as his Bulgarian counterpart Boyko Borisov. It is planned to create a joint venture that will develop the project and raise funds for its implementation. The project is estimated at 20-25 million euros and will take about three months to complete. The pipeline is supposed to improve the overall energy ties between the two countries and give them access to the Trans-Adriatic pipeline, which provides for the transportation of Azerbaijani gas to Europe.

During the meeting between the Prime Minister of Bulgaria Boyko Borisov and the President of Azerbaijan Ilham Aliyev in January 2018 in Baku, the Azerbaijani side showed interest in the gasification of Bulgarian cities. In January 2020, on the sidelines of the Davos Forum, Ilham Aliyev and Boyko Borisov discussed cooperation in the energy sector, including SOCAR's investments in the gasification of Bulgaria.

SOCAR is studying the gas distribution sector of Bulgaria. Thus, at the end of last year, SOCAR announced the procedure for preparing a feasibility study of investment opportunities in the gas distribution sector of Bulgaria. In case of positive results of the feasibility study, we can expect that SOCAR begins first investments in the country in 2H2020.

In 2019, Romanians came up with a proposal to create a special working group on gas supply between Azerbaijan, Romania and Bulgaria. At the same time, SOCAR is considering various forms of participation in the gasification process of Albania. In February 2018, SOCAR Balkan and Albgaz signed a letter of intent for the provision of engineering design services in Albania. Currently, the Azerbaijani side is conducting a detailed engineering design of the pipeline between the cities of Fier (compressor station TAP in Albania) and Vlore. In December 2014, Baku and Tirana signed a memorandum of understanding on cooperation to develop a master plan for gasification of Albania.

Montenegro has repeatedly supported the initiative to attract Azerbaijani SOCAR to the country after the completion of the Trans-Adriatic Pipeline.

Obviously, not only the regional gasification road-map will ensure the energy security of the Balkan Peninsula, but it will also be an important factor in political cooperation between the countries of South-Eastern Europe and the Caucasus-Caspian region.