After edging out Nabucco West pipeline to win the right to transport Azerbaijan natural gas to Europe, the Trans-Adriatic Pipeline (TAP) is now considering multiple options to expand its network across Europe.
Backers of TAP and Nabucco had been competing for four years to ship natural gas from the giant Shah Deniz gas field in Azerbaijan in the Caspian Sea, which is estimated to be one of the largest gas-condensate fields with 40 trillion cubic feet of gas in place.
Shah Deniz partners include British company BP, Norway's Statoil, Russia's Lukoil, France's Total, Azerbaijan's state-owned SOCAR, National Iranian Oil Company (NICO) and Turkey Petroleum Corporation (TPAO).
The project was originally set up to ship gas from the Caspian Sea to markets in Turkey and Europe, opening up the 'Southern Gas Corridor'.
Shah Deniz Stage 2 is expected to add a further 16 billion cubic meters per annum (bcma) of gas production to the approximately 9 bcma from Shah Deniz Stage 1, according to BP, one of the project's key backers.
The pipeline will connect the Trans Anatolian Pipeline (TANAP) near the Turkish-Greek border at Kipoi, cross Greece and Albania and the Adriatic Sea, before reaching southern Italy.
"TAP's landfall in Italy, the third largest gas market in Europe, provides multiple opportunities for further transport of Caspian natural gas to some of the largest European markets such as Germany, France, the UK, Switzerland and Austria," the company said in a statement.
"TAP's routing can facilitate gas supply to several South Eastern European countries, including Bulgaria, Albania, Bosnia and Herzegovina, Montenegro, Croatia and others."
By opening up the Southern Gas Corridor, TAP will connect Azerbaijan to Europe, and reduce the continent's dependence on Russian natural gas.
European governments are worried that a third of their natural gas supplies comes from Russia, which has pursued an aggressive foreign policy under Vladimir Putin.
Shah Deniz companies BP, SOCAR and Total recently exercised their options to take a direct stake in the project, furthering boosting its credentials and clout.
BP and SOCAR have each taken a 20% share while Total has acquired 10%. In addition, Fluxys, a major gas transit operator in Europe, has opted to join TAP, taking a 16% stake in the project.
TAP's shareholding now consists of BP (20%), SOCAR (20%), Statoil (20%), Fluxys (16%), Total (10%), E.ON (9%) and Axpo (5%).
GREEK CONNECTION
Meanwhile, Azerbaijan's SOCAR acquired a 66% stake in Greece's gas transmission system, DESFA, for USD 524 million. The deal also gives SOCAR a stake in the proposed Interconnector Greece-Bulgaria pipeline.
Since then, DESFA has signed up TAP to manage and maintain the pipeline with the intention to connect the two pipelines with the Interconnector pipelines to Bulgaria.
"SOCAR will presumably be in charge of this arrangement, given its unique combination of stakes in both DESFA and TAP," said Vladimir Socor, an analyst with Jamestown Foundation.
"This fits in with SOCAR's priorities to sell certain volumes of gas to Bulgaria (through the Interconnector from Greece), as well as using DESFA pipelines for marketing its gas directly to Greek consumers."
CHANGING MARKETS
While TAP's original shareholders had mainly focused on supplying gas to Western Europe, Azerbaijan's priority has been the Balkan region such as Bulgaria and Albania.
"The TAP consortium had insisted for years that it was mainly targeting the Italian market," Socor said, noting that the pipeline was expected to drop around two bcm per year in Greece and perhaps Albania, while reserving the bulk of the supply to Italy.
"That was shown to make little sense because the Italian gas market was and remains fully saturated and well-diversified with pipeline-delivered and liquefied gas from North Africa, Russia, and the Middle East."
With Italy developing a liquefied natural gas import facility and preparing the groundwork for TAP, the country could emerge as a major transit hub for regional gas.
"The TAP consortium's strategy would seem to fit in well with that vision," Socor said. "In recent months, the consortium's public talking points have clearly indicated that TAP gas would go via Italy to Switzerland, Germany, France, Belgium and even Great Britain. But this might change again, and more than once until 2019 when the first gas is expected to flow through the TAP pipeline from Shah Deniz."
TAP has also suggested connecting pipelines to supply Montenegro, Kosovo, Bosnia-Herzegovina and Croatia, via a proposed Ionian-Adriatic Pipeline (IAP), starting from Fier in Albania to Split in Croatia, with offshoots in Kosovo and Bosnia.
The consortium has signed memorandums of understanding (MOUs) with governments of Albania and Montenegro and with the Croatian and Bosnian pipeline companies Plinacro and BH Gas, respectively, about their possible participation in IAP.
The expanded TAP project has suddenly elevated Azerbaijan to the position of a strategic player in ensuring energy security for Europe and emerged as a strong rival to Russia.
Both the Azerbaijani and European authorities will welcome this new development in the face of a bellicose Russia.
© alifarabia.com 2013
