Editorial comment
There is a new entrant in the race to build a Southern Corridor pipeline; we now have four competing pipeline projects hoping to draw from one reserve. It is estimated that the Shah Deniz II gas field, the largest natural gas field in Azerbaijan, will eventually produce some 10 billion m3/yr and this supply is being hotly pursued by four pipeline projects, each hoping to build a pipeline to bring Azeri gas to Europe.
Register for free »
Get started now for absolutely FREE, no credit card required.
The EU-backed Nabucco pipeline project, which I have written about in detail in this column, would run 3863 km from Turkey to Austria, delivering gas from sources in Iraq, Azerbaijan and, potentially, Turkmenistan. Backed by both the EU and the USA, this pipeline is often seen as the alternative to the Russian South Stream pipeline project (which would bring Russian gas to Italy, crossing the Black Sea). The OMV-led Nabucco proposal is pushed as the ‘secure’ choice, since it meets certain diplomatic aims of Europe and the US: decreasing Russian energy involvement in the EU and feeding gas from US-influenced Iraq.
The Trans-Adriatic Pipeline (TAP) is the second contender for the Shah Deniz reserves. This Statoil, EGL and E.ON venture will bring Caspian gas to the EU via Turkey, Greece and Albania. A spokesman for TAP has stressed that there is room for all of the Southern Corridor projects, positioning TAP as a viable alternative route alongside its competitors.
The ITGI (Interconnector Turkey-Greece-Italy) pipeline already connects Turkey and Greece. The proposed ‘Poseidon’ extension will be the western section of the route and will bring Azeri gas to Europe via an undersea link to Italy.
This week, each project lodged its bid to obtain the 10 billion m3/yr Shah Deniz supply and there was a surprise last-minute bid made by BP - a late runner but a formidable one, seeing as BP is an operator of the Shah Deniz II field, with a 25.5% stake.
BP entered its proposal for what is dubbed the South East Europe pipeline, which would run across Turkey, Bulgaria and Romania to eastern Hungary, tagging on to existing lines to Azerbaijan in the east and Austria in the west.
BP’s proposal would keep initial costs low by pushing a smaller amount of gas through the pipeline when it begins operation, ramping up at a later date when Azeri production is more developed. BP has a strategic advantage in that it is already a key player in the development of the Shah Deniz II field.
Added to this, it has been suggested that BP could leverage its new pipeline proposal in return for Arctic gains. In an article for the European Energy Review, Matthew Hulbert speculates that, “BP knows how important South Stream is to Moscow’s structural designs over European gas – just as much as Moscow knows how crucial an upstream Arctic stake is for BP. So business can be done.”1
Shah Deniz gas is estimated to be available from 2017, and a decision is expected by late 2011. Each proposed project is in direct competition with the other: the Shah Deniz gas is there for the taking, the decision lies in the way that you use it.
1HULBERT, M., ‘BP drives stake through the Southern Corridor’, European Energy Review, 6th October 2011.
