Southern Gas Corridor Proceeds despite Turmoil
The second meeting of the Southern Gas Corridor (SGC) advisory council met in Baku February 29 to express suppport for the project despite turmoil in markets worldwide.
Two EU vice-presidents – the high representative Federica Mogherini and Maros Sefcovic – and the Azeri president Ilham Aliyev were present.
Also there were the US special envoy and coordinator for international energy affairs Amos Hochstein; the director general for international energy affairs of the UK’s department of energy and climate change, Edmund Hosker; the state secretary of Italy’s council of ministers, Claudio De Vincenti; the energy ministers of Turkey, Georgia, Albania and Bulgaria, a representative from the Greek energy ministry and the ministers for the economy of Montenegro and Croatia.
BP’s regional president Gordon Birrell presented an update of the construction activity for the Shah Deniz 2 project, whose gas will be the source for SGC.
He said Shah Deniz 2 was over two thirds done in terms of engineering, procurement and construction. The project remains on target for first gas from stage 2 in 2018. BP is also moving forward with the South Caucasus pipeline expansion (SCPX) which means building pipeline in Azerbaijan and compressor stations in Georgia.
The general manager of the Trans Anatolian pipeline, Saltuk Duzyol, said that the line was progressing well with 320 km of pipes welded and 600 km trenching dug. The last contract for construction of 19-km subsea section of Tanap will be awarded soon.
According to Duzyol, the line will be ready to receive first gas in 2018 in Turkey with further flow to Europe in 2020.
The construction of the European section of SGC – Trans Adriatic Pipeline –will kick off in late May or early June in Greece near Thessaloniki, said TAP CEO Ian Bradshaw.
“We have achieved great progress in Greece. With the help of the government of Greece the pipes will be delivered by the end of April 2016, and the actual building will start in the middle of the year,” he said. Bradshaw said the supply of pipes to Albania is also expected in late April-early May 2016.
While the meeting showed the full political support from all involved in SGC, the relatively low level of representation from members of the international financial community was noticed. Invitees included senior representatives from the European Bank of Reconstruction and Development and the European Investment Bank and International Finance Corp, among others. However there were representatives from regional offices and these expressed interest in funding SGC.
The volatility of the energy market makes it clear that the Southern Gas Corridor project must be completed on time to prevent unnecessary costs, said Maros Sefcovic at a press conference after the event.
"Everything is going according to schedule, so maybe Caspian gas can reach Europe earlier than expected," he said, adding that the regular meetings of the advisory board help track progress and solve potential difficulties.
According to Hochstein, while companies across the energy have cut their capital expenditures, all those present at the Baku meeting, private and public sector, underscored their commitments to SGC. “That is a strong statement of importance of this project that is going to be completed on time in this environment of the energy markets,” he added.
One key player in the SD 2 project, Norwegian major Statoil, sold its 15.5% stake in the field and the SCP in October 2014 as a cost-cutting measure after the oil price crash.
Azerbaijan expressed its positive attitude toward financing its share of the SGC. “We will have no problems with financing of our share in the Southern Gas Corridor project”, said energy minister Natig Aliev. According to him, TAP members also expect to secure funds for the project by the end of April. “Talks are under way. The issues of TAP financing will be completely solved on April 28," Aliev told reporters without giving details.
The meeting participant signed a joined declaration expressing full support for implementation of SGC and its further expansion beyond EU border, mainly in Balkans. “For this purpose, a special interest is shown for the Greece-Bulgaria and the Ionian Adriatic Pipeline interconnector projects,” it said.
SGC envisages the transportation of gas from the giant Shah Deniz field in Azerbaijan to Europe with a 3,500-km journey from the Caspian Sea to EU. The Shah Deniz 2 development and construction of a pipelines chain costs are estimated to cost $45bn.
There are cheaper ways to bring gas to Europe than the SCP-Tanap-TAP route, including Nord Stream, whose third and fourth strings will be able to carry some 55bn m³/yr and covers a far shorter route without any transit countries. But the European Commission is seeking to diversify the supply portfolio for Europe.
Kama Mustafayeva