BP in Georgia: Interview with Neil Dunn

The decision on which pipeline will bring Caspian gas to Europe will be decided in a few months. But the impact for Georgia has already started, according to Neil Dunn, the general manager and vice president of BP Georgia.

The choice between Trans-Adriatic Pipeline project (TAP) and Nabucco West, the two options under consideration, will be made in June. For Georgia, however, regardless of which route, the Shah Deniz 2 pipeline means $2 billon in investment.

“Overall the FDI in Georgia will about around $2.0 billion. We expect around $400 million of that to be spent with local companies,” Dunn said, noting construction on the pipeline in Georgia will run from 2014 to 2017, with first gas planned for 2018.

The planned investment will make the Shah Deniz 2 pipeline the largest foreign investment in Georgia’s history, he said.

“It is hugely important for the region. Opening up the southern corridor and providing access to Europe’s energy markets every country along the value chain,” Dunn said. “The eyes of Europe will be upon Georgia and the rest of the Region; therefore, Georgia matters. For Georgia this is the single biggest foreign direct investment - ever. Bigger than BTC...so this project is very material."

In addition, the project means another source of gas for Georgia.

“While the FDI and the employment benefits the project will bring to Georgia are good, the incremental gas supply that Georgia will receive is very important as well,” Dunn said. “Right now Georgia receives about 0.8bcm of gas per year – which satisfies between 40-50% of the core demand. Georgia will have access to 1.6 bcm yearly once we reach peak delivery which really adds to their energy security by providing energy in their own right."

For the rest of Europe, the final decision between TAP and Nabucco West will depend on several factors, including economics, “strategic considerations” and scalability.

“We published in 2011 our criteria for making our decision with the intent of being very transparent and public about how the decision will be made. Economics of course will be very important – other things like strategic considerations, scalability, l operational reliability and also legal reliability. Considering the route this is going to take, each government has their own legislation which adds to the project’s complexity. We want stable, predictable legal and fiscal regimes,” Dunn said, but he noted the decision won’t be simple.

"There will be several all kinds of quantitative and qualitative assessments [to making the final decision on pipeline routes through Europe]."

Reports that parts of Europe are consuming less gas than previously forecast were widely discussed during the 12th Georgian International Oil, Gas, Infrastructure and Energy Conference in Tbilisi, Georgia, on March 26-27, where Dunn spoke about the Shah Deniz 2 project.

But Dunn stressed that even with lower demands expected in Europe, the Shah Deniz 2 project is on target.

“Forecasts indicate that in some parts of Europe [demand is decreasing] while in other parts, there is an increase,” he said. “My take on this is Europe imports a good portion of its gas. Shah Deniz 2 is really a modest volume compared to everything they import so once we get the gas to Europe; it feeds into the European grid. This first tranche of gas is really modest compared to their demand. If their demand is static or even decreases a bit there is still plenty of opportunity."