David O'Byrne in Kars region, Turkey -
Turkey has formally broken ground on the construction of the 31bn cubic metres a year (cm/y) Trans Anatolian Gas Pipeline (TANAP), which when operational by the end of 2018 will carry Azerbaijani gas to European markets and reduce the bloc's energy dependence on Russia.
The pipeline of 1,850km will initially carry 16bn cm/y of gas from Azerbaijan's Shah Deniz gasfield, with the remaining 15bn cm/y of capacity expected to be filled with gas from other Caspian fields or elsewhere in the region.
At a ground breaking ceremony on March 17 in Turkey's Kars region, attended by presidents Tayyip Erdogan and Ilham Aliyev, the Azerbaijani president announced that he expects the first gas to flow through the line in 2018, and beyond that he foresees the line will be able to carry more Azeri gas. “We have proven [gas] reserves of 7.6 trillion cm, and more optimistic estimates suggest the real reserves could be double that,” he said.
Erdogan for his part stressed the importance of the pipeline for the whole Eurasian region. “[The EU energy project] the Southern Gas Corridor, when it is fully implemented, will provide a strong link between the Caspian and Eurasia region and Europe,” he said.
The importance of the project for Europe was also stressed by Maros Sefcovic, vice president in charge of the energy union for the European Commission. “This project is of immense importance for Europe, as it will supply the only new source of gas currently available,” he said.
No running in the Corridor
TANAP is being developed by a consortium in which the Azeri state energy firm Socar holds 58%, Turkey's state gas importer and Transit operator Botas has 30%, and BP, which is the operator of the Shah Deniz field and only formally joined the TANAP consortium on March 13 after two years of negotiations, has 12%.
Of the 16bn cm/y that TANAP will initially carry, 6bn cm/y will be taken by Botas and supplied to consumers in north-west Turkey. The remaining 10bn cm/y will be transited to the Turkey-Greece border, from where it will be transferred to the planned 20bn cm/y Trans Adriatic Pipeline (TAP), which will carry the gas through Greece and Albania, and then across the Adriatic to Italy, from where it can either supply the domestic Italian market or be transited to Central Europe.
That 16bn cm/y of gas will be supplied from Azerbaijan's Shah Deniz field, which is being developed by a consortium led by BP (28.8%) and with major shareholders including Turkey's state oil company TPAO (19%) and Socar (16.7%).
The ground breaking ceremony for TANAP brings to an end more than 15 years of discussions on how to realise the EU's long-mooted "Southern Gas Corridor” – a project borne out of the bloc's increasing dependence on imports from Russia beginning in the late 1990s, which prompted the EU to launch proposals for a new route for imports from the Caspian and North Middle East via Turkey.
With the construction of TANAP guaranteed by Baku and Ankara, and 16bn cm/y of gas secured from the consortium developing Azerbaijan's Shah Deniz gasfield, the development of TAP is also now certain, and the development of the long-planned corridor also now guaranteed. The only question remaining is how to fill the remaining 15bn cm/y of TANAP’s capacity.
While both Socar and BP have stated their preference for using gas from other Caspian fields in which both companies have interests, the inter-governmental agreement between Turkey and Azerbaijan for TANAP also allows for the line to carry gas from Turkmenistan, and the Turkish parliament recently approved a bill allowing Turkmen gas to be transited through Turkey to Europe.
That possibility was further bolstered last year when Malaysia's state oil company Petronas, which already holds the rights to three gasfields in the Turkmen sector of the Caspian took a 15.5% stake in the Shah Deniz consortium. Petronas already holds the rights to three gasfields in the Turkmen sector of the Caspian and is looking for markets for the gas. Whether this will result in the construction of a long-planned gas export line across the Caspian from Turkmenistan to Azerbaijan remains to be seen.
However, an alternative exists in the form of exports overland via existing infrastructure through Iran – the sole hurdle being the need for Tehran to finalise a deal with the West over its nuclear programme.
Also technically possible would be for gas from Iraqi Kurdistan to be transited via TANAP. Both the Kurdistan Regional Government and developers operating in the region have stated that gas could be made available for export to Turkey and Europe as soon as 2018. Although for that to be realised, it would require both the approval of the Iraqi central government in Baghdad and an agreement between Turkey and Azerbaijan to amend the inter-governmental agreement for TANAP.
With several options for filling TANAP – and by extension TAP also – the EU should be reassured that its Southern Gas Corridor is finally being realised. However while 31bn cm/y is a healthy start for the corridor, it is still dwarfed by Russian exports to Europe which topped 160bn cm in 2013 and are expected to continue rising.
With more Caspian gasfields yet to be developed and the prospect of both Turkmen and Iraqi gas being available, Azerbaijan has already floated the possibility of a second TANAP line to be laid parallel, doubling the currently planned capacity. That, though, will depend on how much gas the European market needs and when.
With Turkey and Russia already in serious talks over the construction of Moscow's planned 63bn cm/y so-called “Turk Stream” pipeline through Turkey, serious questions remain over when, and indeed if, an expanded TANAP could become viable. Not to mention the question of whether Turkey wants to go against the interests of its close ally Azerbaijan, damage its prospects of joining the EU, and further increase its dependency on Russia, which already meets close to 60% of Turkey's gas needs.
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