It's been years in the making, but final submissions for the tender to choose which pipeline will carry gas from the second phase of Azerbaijan's giant Shah Deniz field to Europe are due by the end of March, with an initial decision seen in June and a final deal by October.
The choice before Azerbaijan and the Shah Deniz consortium - in which BP, Norway's Statoil and Azerbaijan's Socar are the main players - will be to pick one of two pipelines that will carry 10bn cm/y of gas earmarked for Europe (6bn cm/y will be kept for Turkey's domestic use) from the Turkish border to the EU markets. The gas will first be sent from the Shah Deniz field to the Georgian-Turkish border via an existing pipeline, from where it will hook up to the planned Trans Anatolia Natural Gas Pipeline (TANAP) that's being built by Azerbaijan and Turkey, which will then transport the gas to the Turkish-European border. The two candidates to take the gas from there on to Europe are the Trans Adriatic Pipeline (TAP) and Nabucco West.
TAP is a private sector project that will run from the Turkey-Greece border via Greece and Albania and onward under the Adriatic Sea to southern Italy. TAP's current shareholder structure includes Axpo of Switzerland (42.5%), Norway's Statoil (42.5%), and Germany's E.ON Ruhrgas (15%).
Kjetil Tungland, TAP's managing director, is increasingly optimistic that his €2.5bn pipeline will get the nod, as it is no longer the underdog to Nabucco. "I think the odds are highly in our favour because we were more in front technically and commercially all the time, but politically we had to catch up," Tungland said in a recent interview.
Indeed, Nabucco West is the remnant of an ambitious - and ultimately doomed - EU-backed plan to bring gas all the way from the Shah Deniz field to Austria. It had huge political backing, but simply wasn't economically or practically feasible. The shorter version of 1,300 km will pick up from TANAP at the Turkish-Bulgarian border and run to the gas hub at Baumgarten near Vienna, via Romania and Hungary. At present, the six equal shareholders in Nabucco West are Austria's OMV, Hungary's Mol, Romania's Transgaz, Bulgarian Energy Holding, Turkey's Botas and Germany's RWE.
Analysts too say that on the face of it, TAP looks a better bet, since it offers a shorter route with fewer transit countries and fewer partners to complicate matters. However, a growing number of experts are speculating that both pipelines could end up getting built - a view given some weight by recent comments from BP and Socar.
Andrew Neff, senior energy analyst at IHS Energy, says the fact that TANAP is open to having two exit routes, to Bulgaria and to Greece, seems to suggest that both Nabucco West and TAP could be built in the end. "There is a growing expectation now that Nabucco West versus TAP is not an 'eitheror' proposition so much as a 'which comes first?' decision - with the June decision on which route will be built first and will carry Shah Deniz 2 gas, while the 'loser' option could yet be built one to two years behind, carrying additional Azeri gas supplies from Umid, Absheron, and future output from Shafag-Asiman, deepwater ACG," says Neff.
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