David O'Byrne in Istanbul -

While getting Caspian and Central Asian gas to Europe without crossing Russian soil has proved difficult, that's not because of a shortage of ideas. The latest alternative to the long-stalled EU-backed Nabucco gas export pipeline is a Georgian plan to export Azeri gas across the Black Sea in the form of liquefied natural gas (LNG).

Speaking to bne, Georgia's first deputy minister of energy, Mariam Valishvili, said her government hopes to offer an alternative route to the European market for Azeri gas with the construction of an LNG export terminal on the country's Black Sea coast.

Valishvili explains that Azerbaijan and Romania recently signed an agreement for the export of Azeri gas arriving in Romania as LNG to Europe, for which an LNG export plant in Georgia would be an essential component. "We want to be part of that corridor," she says, explaining that gas could be supplied through the existing BP-operated South Caucasus gas Pipeline, which is already carrying Azeri gas to Turkey via Georgia, and carried to the coast at Supsa, a Black Sea port city in western Georgia, through existing soviet-era lines which are currently being rehabilitated. There the gas can be turned into LNG in a plant with an initial capacity of between 5bn-10bn cubic metres per year (cm/y), she says. That gas will then be shipped by special LNG tankers across the Black Sea to the Romanian port of Constanta, where Romania's state gas company Romgaz is already developing plans for an LNG import terminal.

Stressing that the project is still very much in the early stages and that both formal talks with Azerbaijan and a full technical feasibility study have yet to be launched, Valishvili explained that if given the go-ahead, the route could also be used to export gas from other Caspian region suppliers including gas-rich Turkmenistan, which currently has to export most of its gas through Russia. "In that case, the plant could be expanded to handle anything between 15bn-30bn cm/y," she said, adding that in that event LNG could be sent to terminals other than in Romania.

Turkish displeasure

However, any move to export LNG to terminals outside the Black Sea would risk scuppering Georgia's traditionally close relations with its western neighbour Turkey, which has long warned of the dangers of transiting hazardous cargoes through the narrow Turkish straits.

Indeed, Turkey is unlikely to be pleased at the prospect of Georgia exporting Azeri gas even across the Black sea, creating as it does an alternative to long mooted pipeline export routes across Turkey. Turkey already receives up to 6.6bn cm/y of gas from Azerbaijan's Shah Deniz gasfield, which arrives through the 8.8bn cm/y BP-operated South Caucasus Pipeline (SCP) to be used both for domestic Turkish consumption and for re-export to Greece.

Ankara also harbours hopes of boosting the capacity of SCP to 20bn cm/y to carry the bulk of production from the second phase of the development of Shah Deniz. Of this, around 6bn cm/y is slated for export to Italy via Greece and the remainder to Central Europe via the long-planned Nabucco line.

However, plans for both are on hold due to a long running spat with Azerbaijan over Turkey's existing gas deal. That deal allowed for Turkey to buy gas at a substantial discount for the first year of SCP's operation, after which a new pricing mechanism was to be agreed. Despite the discount period having ended in mid-2008, the two countries have yet to agree a new price formula, with Baku insisting Turkey must pay full market price for its gas and Ankara reportedly holding out for a substantial discount in return for allowing Azeri gas to transit to European markets.

The result - a Mexican stand-off that has already seen Baku agreeing to sell a symbolic 1bn cm/yr of Shah Deniz II gas to Russia and flirting with the possibility of selling Gazprom all of the field's planned output. That would effectively end Turkey's plans to transit Azeri gas to Europe along with its hopes of cheap gas, and end Europe's hopes of establishing Nabucco as an alternative route to Russia for the export of Caspian gas to Europe.

The same could be true of Georgia's plans to export Azeri gas in the form of LNG. Valishvili claims the planned terminal's initial phase of between 5bn-10bn cm/y won't necessarily compete for the same gas as Nabucco. Perhaps, but with production from Shah Deniz II expected to be only around 12bn-16bn cm/y, the only clear prospect is that someone is going to be terribly disappointed.