Azerbaijan offers Iraq gas pipeline route to Europe

By bne IntelliNews February 11, 2014

bne -

Azerbaijan has offered to allow Iraq access to its pipeline network to export gas to Europe, Foreign Minister Elmar Mammadyarov said February 10 during a visit to Baghdad.

According to Mammadyarov, Iraqi government officials are interested in exporting through the Southern Gas Corridor, an EU project designed to gain direct access to gas from the Caspian and Middle East, thereby reducing dependence on imports from Russia. "It's a huge project ... and it's open if Iraq is also interested to deliver their own natural gas," Mammadyarov said, according to Trend.

"The project is there, so if any other countries... want to join the Southern Gas Corridor, including Iraq, who already expressed some interest for this project, we are ready to start negotiations," the official continued.

Azerbaijan is already planning to build new infrastructure to enable gas exports from the offshore Shah Deniz field to Europe, where demand for gas imports are expected to increase by 49% in the next two decades according to BP's Energy Outlook 2035. In December, the consortium developing the field announced it had finalised the investment agreement for the second phase development of Shah Deniz and related pipeline infrastructure.

The existing Southern Corridor Pipeline from Azerbaijan to Georgia will be expanded from 9bn cubic metres (cm) to 25bn cm capacity. The Trans-Anatolia Gas Pipeline (TANAP) will then transport gas from the Georgian border across Turkey, where it will connect to the Trans-Adriatic Pipeline (TAP), which will run across Greece and Albania to Italy.

Shah Deniz II will supply 16bn cm of gas through TANAP per year. Turkey will take 6bn cm, with the remainder set for European markets. The first shipment is due to reach Turkey in 2018 and European customers the following year.

The route is a direct competitor to Russia's South Stream project. That planned pipeline aims to ship 63bn cm per year under the Black Sea and then via Bulgaria, Serbia and Hungary. Brussels, however, has challenged the project's standing in relation to its Third Energy Package legislation, which demands Russian gas giant Gazprom allow access to third party suppliers. It has demanded that the current contracts with EU transit countries must be revised.

As of end-2012, Iraq's proven gas reserves were 3.6 trillion cm, but the country produced just 800m cm during the year, down 9.3% compared to 2011, according to BP's Statistical Yearbook 2013, with most of this gas sold domestically. However, Baghdad is keen to increase exports and is looking for new routes.

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