The EU’s Energy Commissioner Günther H. Oettinger said that the EU has obtained a definite commitment from Azerbaijan that gas will be directly delivered to Europe through a new dedicated gas pipeline system. “Whether the system consists of two gas pipelines – TANAP and TAP – or one single pipeline as earlier projects had foreseen - does not make any difference in terms of energy security. We now have a new partner for gas, and I am confident that we will receive more gas in the future,” – he said in a statement.

TAP’s gas transportation route – backed by Swiss energy company Axpo (42.5 percent), Norway’s Statoil (42.5 percent) and Germany’s E.ON Ruhrgas (15 percent) – will be approximately 800 kilometers in length, which is 400 kilometers shorter than its rival pipeline. Transport will begin near the Greek-Turkish border (Komotini), cross Albania and the Adriatic Sea, and connect with the Italian natural gas distribution system near San Foca in Italy.

Regarding the selection of TAP, BP said there was a “substantial” commercial difference between the two competing pipeline projects, including the cost of shipping the Azerbaijani gas and gas prices in the respective markets. BP operates the Shah Deniz consortium, which also includes Statoil, Azerbaijan’s energy company SOCAR, Total, Lukoil, NICO and TPAO. The decision was characterized as “an important milestone” in the opening of the Southern Corridor, which will deliver natural gas to customers in Greece, Italy and Southeast Europe. “For over two years we have been working closely with and evaluated a number of pipeline projects to select the best option that will become part of the planned southern corridor,” said BP’s regional president Gordon Birell on June 28 at the official ceremony. BP also states that the decision is an important step in the consortium’s plans for a final investment decision on Shah Deniz II. This project, with its associated pipelines, will cost over US$ 40 billion and will bring over 16 billion cubic meters annually (bcma) of Azerbaijani gas to market. “We are delighted that the implementation of the Southern Gas Corridor will be made possible through development of the South Caucasus Pipeline Expansion, the Trans Anatolian Pipeline and the Trans Adriatic Pipeline,” stated Rovnag Abdullayev, President of SOCAR. 

It is planned that TAP will start initial deliveries of ten bcma of gas annually to Europe and six bcma to Turkey in 2019, linking to the Trans Anatolian Pipeline (TANAP), which envisages the construction of a pipeline from Turkey’s eastern to its western border. According to SOCAR, TANAP’s annual capacity is planned to reach 23 bcma in 2023 and 31 bcma in 2026. Shah Deniz II is expected to add another 16 bcma of gas to the approximately nine bcma from Shah Deniz I. 

The second stage of development of the Shah Deniz field, located some 70 kilometers offshore in the Azerbaijan sector of the Caspian Sea, is expected to include two new bridge-linked production platforms; 26 subsea wells to be drilled with two semi-submersible rigs; 500 kilometers of subsea pipelines built at up to 550 meters of water depth; a 16 bcma upgrade for the South Caucasus Pipeline (SCP); and an expansion of the Sangachal Terminal. Further pipelines will be built and expanded to transport Shah Deniz gas through Turkey and Europe.

Although the capacity of the TAP pipeline can expand to 20 bcma, SOCAR is in no hurry to reject the Nabucco pipeline. “We clearly see the Nabucco pipeline corridor as the natural market for our future volumes of gas,” Abdullayev said at a news conference. He stressed that beyond Shah Deniz, Azerbaijan’s gas exports will increase dramatically as fields like ACG Deep, Absheron, Umid and Shafag-Asiman are developed, and Azerbaijan views the pipeline route towards Austria as a natural market for this gas. Turkey’s Energy and Natural Resources Minister Taner Yildiz also supports the idea that both projects will be needed considering the growing gas demand in Europe. The Turkish and Greek governments are currently assessing an offer to become partners of TAP.

According to TAP managing director Kjetil Tungland, Belgium’s Fluxys is expected to join the TAP by August, while Shah Deniz members SOCAR, BP and France’s Total have said they will take stakes in the pipeline project by the end of the year.

The International Energy Agency forecasts that gas demand in the EU will increase from the current 526 bcm to 622 bcm by 2030. Simultaneously, the EU’s Energy Roadmap 2050 forecasts that gas imports will rise, notably due to a decline in home production. This additional demand should be covered by new, additional gas suppliers.

The Shah Deniz consortium has agreed on terms with a number of companies in Italy and Greece for its gas sales. In addition, negotiations are underway to sell gas in Bulgaria, and Shah Deniz plans to express its interest in expanding pipeline capacity to that country.

BP’s vice-president for the Shah Deniz Project El Cook has stated that negotiations with potential buyers have already been conducted, and “we can expect signing of contracts within a few weeks.”

According to Fineko agency, SOCAR’s Vice President Elshad Nasirov said that the final gas tariff will be set in negotiations with specific customers. He noted that it will not be a fixed price, which Azerbaijan has applied for gas exports from Shah Deniz I. “Within the first stage the gas will be received by Greece and Italy. There will not be a single gas buyer in Europe. Only in Italy it is planned to enter into agreements with several buyer companies,” Nasirov added. Switzerland is a potential buyer after a connecting gas pipeline between Italy and Switzerland will be built in 2016. The Greek natural gas company DEPA has already submitted an initial bid to buy one bcma of gas from Azerbaijan through TAP, the Greek Deputy Energy Minister Asimakis Papageorgiou said on Friday. Energy Minister Yannis Maniatis said the quantities were provisional and could change when commercial terms of the planned pipeline are finalized.