The partners decided that TAP was economically and technically the best option.
Gas from the Shah Deniz field in the Azeri offshore sector will head west through the new 20 bcm/yr (706 bcf/yr) capacity TAP pipeline. This will connect with another new overland system, the Trans-Anatolian Pipeline (TANAP), near the Turkish/Greek border at Kipoi. TAP will traverse Greece and Albania and a 115-km (71-mi) section of the Adriatic Sea, finally making landfall in Sana Foca, southern Italy.
The route will facilitate gas supplies to southeast Europe countries such as Bulgaria, Albania, Bosnia and Herzegovina, Montenegro and Croatia, and the landfall in Italy will provide further openings for gas deliveries to Germany, France, the UK, Switzerland and Austria.
TAP’s shareholders are Axpo of Switzerland (42.5%), Norway’s Statoil (42.5%) and E.ON of Germany (15%). Shah Deniz Consortium members BP, SOCAR, and Total are co-funding the development and have options to purchase shares in TAP up to a total of 50%.
Shah Deniz Stage 2 is expected to produce up to 16 bcm/yr (565 bcf/yr), in addition to the 9 bcm/yr (318 bcf/yr) already delivered by Shah Deniz Stage 1. TANAP construction is scheduled to start next year and is expected to be completed in 2018.
Last month Azerbaijan’s state oil company SOCAR agreed to acquire a 66% stake in DESFA, the Greek gas transmission network operator, for $609 million. Nearly half will be allocated to reviving the ailing Greek economy.
Analysts Wood Mackenzie claimed the BP-led Shah Deniz consortium favored TAP’s greater commercial attractions over the strategic benefits of the rivalNabucco West project.
Massimo Di-Odoardo, senior European Gas & Power research analyst, said: “The shorter TAP option will have been able to propose a more attractive tariff, overcoming long-held strategic support for the Nabucco project. Nabucco West is a downsized version of the original Nabucco pipeline, and a means of diversifying supply to southeast Europe, which is dominated by Russian gas. The decision has been driven by commercial considerations, including the financial robustness of the pipeline consortia and expected prices in target markets.”
Nick Gellatly, lead analyst – Caspian Upstream research, added: “A final investment decision on Shah Deniz Phase 2 is expected to be taken before the end of the year, with gas sales agreements finalized before then. First gas could be achieved in late 2018, with first volumes reaching Europe in 2019.
“The initial 10 bcm capacity of TAP is strategically significant but represents only a small percentage of current European gas demand. SOCAR has consistently emphasized the importance of scalability as it seeks to become an influential supplier to Europe in future. To this end, future TAP expansion to greater than 20 bcm will be important.”
However, the costs of constructing the connecting TANAP overland line remain to be confirmed. “The pipeline’s construction has major political support, but will be expensive,” Gellatly said. “If progress is delayed, Shah Deniz Phase 2 gas could reach western Turkey via expansion of the existing BOTAS network. This would be a lower cost, albeit less scalable, option.
“The future ramp-up in Azerbaijan’s gas exports will still depend on development constraints in the country, such as a lack of rigs and the high cost and complexity of many of the offshore projects.”
Di-Odoardo added: “Gas may still flow along parts of the proposed Nabucco West route via the incremental construction of interconnectors and spur lines. That said, the wider ambitions of the originalNabucco project are now unlikely to be realized.”