Will AGRI be an alternative to Nabucco?

At the ministerial meeting on the Azerbaijan-Georgia-Romania Interconnector (AGRI) project in Bucharest, representatives of Azerbaijan, Georgia, Romania and Hungary expressed their full support to AGRI, which provides the delivery of Caspian gas in liquefied form via the Black Sea coast of Georgia in Eastern Europe.

“Representatives of the four countries stood for rapid start of the preparation of the AGRI project’s feasibility study (FS) at the ministerial meeting,” Vitaly Beylarbeyov, member of the AGRI LNG Co managing team, told Trend on Wednesday.
He mentioned that during the ministerial meeting the representatives were introduced the presentations of commercial companies in Japan, Norway, Turkey, Korea and France, which expressed a desire to prepare a feasibility study for AGRI.

“Bidding for the preparation of a feasibility study is going to be announced in summer 2011,” Beylarbeyov said. Currently, the AGRI LNG Co. Board of Directors continues to work on the company’s budget and work program and is engaged in recruitment as well. On February 14, Azerbaijan, Georgia, Romania and Hungary signed a protocol within the framework of the AGRI project. The document stressed the need for support of companies participating in the project in attracting the necessary funding for the feasibility study. It was also noted that under the increased work of the AGRI, the creation of the interconnector Romania – Hungary (Arad-Szeged) means finding the shortest route of delivery of Azeri gas to European markets. Earlier in Romania, within the framework of the AGRI project, Joint Venture Company was registered which will prepare the feasibility study of a new project and seek funding. Participants in the joint venture are Romanian ROMGAZ, Oil and Gas Corporation of Georgia, the company SOCAR (State Oil Company of Azerbaijan) and MVM. Each of the participants in the joint venture has a 25 percent share holding.

The AGRI project envisages transporting Azerbaijani natural gas through pipelines to the Black Sea coast of Georgia, where the gas will be liquefied at a special terminal, after which it will be delivered via tankers to the terminal in the Romanian port of Constanta. Later, the liquefied gas will be contained in the state of natural gas and using the available gas infrastructure in the country, will be directed at meeting the needs of Romania and other European countries.

It is expected that Turkmenistan, by participating in the project as a supplier could supply liquefied natural gas across the Caspian Sea to Azerbaijan for further transit to Europe. The cost of the AGRI project can vary from 1.2 billion to 4.5 billion euro.

Meanwhile, as the Nabucco Gas Pipeline International report was released on last Wednesday, a Project Support Agreement on the Nabucco gas pipeline, was signed on June 8 in Kayseri (Turkey), which is a prerequisite for successful project financing. The PSA will be signed by the Nabucco consortium and governments of the five transit countries of the project (Austria, Bulgaria, Hungary, Romania and Turkey). The main elements of the PSA are the affirmation of an advantageous regulatory transit regime under EU and Turkish energy law, the protection of the Nabucco pipeline from potential discriminatory law changes, and support for legislative and administrative actions to further implementation of the project. Nabucco gas pipeline project with a maximum capacity of 31 billion cubic meters of gas a year, envisages the supply of gas from the Caspian region and Middle East to the EU. Project participants are the Austrian OMV, Hungarian MOL, Bulgarian Bulgargaz, Romanian Transgaz, Turkish Botas and German RWE. Each participant has a 16.67 percent shareholding. In early May, the Nabucco consortium has announced the postponement of the project. Construction of the pipeline is now scheduled for 2013, and the first deliveries of gas on it are expected in 2017.

As noted in an interview with ‘Echo’, the chairman of the Center for Economic and Social Development (CESD) Vugar Bayramov, Azerbaijan attaches great importance to the AGRI and Nabucco projects.

“But we should not consider the coincidence of time of the signing ceremony of both projects, like the fact that they are competitors. AGRI cannot be an alternative to the Nabucco project as a minimum on the grounds that its capacity is only 8 billion cubic meters. Moreover, if the transportation of “blue fuel” on the Black Sea is effective at the first stage of this pipeline is planned to transport only 4 billion cubic meters.” As Vugar Bayramov notes, Azerbaijan is trying to make maximum use of alternative projects.”The main purpose is to bring Azerbaijani gas to international markets at cheaper prices. ”

According to the expert opinions regarding Nabucco, Azerbaijan has not refused to participate in this project. “Azerbaijan has participated in almost all the summits devoted to the Nabucco project, which once again indicates the existence of political will in implementing the project.”

And finally, as Bayramov notes ‘It should be taken into account that the volume of gas production in Azerbaijan is steadily growing. “Thus, it needs alternative pipelines. At present, Russia exported 2 billion cubic meters of “blue fuel “. Taking into account the possibility of a gas pipeline between Russia and Azerbaijan, the figure in the best case, can reach 6 billion cubic meters. However, the capacity of the Baku-Tbilisi-Erzurum (8 billion cubic meters) only in the next few years can reach 20 billion cubic meters. After the launch of Shah Deniz-2, Gas production in Azerbaijan will reach 45 billion cubic meters from 29 billion cubic meters. In this case, by 2020 natural gas production in Azerbaijan will reach 85 billion cubic meters. From this, as noted Bayramov, Azerbaijan in the next few years will need alternative pipelines.

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