Opportunities to supply gas to Europe

Opportunities to supply gas to Europe

Azerbaijan has all opportunities for supplying gas to Europe, the Foreign Affairs Minister of Azerbaijan Elmar Mammadyarov said in an interview to the Wall Street Journal.

He explained that one idea to bring his country’s gas to Europe is to build a dedicated pipeline across Turkey to the border with the EU.

It would then split up in two branches, one toward Greece and one to Bulgaria, where it would split even further, “like a Christmas tree,” feeding Central European countries and the Balkans until it reaches Austria, the site of one of the biggest European gas hubs, Mammadyarov said.

“Technically it is possible and from the financial point of view is also one of the good ideas -not spending a lot of money,” he said.

He believes the Interconnector Turkey Greece Italy (ITGI) is still the most advanced project, but the financial crisis that’s taking a heavy toll on Greece and Italy is raising concerns about the future gas demand in these two countries.

He didn’t elaborate on the Trans Adriatic Pipeline (TAP), which also has Italy as its ultimate market.

Three projects – Nabucco, ITGI and TAP – have been competing for years to transport the gas from Shah Deniz II field, which is being developed by the consortium of BP PLC and Norway’s Statoil ASA. The consortium is expected to decide which pipeline project to use to carry the gas to Europe in the first half of 2012.

BP put forward another project, called the South-East Europe Pipeline, which would move the gas from the EU-Turkish border all the way to Austria, feeding the markets of Central and Eastern Europe, and possibly the Balkans.

The pipeline would have a similar route to the bigger and potentially more expensive Nabucco, which would cost more than €8 billion. But the innovative idea would be that the capacity of the pipeline declines as it makes its way through Europe, leaving gas in the national gas markets it crosses on its way up to Austria.

Caspian gas is key for Europe’s efforts of increasing its energy security by diversifying supplies away from Russia.

Nabucco gas pipeline project is designed to transport gas from the Caspian region and Middle East to the European countries. The total length of the pipeline is 3,900 kilometers with a maximum capacity of 31 billion cubic meters per year. The project’s partners include the Austrian OMV, Hungarian MOL, Bulgarian Bulgargaz, Romanian Transgaz, Turkish Botas and the German RWE.

Nabucco project is planned to start construction in 2013 and the first supplies will be commissioned in 2017.

Experts are skeptical that more gas will be available in time for Nabucco, and the companies developing Shah Deniz don’t like Nabucco because they are afraid that they will have to pay higher transit tariffs to cover for the resulting spare capacity.

But the consortium seems to be keener on Central and Eastern Europe –where most of the countries still heavily depend exclusively on gas from Russia– as a market for its gas, rather than the alternative route going to Greece and Italy. Because that’s the region most dependent on Russian gas imports, it’s the area where diversification of supply is really valuable.



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