beyondbrics

The choice of Christmas day for the signing of a memorandum of understanding between Azerbaijan and Turkey for the construction of a new pipeline to carry Azeri gas to Europe, was quite possibly deliberate.

The signing of the MOU for the Trans Anatolian Gas Pipeline (TANAP) finally commits Azerbaijan to guaranteeing to supply gas from its Shah Deniz field to Europe via Turkey.

As a seasonal gift of gas, it is in itself not huge. On offer is 10bn cu m per year of gas which will be transited to Turkey’s European border with Bulgaria, with another 6bn cu m per year being sold to Turkey which can, if the gas is not needed by domestic consumers, re-export the gas as it pleases.

However the commitment by Ankara and Baku to construct TANAP effectively guarantees the realisation of the EU’s long-held policy aim of creating a “Southern Gas corridor” into the Union, providing valuable competition to Russia which already supplies close to 50 per cent of the EU’s gas imports.

As such, it almost certainly spells the end of the EU-backed Nabucco pipeline project designed to carry gas from eastern Turkey to Europe’s main gas hub at Baumgarten in Austria.

The 31bn cu m per year project has long looked doubtful with estimated costs ballooning from around €7bn to as much as €15bn, and no clear indication of where it planned to source the additional 21bn cu m per year of gas it required over and above the 10bn cu m per year Azerbaijan is guaranteeing to export.

However TANAP may yet offer a lifeline to the 8bn cu m per year ITGI project backed by Greek gas monopoly DEPA and Italy’s Edison and the 10-20bn cu m per year Trans Adriatic Pipeline project backed by a consortium of Statoil, EGL and E.ON, both of which aim to carry Azeri via Greece and across the Adriatic to Italy.

Turkey’s energy ministry has confirmed to the FT that while TANAP is slated to run to the Turkey-Bulgarian border it could also connect to the 13bn cu m per year Turkey-Greece pipeline, which currently carries less than 1bn cu m per year, depending on future talks.

Further reading:
Guest post: Balkan energy markets need reforms as well as Caspian gas, beyondbrics
Nord stream: turning on the tap, beyondbrics
Nabucco pipeline nations want gas pledges, FT