By TBY | Azerbaijan | Jun 09, 2015
While the Southern Gas Corridor is positioned to ease Europe's energy concerns, Azerbaijan has increased its investment at every stage of the pipeline project to ensure Caspian gas reaches European markets.
The Southern Gas Corridor—Azerbaijan at one end, and Europe on the other. Although the concept has been established for some time, 2015 is an important year. Interest from Azerbaijan has increased in the three most important sections of the Corridor: the Southern Caucasus Pipeline (SCP), the Trans Anatolian Pipeline (TANAP), and the Trans Adriatic Pipeline (TAP). While the final investment decision regarding Shah Deniz 2 in December 2013 was a landmark moment, guaranteeing the transportation of its substantial gas reserves to the European market is perhaps even more important.
It is proposed that SCP, TANAP, and TAP will transport gas from Azerbaijan all the way to Italy along a network of over 3,500km. The SCP stretches from Shah Deniz through Azerbaijan and Georgia and into the border regions of Turkey. TANAP—the longest pipeline of the project—winds its way across the territory of Turkey, while TAP starts in Greece and moves via Albania and the Adriatic Sea before terminating in Italy.
As the project comes closer to fruition, Azerbaijani interest has increased. The shareholders of the Shah Deniz consortium changed significantly in 2014, and this has also been reflected in the pipelines. Interest from Azerbaijan has, however, remained solid in the Corridor. Although the withdrawal of Total and Statoil from SCP and increased investment from Türkiye Petrolleri Anonim Ortakl€º‚¬€º (TPAO) and Petronas is indicative of modifications of the project, the interest from BP and SOCAR demonstrate the consistent importance of the Southern Gas Corridor for Azerbaijan.
The canceling of the South Stream by Russia was a significant moment as it brought to mind that not only the Southern Gas Corridor could be a viable alternative. Some are now seeing the proposed Turkish Stream as a potential competitor. While still in its infancy, the possibility for Russia to find another entrance into Europe could add some pressure. Turkish Minister of Energy Taner Yildiz proposed that the Turkish Stream would provide positive competition. There has also been conjecture that dormant projects such as the Nabucco Pipeline—which was not selected by the Shah Deniz Consortium in favor of TAP—might have a chance for revival. However, the Italian Ambassador to Azerbaijan, Giampaolo Cutillo, said in an interview with TrendAZ, “I do not see…how [Turkish Stream] could impact TANAP.” Still, the Southern Gas Corridor partners will monitor the development of the Turkish Stream to assess competition for Europe’s energy demands.
The importance of this project for Azerbaijan is also beginning to be echoed in Europe. European Commissioner for Climate Action and Energy Miguel Arias Cañete said that due to a long-term increase in global energy demand, Europe would still be dependent on energy imports. “We want to develop the Southern Gas Corridor, but as the South Stream has been canceled, for South-east Europe, we also have to develop infrastructure,” said Cañete. He is not the first to voice such an opinion. Former Deputy Foreign Minister for Italy Marta Dassí¹ said in 2013, the “Southern Gas Corridor is strategically important not only for Italy, but also for the whole of Europe as a project diversifying European gas supplies.”
Ensuring the smooth transition of gas to the European market is fundamental not only for Azerbaijan’s energy sector, but also for its economic development and position as a reliable trade partner. While competition may increase from the proposed Turkish Stream, 2015 will be a pivotal year. The beginning of construction works in Albania for TAP are set to begin, while the TANAP consortium made an important decision in December 2014 announcing the contractors for construction. The Southern Gas Corridor is well under way and Azerbaijan is monitoring it closely.
