TANAP key EU conduit for Azerbaijani natural gas

"TANAP is important Project not only for Turkey but also for Southeast Europe,” an ex-CEO of Turkey’s Botas, Gokhan Yardim, told New Europe from Ankara, adding that Russia’s Turkish Stream project is also important.

"Russia and Azerbaijan are two reliable gas partners for many years and Turkey has good relations for many years,” Yardim said, adding that 10 billion cubic metres of Russian gas and 1.3 billion cubic metres of Azeri gas are being delivered to Turkish private importers so these gas supplies are the basis of Turkish liberal gas market.

Meanwhile in cloudy Baku, energy is also a strategic priority. Gulmira Rzayeva, a senior research fellow at Azerbaijan’s Centre for Strategic Studies (SAM), told New Europe, "thus far the Azeri natural gas price is the cheapest among the Turkey’s gas suppliers gas. Consequently it is competitive”. The 6 billion cubic metres of Shah Deniz 2 gas has been already contracted with Turkey’s Botas. "What will be the price at the moment when gas will flow to the Turkish market in 2018 is not known at the moment. However, as the gas price formula is linked to the oil price and given the current low price environment, which most likely to maintain in next two-three years, I assumed that the Shah Deniz 2 price for Botas will be lower than Shah Deniz 1 gas price and quite competitive,” Rzayeva said.

The $10-billion TANAP project envisages transportation of Azeri gas from the Georgian-Turkish border to the western border of Turkey. The initial capacity of TANAP is expected to reach 16 billion cubic metres per year. Around 6 billion cubic metres will be delivered to Turkey and the rest will be supplied to Europe.

Turkey will get gas in 2018 and after the Trans-Adriatic Pipeline (TAP) is completed, it will be delivered to Europe in early 2020.

Rzayeva said the TAP project is going according to schedule and no delay is expected. "According to TAP press releases tender for construction works and pipe supplies have been announced, so I think we should see the pipeline in place in the set schedule,” she said.

In April, Shah Deniz-operator BP became one of the TANAP shareholders with a 12% share. The other shareholders of TANAP are: Azeri state oil company SOCAR (58%) and Botas (30%).

Rzayeva noted that it is a challenging time now for energy majors to develop upstream and also invest in midstream and downstream projects given current low oil and gas prices. Final investment decisions for new projects that could bring new gas volumes from alternative sources to the European market either may be delayed or postponed, she added.

The Shah Deniz gas is in advantageous position as they have secured all the necessary binding agreements, Rzayeva said. It seems that Shah Deniz 2 gas is the only firm alternative for the EU at the moment. "I think this is the main significance of the Azeri gas,” Rzayeva said.