The beginning of construction for TAP is taking place at a pivotal time for the Greek economy and the wider region, Prime Minister of the Hellenic Republic Alexis Tsipras said at the ground breaking ceremony for the Trans Adriatic Pipeline (TAP) in Thessaloniki on May 17. From the perspective of the project’s economic significance, ensuring energy supply for Europe constitutes the foundation stone of the energy strategy of Greece and Europe. According to him, TAP has been one of the biggest direct foreign investments in Greece. At the initial stage the pipeline will supply 10 billion cubic meters of Azerbaijan gas to Europe and will be crucial for ensuring Europe's energy security, the Prime Minister added. The event was attended by First Deputy Prime Minister of Azerbaijan Yagub Eyyubov, SOCAR President Rovnag Abdullayev, Minister of Energy of Azerbaijan Natig Aliyev, US State Department Coordinator for International Energy Amos Hochstein, Vice-President of the European Commission for Energy Union Maroš Šefčovič, senior officials from Albania, Italy, Bulgaria, representatives of the member companies of the consortium.
TAP will transport natural gas from the giant Shah Deniz II field in Azerbaijan (recoverable reserves at 1 trillion 200 billion cu m) to Europe. The pipeline is 878 km long. Of these, 545 km will pass via Greece, 215 km via Albania, 105 km across the Adriatic Sea, 8 km in Southern Italy. The highest point of the pipeline will be located in the mountains of Albania (1,800 m), its lowest point at the bottom of the sea (820 m). First gas sales to Georgia and Turkey are scheduled for late 2018, and first deliveries of Azerbaijan gas to Europe will be commenced in 2020. TAP’s shareholding is comprised of BP (20%), SOCAR (20%), Snam S.p.A. (20%), Fluxys (19%), Enagás (16%) and Axpo (5%).
TANAP will be implemented in 4 stages. Its throughput capacity will reach 16 billion cu m (10 bcm for Europe and 6 bcm for Turkey) in 2020, 23 bcm in 2023, 31 bcm in 2026. The TANAP pipeline will transport Azerbaijan gas to the western borders of Turkey. The throughput capacity of the new gas pipeline for transit of Azerbaijan gas via Turkey will be at least 16 bcm.
Shareholders of TANAP: SOCAR - 58%, BOTAŞ - 30%, BP - 12%.
“The Southern Gas Corridor project is based on the efforts we together with our partners have been making here in Azerbaijan for the past 20 years, President Ilham Aliyev said at the meeting of the Southern Gas Corridor Advisory Council….. . “Without those essential elements already created in Azerbaijan and in the neighbourhood, the Southern Gas Corridor “would have sounded just like a good idea or aspiration today”, Ilham Aliyev said.
In 1996, Azerbaijan and the BP-led consortium of foreign companies signed the Shah Deniz agreement. The Shah Deniz gas field is the essential resource base for the Southern Gas Corridor. The first oil was produced from the Chyrag platform in 1997. This was a record in the history of the oil industry. That is the difference in time between the signing of the contract and the first oil production comprised only three years. In 1999, the Baku-Supsa pipeline was built to connect the Caspian Sea with the Black Sea. It enabled transportation of Azerbaijan oil to the Georgian port of Supsa on the Black Sea. This was the important element of diversification. For the first time the Black and Caspian Seas were connected by the pipeline transporting crude oil. The first ever pipeline connecting Caspian and Mediterranean Seas, Baku-Tbilisi-Ceyhan, was commissioned in 2006. In 2007, the South Caucasus gas pipeline was constructed to connect Baku, Tbilisi and the Turkish city of Erzurum.
Fight against monopolism
But it was only the initial stage. The challenging tasks, namely the fight against monopolies to survive the winter in 2006 -2007 and ensure gas supplies not only for Azerbaijan, but for neighbouring Georgia as well, and the subsequent fight against inertia, snobbery and bureaucracy of the European Old World, were still to come.
The fact is that in 2006 Azerbaijan used to import 4.5 bcm of gas and paid a lot of money for it. So, in 2006 the price was $110. But in late 2006 the exporter selling gas to Azerbaijan suddenly increased the price by more than twice, and the price for Azerbaijan for 2007 was set at $230. “We took it as a great surprise, and immediately demonstrated our intention to start negotiations. The negotiations resulted in even a higher price”, the President of Azerbaijan said in one of his speeches.
“We were told: if you do not want to buy for $230, then you will buy for $235. It was quite unacceptable approach. The approach was not compatible with any normal civilized relations, so, Azerbaijan refused of course. We took concrete and practical measures, despite the fact we had only a month or even less to have these measures in place since those negotiations began in November 2006, and we received the final reply in December. That was the reality, and Azerbaijan by mobilizing all possibilities successfully lived through the winter 2007, moreover in 2007 it even started to transport gas to Georgia. These are our opportunities, this is the reality”, Ilham Aliyev said. “Once again I highlight all these questions because they should not be forgotten. Today we meet all our electricity, oil, gas needs. Therefore, we live with a quiet life. Therefore, crisis relations of this sphere do not affect us. But we have to keep everything in mind and make conclusions”, the head of state emphasized particularly.
Fight against inertness
and bureaucracy
Negotiations on the project which got an ambitious name “Nabucco” and was supposed to deliver Caspian gas from Shah Deniz field to Austrian Hub in Baumgarten have started since 2006. Negotiations over the classic version of Nabucco were held for over 7 years. Signed were 7 declarations. The same amount of conferences and summits were held for support of this project. Lack of the main export solution always postponed the investment decision about the launch of the Shah Deniz field development in the Azeri sector of the Caspian. As a result, Azerbaijan had to prolong the contract with a foreign consortium for 5 years – till 2036.
It had lasted before Azerbaijan and Turkey assumed a financial responsibility for this project in 2011. “We decided that Azerbaijan should take a leadership in this area as well, just like it did in mid of 90s by assuming all responsibility and obligations over the Baku-Tbilisi-Ceyhan project implementation”, President of Azerbaijan Ilham Aliyev stated. The project was named TANAP – Trans-Anatolian gas pipeline. The length of TANAP from the Georgian-Turkish border till the Turkish-European border will total 2000km. The carrying capacity will reach up to 40 bcm per year. Investments will total $10 bln.
Made was also one more decision about competition of two routes – European branches from TANAP – Nabucco West project envisaged construction of a 1300km long pipeline (Bulgaria – 412km, Romania – 469km, Hungary- 384km, Austria – 47km) from the Turkish-Bulgarian border till Austrian Baumgarten. Another branch line is TANAP-Trans Adriatic gas pipeline (TAP). Estimated cost of the project on gas pipeline construction totaled $2.2bln.
In 2011 EU and Azerbaijan signed a joint declaration about the Southern Gas Corridor in Baku. Azerbaijan in this document is presented as a country, contributing and implementing the Southern Gas Corridor.
Major stages of SGC
Turkey and Azerbaijan signed a memorandum of understanding on October 25, 2011 in Izmir to establish a consortium to build a gas pipeline to supply gas from the “Shah Deniz” field to Europe through the Turkish territory.
Ministry of Energy and Natural Resources of Turkey and Ministry of Industry and Energy of Azerbaijan inked the document. The consortium will include State Oil Company of Azerbaijan (SOCAR), Turkish BOTAS and TPAO.
The governments the Republics of Azerbaijan and Turkey signed an agreement in Istanbul on June 26, 2012 about sale of natural gas to Turkey, transit of the Azerbaijani gas via the Turkish territory and construction of the independent Trans-Anatolian pipeline to transport natural gas via the territory of Turkey.
The carrying capacity of the new gas pipeline will total 16 bcm at the initial stage: 10 bcm for Europe and 6 bcm for Turkey. It is possible to increase carrying capacity up to 37 bcm in future. The width of the corridor will make 22m. According to primary estimates, total length of the TANAP pipeline will make 1700km. The parties to project are SOCAR (80%), the rest 20% belong to Turkish companies BOTAS and TPAO. The commissioning of the project has been scheduled for 2016-2017.
November 27, 2012 - President of Azerbaijan Ilham Aliyev signed a Law about ratification of the agreement signed between the governments of the Republics of Azerbaijan and Turkey about sale of natural gas to Turkey, transit of Azerbaijani gas via the territory of Turkey and construction of the independent pipeline for transportation of natural gas via the territory of Turkey.
January 17, 2013 - President of Turkey Abdullah Gul approved an intergovernmental agreement about implementation of the Trans-Anatolian gas pipeline project (TANAP).
A.Gul approved an Azerbaijani-Turkish agreement about the Trans-Anatolian gas pipeline systems and its supplements, including the agreement between the government of Turkey and The Trans Anatolian Gas Pipeline Company B.V.
January 18, 2013 – President of Azerbaijan Ilham Aliyev signed a Law about approval of the “Agreement between the government of the Republic of Azerbaijan and the government of the Republic of Turkey about Trans-Anatolian gas pipeline system.
February 13, 2013 –Athens hosted the signing of the three-sided Greek-Albanian-Italian intergovernmental agreement about construction of the Trans-Adriatic gas pipeline (Trans Adriatic Pipeline – TAP). The carrying capacity of the gas pipeline will reach from 10 up to 20 bcm per year.
Shareholders of the project are the Swiss company EGL (42.5%), Norwegian Statoil (42,5%) and German E.ON Ruhrgas (15%).
The gas pipeline is expected to be laid from the Greek city of Komotini to Albania and further to the Italian port Brindizi across the bed of the Adriatic Sea.
March 19, 2013 – The Cabinet of Ministers of Turkey approved an intergovernmental agreement with Azerbaijan about sale, purchase, transit tariffs and transit of natural gas via the territory of Turkey, as well as an intergovernmental agreement about the Trans-Anatolian Gas Pipeline System (TANAP).
March 27, 2013 – Parliament of Albania ratified an agreement about construction of the Trans-Adriatic Pipeline (TAP) signed in Athens on February 13 of this year. Construction of the pipeline via the republic will draw investments worth about $2 bln into the country.
April 8, 2013 – at the session of the Global Economic Congress, held in Baku, President of Azerbaijan Ilham Aliyev stated that the Trans-Anatolian gas pipeline (TANAP) will play a significant role in energy security provision of Europe for at least 100 years.
July 27, 2013 – a prequalification tender for production and supply of pipes with exterior and internal coating was announced within the framework of the Trans-Anatolian gas pipeline (TANAP).
September 19, 2013 - signing of agreements with the European gas customers within the framework of the second stage of development of Shah Deniz gas condensate field in the Azeri sector of the Caspian Sea took place.
The size of profits from contracts signed in Baku and envisaging supply of approx 300 bcm of Azerbaijani gas, extracted from Shah Deniz field, to Europe will make about $200bln.
In particular, German E.ON will purchase 40 bcm of Azerbaijani gas within the framework of the 25-year contract. Gas supplies will start no earlier than 2019.
According to the information of the French GDF SUEZ, the company made a contract for 2.6 bcm of Azerbaijani gas per year.
Spanish Gas Natural Fenosa will gain 1 bcm of Azerbaijani gas on annual basis, the company said.
Italian company Hera will get 300 mln cubic meters of Azerbaijani gas per year within the framework of the signed contract.
November 4, 2013 – Consortium for the construction of the Trans-Anatolian gas pipeline (TANAP) started election of lands for laying of this pipeline.
December 2 – Parliament of Greece ratified an agreement, signed in June 2013 between TAP (Trans-Adriatic pipeline) and government of Greece which is a host country. The agreement establishes rules under which the project will be implemented. It implies acquisition of lands, technical, ecological standards and safety standards.
December 5, 2013 – parliament of Italy ratified a three-sided intergovernmental agreement (IGA) signed between Italy, Greece and Albania on February 13, 2013 within the framework of the Trans-Adriatic gas pipeline (TAP).
January 7, 2014 – Trans-Adriatic Pipeline (TAP) and ICGB Company, engaged in development, financing and construction of the Greece-Bulgaria (IGGB) interconnector, signed a memorandum of understanding and cooperation.
The memorandum will let companies cooperate in order to define points of connection of pipelines near Komotini (Greece).
Creation of the necessary infrastructure will make it possible to deliver gas via the gas network of Bulgaria to the South-East European regions.
TAP project shall transport Caspian region gas via Greece, Albania and the Adriatic Sea to south of Italy and further to the Western Europe.
February 10, 2014 – Azerbaijan’s Foreign Minister Elmar Mammadyarov stated at the press conference held in Bagdad that Azerbaijan had offered Iraq an access to the Southern Gas Corridor, connecting the Caspian Sea with the European Union, so that to help Iraq in supply of natural gas to Europe.
“Any other countries which have already expressed an interest, including Iraq, can join in the Southern Gas Corridor if they want it. We are ready to start negotiations”, Mammadyarov said.
April 10, 2014 – The consortium for the development of the Trans-Adriatic pipeline (TAP) got permission for construction of the Albanian section of the gas pipeline.
The permission was given by a National Territorial Council of Albania headed by the Prime Minister of the country Edi Rama.
Construction operation will start in Albania in 2015 from upgrading and construction of approach roads and bridges. Then, construction of the pipeline and other facilities related to the gas transportation infrastructure will start.
April 2014 – the European Commission approved 2014-2020 program on construction of gas pipelines, including those between Spain and France which plan to receive gas from the Southern Gas Corridor.
The Connecting Europe Facility (5.85 bln euro till 2020), established by the European Commission, will ensure financing of 248 cross-border projects. These projects will be provided with an advantage in terms of accelerated planning and approval within at least 3 years, as well as effective procedures on assessment of ecological risks. It will help Europe to increase gas supply from Azerbaijan and start export from Turkmenistan and Iran (in case of lifting of sanctions).
July 24, 2014 – SOCAR created two companies within the framework of the “Southern Gas Corridor”. Both companies (SOCAR Upstream Management Internatilonal and SOCAR Midstream Operations) are located in the head office of SOCAR and have an authorized capital worth 1 thou AZN.
August 28, 2014 – A credit agreement worth $1bln was signed within the framework of financing of acquisition of 10% stake of the French company TOTAL in Shah Deniz project by TPAO.
September 10, 2014 – President of the Republic of Azerbaijan Ilham Aliyev signed an order “On more effective organization of the process of getting rights for lands and other immovable property assets due to the expansion of the South-Caucasus pipeline.
September 20, 2014 – Southern Gas Corridor’s foundation laying ceremony took place. President of Azerbaijan Ilham Aliyev, Prime Minister of Georgia Irakli Garibashvili, Prime Minister of Greece Antonis Samaras, President of Bulgaria Rosen Pnevneliyev and other participants of the ceremony left signatures on the first pipe which would be laid into the foundation of the Southern Gas Corridor.
February 3, 2015 – Germany’s chancellor Angela Merkel stated about big hopes that Germany rests on implementations of the Trans-Anatolian gas pipeline.
February 12, 2015 – Baku hosted the first meeting of the Advisory Council of the Southern Gas Corridor project participants. The joint declaration of the Advisory Board members notes the reliable supplies and safe transportation of energy resources to world markets are important factors in provision of sustainable development. The importance of continuation of the policy aimed at diversification of routes, supply of energy resources from Azerbaijan to Europe and other markets was stressed.
February 29, 2016 - Baku hosted the second meeting of the Advisory Council of countries-participants of the Southern Gas Corridor. A declaration highlighting important and strategic role of Azerbaijan in implementation of the Southern Gas Corridor project was signed with participation of 11 states and European Commission. The declaration was signed by countries located along the pipeline route: Azerbaijan, Turkey, Greece, Bulgaria, Albania and Italy. Two more states (Croatia and Montenegro) have signed the declaration. High-ranking representatives of the governments of USA and Great Britain as well as Vice President of the European Commission were also among those who signed the declaration. “These 12 signatures mean that the Southern Gas Corridor is a reality”, President of Azerbaijan Ilham Aliyev stated.
May 16, 2016 – Tbilisi hosted a ceremony dedicated to the 20th anniversary of creation of the “East-West” energy corridor. The foundation of the “East-West” energy corridor was laid by the construction of the Baku-Supsa oil pipeline.
May 17, 2016 – Thessaloniki hosted foundation laying ceremony of the Trans-Adriatic pipeline (TAP). ТАР will initially supply 10 bcm of Azerbaijani gas to Europe and play an important role in provision of energy security of Europe.
