Shake-up for backers of Caspian-gas
pipelines By Vladimir Socor
The Trans-Anatolia Pipeline (TANAP)
project, initiated by Azerbaijan with Turkey, is
the first real boost to the European Union-backed
Southern Corridor for Caspian gas to Europe.
Planned to carry Azerbaijani (and, in due course,
also Turkmenistani) gas, TANAP has resurrected the
Corridor's centerpiece, the Nabucco pipeline
project, from a quasi-moribund status, to that of
an indispensable continuation of the TANAP route
into Central Europe, as the shorter Nabucco-West.
Competing against Nabucco, a trans-Adriatic
pipeline project seeks to divert the Caspian gas
flow from TANAP toward Italy.
With TANAP
planned to run from the Georgia-Turkey border to
the Turkey-EU border (in effect, replacing the old
version of Nabucco
across Turkey), a
decision is pending about the onward pipeline
route to European consumer countries. That
decision is up to the gas producers' consortium at
Azerbaijan's Shah Deniz field development, the
main supply source for the planned TANAP pipeline
and any continuation into Europe.
The
TANAP initiative, and the process of selecting the
onward route into Europe, are now repositioning
the many interested parties and recasting the
composition of pipeline consortiums. Since the
June 26 signing of the Azerbaijan-Turkey
agreement, practically all parties find they must
in one way or another accommodate Azerbaijan's
TANAP initiative.
The Shah Deniz
producers' consortium includes British Petroleum
(BP, technical operator of this project) and
Norway's Statoil with stakes of 25.5% each;
Azerbaijan's State Oil Company (SOCAR), Total of
France, LukAgip (joint venture of Russian Lukoil
with Italian ENI's Agip subsidiary), and Naftiran
Intertrade (subsidiary of the National Iranian Oil
Company - NICO) with 10% each; and Turkish
Petroleum with 9%.
This composition is
identical with that of the existing pipeline from
Azerbaijan to the Georgia-Turkey border (South
Caucasus Pipeline, also known as
Baku-Tbilisi-Erzurum pipeline), the connecting
link with TANAP. The Shah Deniz producers'
consortium has declared the Iranian shareholder
company ineligible for participating in TANAP or
in any other gas transportation projects to
Europe.
TANAP's founding stakeholders are
Azerbaijan's State Oil Company with 80% and Turkey
with 20% (split between the Botas state pipeline
operator and Turkish Petroleum).
From the
outset, Baku announced that it would sell portions
from its TANAP majority stake to some of the gas
producing companies active in Azerbaijan, meaning
primarily BP, presumably also Total and
potentially others. However, Azerbaijan would
retain a majority of shares and operating rights
in the project. BP is interested in joining the
project, preferably with a significant stake, and
at least as a means to take part in
decision-making, rather than being left out
altogether.
BP had, until recently,
favored using Turkey's state-owned pipelines for
exporting limited gas volumes from Shah Deniz, but
Baku came up with the TANAP project to build a new
pipeline for big volumes of Caspian gas. BP is now
adjusting to this.
According to President
Ilham Aliyev, "companies that have long been in
Azerbaijan and are friendly to us can participate
in this [TANAP] project as shareholders and
investors. But, of course, we will determine which
companies can participate in this project".
Meanwhile, Azerbaijan's State Oil Fund has
announced that it considers the possibility of
joining TANAP as one of the co-investors.
Nabucco's shareholders are Austrian OMV,
German RWE, Hungarian FGSZ (Natural Gas
Transmission subsidiary of MOL), Romanian
Transgaz, the Bulgarian Energy Holding and
Turkey's Botas, with equal stakes of 16.67% each.
The absence of a major ("champion")
gas-producing company was a weakness of the
Nabucco project all along. This is about to
change. Already in May, anticipating the signing
of the Azerbaijan-Turkey TANAP agreement, the
Nabucco project company suggested a negotiated
entry of some Shah Deniz producer companies into
Nabucco's abridged version, Nabucco-West.
BP has become the first among Shah Deniz
producers to announce its intention to join the
Nabucco consortium. The consortium has also made
overtures to Azerbaijan's State Oil Company for
possible entry into the Nabucco-West project.
Logically along the same lines, the Nabucco
project company has proposed in Baku to start
talks about connecting Nabucco-West with TANAP.
Thus, the Nabucco consortium seems to be
up for significant restructuring. This would
redistribute decision-making powers in favor of
gas suppliers, new entrants into the pipeline
project. By the same token it would substantially
increase a reformed consortium's capacity to
finance construction of the Nabucco-West pipeline,
which the project's existing shareholders cannot
do on their own.
The producers' entry into
Nabucco-West could strongly incentivize the Shah
Deniz consortium to select this route, from
Bulgaria to Vienna with a link to Germany, as
against the rival trans-Adriatic pipeline (TAP)
project in the direction of Italy. The TAP
consortium includes Norway's Statoil and Swiss
Elektrizitaetsgesellschaft Laufenburg (EGL) with
stakes of 42.5% each, and German E.On Ruhrgas with
15%.
Thus, the TAP consortium has had one
of the major Shah Deniz producers, Statoil, among
TAP shareholders all along. Statoil has a vested
interest in TAP and is advocating for TAP in
Brussels. This would place Statoil in a perceived
conflict-of-interest situation when the Shah Deniz
consortium decides whether to select Nabucco-West
or TAP as the European export route for its gas.
But BP also intends to join TAP, as a
stakeholder in that project. According to BP vice
president Al Cook (overseeing the Shah Deniz
project), BP proposes to take stakes in both rival
projects, Nabucco-West and TAP, to treat them
equally, comparing their respective costs, risks,
and market potentials, and on that basis select
one of these pipeline routes.
BP had first
signaled an interest in joining the TAP project.
But Azerbaijan State Oil Company's president,
Rovnag Abdullayev, cautioned that BP would need to
coordinate any such move with other Shah Deniz
consortium members, so as to avoid a
conflict-of-interest situation if it joins TAP
only.
The TAP project company seems
willing to jump aboard TANAP, connecting the
planned TAP pipeline with TANAP near the
Turkey-Greece border (competing against
Nabucco-West's connection with TANAP at the
Turkey-Bulgaria border). But TAP declares an equal
interest in using Botas pipelines in Turkey and
the Inteconnector Turkey-Greece (ITG), instead of
TANAP, for accessing Azerbaijani gas. TAP pursues
these two options as "and/or" options, according
to the project company's latest presentation.
These suggestions seem designed, first, as
a minor incentive for a reluctant Greece to
cooperate in a project on Greek territory without
Greece being a stakeholder in it. But more
significantly, TAP's Botas option seems designed
to appeal to BP.
Until recently, BP was
proposing to use Botas pipelines for limited
exports of Azerbaijani gas to Europe, instead of
building a new pipeline of strategic significance,
be that Nabucco or indeed TANAP. Apparently, TAP's
Botas option stems from calculations that BP
remains unenthusiastic about TANAP.
Vladimir Socor is a Senior
Fellow of the Washington-based Jamestown
Foundation and its flagship publication, Eurasia
Daily Monitor, and is an internationally
recognized expert on the former Soviet-ruled
countries in Eastern Europe, the South Caucasus
and Central Asia. Socor is a regular guest
lecturer at the NATO Defense College and at
Harvard University’s National Security Program’s
Black Sea Program. He is a Romanian-born citizen
of the United States based in Munich, Germany.
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