AGRI LNG: Potential for Project High if European Demand Remains Firm
The Interconnector Azerbaijan-Georgia-Romania-Hungary (AGRI) pipeline project is still possible, and could provide a stimulus for “east Caspian countries” to produce more gas, according to energy specialist Liana Jervalidze.
AGRI, a proposed source of liquid national gas (LNG) to Europe, could be an auxiliary to the major gas pipelines once they come on line in 2018, she said.
“We don’t see now immediately chances for this project to be realized but in ten years time when Shah Deniz Two and TANAP will be implemented and addition volumes of gas will be available in Azerbaijan from other projects…maybe there will be room left for LNG as part of Azerbaijan energy diversity strategy,” she said during the 12th Georgian International Oil, Gas, Infrastructure & Energy Conference in Tbilisi on March 26.
Jervalidze, a professor at Ilia State University in Tbilisi and Analyst on Geopolitics of Energy, outlined the potential – and the challenges – for the AGRI project during the conference.
AGRI, a joint project between ROMGAZ, Georgian Oil and Gas Corporation, SOCAR, and Hungry’s MVM, could help the European Union met their 2050 goals to diversify types and sources of energy, Jervalidze noted.
If put on line, AGRI would have the potential to bring between 2 bcm and 8 bcm to Europe.
“The positive aspect of LNG on the Black Sea is that you have all parties – producer, transit, and market involved in the project and LNG is not limited to just the Black Sea basin. In addition it stimulates gas producers in the eastern Caspian to dedicate certain volumes of the gas to the EU market as part of the export market diversification strategy,” Jervalidze said, noting that while demand for gas in some parts of Europe is falling, there are plenty of signs that the market exists for LNG.
“The market in the EU – we see LNG imports standing at 65 million metric tons in 2011…[and we] expect an increase in demand because of closure of nuclear power plants in Germany, France, and Beligum … and the trend of using compressed gas in transportation…as well as LNG in the long term for big lorries.”
While there has been some fear that AGRI is a “instrument” to “leverage” against other pipeline projects, Jervalidze dismissed those concerns.
“[T]he process of AGRI started after Azerbaijan and Turkey made their agreement on TANAP,” she noted. “This is why I think that AGRI is not a leverage project; it is a real project that has a chance to be implemented, but later – in eight or ten years period of time.”
Another perceived obstacle to the AGRI project – and overall demand for LNG in Europe – is US exports of shale gas to the European Union.
But Jervalidze noted that demand for cheap gas in the United States, especially with the current efforts to stimulate the economy, should keep the volume of exports down and will not have a long term impact on LNG’s potential in Europe.
“AGRI is possible if the demand is there of the European market, if Europe is firm about receiving fuel from alternative sources, through alternative routes, then yes it is possible,” she said. “And it is possible that other producers in the Caspian region – like Azerbaijan and others in the eastern part of the Caspian - will decide to develop complimentary projects as part of the routes diversification strategy but also as part of market diversification strategy through small deals going further than the Black Sea basin.”