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    Baku Eyes $30-50bn Profit from Southern Corridor

Summary

Azerbaijan is hoping in the best case for profits in excess of $50bn from the Southern Gas Corridor (SGC) and even in the gloomiest outlook the profits would be $30bn

by: Azerbaijan desk

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Baku Eyes $30-50bn Profit from Southern Corridor

Azerbaijan is hoping in the best case for profits in excess of $50bn from the Southern Gas Corridor (SGC). State oil company Socar told NGE June 20 that even the gloomiest outlook showed that Azerbaijan’s share in the profit of SGC would be at least $30bn over the 25 years' duration of the sales and purchase agreements.

SGC is a project consisting of the development of Shah Deniz gas field stage 2 (SD2), including the South Caucasus Pipeline Expansion (SCPX), as well as the Trans-Anatolian Natural Gas Pipeline (Tanap) and Trans Adriatic Pipeline (TAP).

Azerbaijan has 16.7% share in Shah Deniz project, 58% in Tanap and 20% in TAP. The total costs of the implementation of SGC is expected to reach $39.1bn, of which about $9bn would be invested by Azerbaijan. “In return, the country is expected to earn $30bn-$50bn from SGC, depending on oil prices and additional incomes from transiting the other suppliers’ gas through SGC,” Socar said. 

Shah Deniz 2 natural gas field (credit: Statoil)

Shah Deniz 2 (credit: Statoil)

SD2 is projected to produce 16bn m3/yr of gas in 2018, of which 6bn m3/yr would reach Turkey in 2020 and the rest would flow into the EU by 2021. SD2 would also add 70,000 b/d to the gas condensate output of SD1, which stands at 50,000 b/d. SD1 produces about 10bn m3/yr of natural  gas, of which 60% goes to Turkey.

Socar said that even with ignoring the gas export and transit revenues and taking the average oil price at $60/barrel in 2020-2030, the SGC shareholders would have $26bn revenues from only gas condensate export in ten years. At $80/barrel, the figure would stand at $35bn.

“The mentioned figures are for a 10-year period. In 25 years, with adding the gas revenues, transit incomes and taxes to this figure, the share of only Azerbaijan in SGC’s profit would be around $30bn-$50,” Socar said.

The company also added that with transiting other suppliers’ gas, the profits would increase even more. Azerbaijan has repeatedly announced that SGC is open for other suppliers. Tanap’s transit capacity is about 31bn m3/yr, while TAP can transit 20bn m3/yr.

Azerbaijan’s energy minister Natig Aliev told NGE in March that the revenues (not profit) of SGC would exceed the expenditures by 2028-2030 based on expected oil and gas prices, while SGC is projected to remain active for 50-60 years.

 

Azerbaijan desk

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