Coming Attractions: Southern Corridor Update

For some in Europe, the diversification of natural gas supplies has taken on a greater urgency, something which made news about the Southern Corridor project and prospects for increased deliveries from Azerbaijan good news coming down the pipeline at Flame in Amsterdam, the Netherlands (even if first gas deliveries are years away).

In a session dedicated to Southern Corridor associated projects, key players from BP, SOCAR and the Trans Adriatic Pipeline (TAP) took to the stage to provide updates.

Session moderator Gulmira Rzayeva of the Center for Strategic Studies noted that the project had achieved important milestones in 2013, like the selection of the TAP that would deliver gas from Shah Deniz II to Italy. “The most important development,” she explained, “was the final investment decision, which took place in December last year – a crucial step toward the materialization of this project.”

Vitaliy Baylarbayov, Deputy Vice President, SOCAR, noted the importance of the project for Azerbaijan and that it was a “superb opportunity” to deliver natural gas to the final destination and the countries along the way.

He said, “It's a great opportunity to develop the gas potential, not only at the second stage of Shah Deniz development, but in other fields which we have for which we have activities on the way, plus the fields which are not yet developed.

“For the countries along the way,” referring to the Southern Corridor pipeline, “this is an additional opportunity to reach European customers through a reliable, single pipeline through the companies working closely with each other."

Regarding the development of Shah Deniz II gas, Andy Lane, head of Business Development, Integrated Supply and Trading, BP, reported that the company had made progress, already drilling one-fifth of the production wells on the Shah Deniz field, $8 billion in contracts were in place and construction activities had started. “It's a big beast, there's a lot of orchestration required to get all this complex project moving, it's going in the right direction at the moment and we're comfortable that it will be ready in 2018,” he commented.

Asked about the challenges of an environmental impact assessment, Kjetil Tungland, Managing Director, Trans Adriatic Pipeline AG, said the project had put its feet on the ground to begin its work. “We will start construction in 2016,” he said, adding that social and environmental assessments were being conducted in an extremely transparent way. He reported that people were raising concerns about the route of the pipeline in Greece and Italy, prompting the project to make amendments, but strong views had to be addressed.

“At the end of the day, we have very good support from the Italian government and the regional authorities, and with the cooperation of the stakeholders we find good solutions.”

The ESIA assessment should be concluded, said Mr. Tungland, by the end of the month. Meanwhile, he said that in Albania the company would be building 100km of roads to accommodate 40 ton construction trucks; a tender for that would happen this summer.

The pipeline would be ready to receive the gas in early 2020, he added.

Asked about the viability of Italy as a market for Shah Deniz gas, BP's Andy Lane said that in the future, as more gas became available, new pieces of pipeline infrastructure could be built to serve customers of Shah Deniz natural gas, but defended Italy as the final destination.

He said, “Italy is a market that is very well connected, becoming better connected to the rest of Europe. A lot of the buyers of gas from Shah Deniz are trans European – they're not purely Italian – and have the ability to move gas around with their own portfolio of gas sales and purchases.”

Drew Leifheit is Natural Gas Europe's New Media Specialist.