Southern Corridor's Final Countdown
The coming months will be crucial for the Southern Corridor’s selection process between TAP and Nabucco, which is due to be finalized in June 2013.
In late February, the natural gas regulatory authorities of Italy, Greece and Albania will make their decision public, which will finalize technical exemption details for TAP. On the 31st of March, TAP will submit its “Decision Support Package.” Nabucco will also bid its own package and both companies will outline to the Shah Deniz consortium tariffs for the purchase of Azeri gas. A binding offer by both will be submitted in late April, thus leaving space for Shah Deniz to estimate the profits its partners will make by each respective pipeline consortium. This process will play a decisive role in the final selection.
Furthermore, TAP and E.ON New Build & Technology (ENT) began on February 1st a two staged pre-qualification process for the onshore engineering of the pipeline. TAP is currently in the front-end engineering design stage (FEED) and it will require approximately 400,000 tons of steel pipe to lay approximately 800 km of the 48 inch thick pipeline, over a three year construction period.
On January 31st Nabucco proceeded with its pre-qualification process for steel pipe producers and also for finalizing an overall business and funding plan. In parallel, it awarded contractor Saipem to perform Front End Engineering & Design (FEED) services on January 28th.
On a political level the EU, through the Energy Commissioner Oettinger, has kept equal distance over the past few months has and supported both plans. American Diplomacy, which in the past heavily supported Nabucco, has also shifted stance and now backs both pipelines without favoring any particular one.
Commissioner Oettinger in a late 2012 press conference in Baku stated that "Both pipeline concepts are good and no matter which proposal succeeds, the pipeline will be European." Quite a few pundits have expressed their view that in fact both pipelines could eventually built, although in 2013 it expected that only one will be the first in selection, consequently having the advantage to set the market and reap the benefits both at an economic and political level.
The most important aspect in the countdown to June's selection will be the last month centered in Baku by all players. A well-informed energy insider in Azerbaijan told Natural Gas Europe that ,on a technical and business level "both TAP and Nabucco can be said to be equal. The final decision is presumed to take place after a series of complicated bargains and tradeoffs between all parties included that are in fact the majority of the biggest players in natural gas market in Europe and beyond... the third parties who already have started predicting the winner, they really don’t know and the ones that could know, most certainly will not comment." Due to the resources committed to the Shah Deniz project, finances will play a leading role, despite heavy overtones by analysts regarding geopolitical and diplomatic factors.
Overall, the next 15 weeks or so will be frantic between competing consortiums and will also bring about some long-term and binding commitments by Shah Deniz shareholder, a 28 billion USD project, one of the largest of its kind in presently worldwide and with estimated reserves of 1.2 tcm of gas, which is enough to fulfill the needs of several markets for the next generation.