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    Tanap Eyes Early Payback


Lower construction costs mean payback will come sooner than budgeted.

by: Dalga Khatinoglu, Ilham Shaban

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Natural Gas & LNG News, Europe, Premium, Corporate, Import/Export, Investments, Balkans/SEE Focus, Caspian Focus, Infrastructure, Pipelines, Trans-Anatolian Gas Pipeline (TANAP) , News By Country, EU, Azerbaijan, Turkey

Tanap Eyes Early Payback

The Trans Anatolian Pipeline (Tanap) will earn back its costs sooner than forecast, the head of the investments division at Azeri state-run Socar told NGW September 30. Socar Turkey Energy as project operator has 7% and fellow Azeri state entity Southern Corridor Gas Company has 51%, Turkish Botas has 30% and BP has 12% in the project.

Vagif Aliev said the gross revenue is fixed at $1.45bn/yr, as scheduled before, because the transit revenues is fixed and not dependent on gas price, but the cost of building the 16bn m³/yr Tanap fell from its $11bn initial estimate in 2013 to $6.5bn, owing to declining material and service costs: "As a result of the successes achieved, our calculations show that after reaching the designed capacity, the capital investments will return in seven or eight years," Aliev said.

Tanap has been operating since mid-2018 and will reach its 16bn m3/yr full capacity by 2022. Alongside operating expenditures, Tanap is to pay $$5.95/’000 m3 tax to the Turkish government ($95.2mn for 16bn m3/yr). From June 30, 2018 to August 2019, Tanap transited 2.39bn m3 of Azeri gas to Turkey, providing $14.3mn tax revenues for the government, the project CEO Saltuk Duzyol announced September 28. Deliveries to Turkey from June 2019 to June 2020 are  expected to stand at 4bn m3.

According to Socar forecasts, Tanap will cover 12% of Turkey’s gas demand and Azerbaijan's gas will account for a quarter of the total.

Tanap is dedicated to transit 16bn m3/yr Shah Deniz stage 2 gas to Turkey (6bn m3/yr and the rest to the EU), but Azerbaijan also exports SD1 gas to Turkey through Baku-Tbilisi-Erzurum pipeline. Tanap will start transit 10bn m3/yr to EU in 2021, but the initial deliveries, to Greece, will only start after October 2020.

Commenting on the halving of gas prices in European markets since 2013, when the SGC was approved, Aliev said this would not affect on Tanap revenues, which are based on volume contracted not price.