Turkey, Azerbaijan Commission Tanap
Turkey and Azerbaijan formally commissioned the first supply stage of the 31bn m³/yr TransAnatolian Pipeline (Tanap), which is being developed jointly by Azeri state oil company Socar (58%), Turkish state gas transit company Botas (30%) and the UK major BP (12%). So far it is on time and under budget.
The lavish ceremony at the pipeline’s main Turkish off-take point at Eskisehir was attended by the two countries' presidents, Recep Tayyip Erdogan and Ilham Aliyev; also present were the Serbian president Alexander Vucic and the Ukrainian president, Petro Poroshenko.
All four paid tribute to the long history of co-operation between Turkey and Azerbaijan that since the final investment decision was taken at the end of 2013; and they looked forward to the final completion of the project and the realisation of the long mooted European Union (EU) plan to have a Southern Gas Corridor (SGC) to carry gas from the gas-rich states of the Caspian region to the gas markets of the EU, enhancing Europe’s energy security and diversity of supply.
Socar CEO and chair of Tanap Rovnag Abdullayev said the "transportation of Azerbaijani gas directly to European markets will strengthen Turkey's geostrategic position and will allow it to be an important energy hub."
Wood MacKenzie said that since 2013, Tanap has "been transformed from a strategically necessary but commercially questionable pipeline into a fast-tracked development with acceptable standalone economics." The energy consultancy described Tanap as "a world-class example of cost savings" as its current budget of $8bn in 2018 terms is a 32% decrease from the initial $11.7bn estimate. This is thanks to a combination of good timing – contracting in the commodity and currency downturn – and best practice in an established pipeline corridor."
With Tanap now set to start supplying up to 6bn m³/yr of gas to Turkey with actual gas flow set to start at the end of this month, attention will turn to the second delivery phase of the project: the transit of an additional 10bn m³/yr of Azeri gas though Tanap to the Greek border from where it is set to be transited to Italy via the up-to-20bn m³/yr Trans Adriatic gas Pipeline (TAP).
Neither Aliyev nor Tayyip Erdogan made any reference to the current political problems facing TAP in the shape of the newly elected Italian coalition government which has questioned whether the pipeline with its supply of Azeri gas to Italy is needed. It has threatened to launch a review of the project’s validity.
Aliyev whose state oil company Socar holds a 20% stake in the project confirmed that 72% of the line has been constructed, and promised that the line would be commissioned within two years as planned, realising the completion of the SGC, with Erdogan saying that Tanap would deliver first gas to the Turkey-Greece border in June 2019.
Future market direction
However the possibility that Tanap may need to look to other export routes, either now or in the future was alluded to by both the Serbian and Ukrainian presidents who expressed their countries' interest in importing Azeri gas either in place of, or in tandem with, existing Russian supplies, both to enhance their supply security and diversity of supply.
This could become possible in the short term if delays to TAP force the consortium developing Azerbaijan’s Shah Deniz gas field to look for alternative markets.
However it appears more likely to become a reality over the longer term when the ongoing development of new gas fields in the Azeri sector of the Caspian will make further volumes available to fill the 15bn m³/yr of spare capacity.
Reminding those in attendance that Russia has used its position as monopoly gas supplier to put pressure on Ukraine and other gas importing countries in south east Europe, Poroshenko announced that his country was ready to import gas transited across Turkey through Tanap. “We want to receive gas from Tanap via Bulgaria and Romania,” he said promising that the gas would be used for the benefit of not just Ukraine, but the whole region.
That would appear to involve using the existing TransBalkan gas pipeline, now used to carry 14bn m³/yr of Russian gas to Turkey through Ukraine and the Balkans, but which is scheduled to be replaced by the 15.75bn m³/yr TurkStream pipeline from the end of 2019 which will carry Russian gas directly to Turkey under the Black Sea.
This switch opens the possibility of flow being reversed and the TransBalkan line used to transit gas from Turkey, to south east Europe and Ukraine.
This however potentially puts Tanap in direct competition with Russia’s Gazprom which according to recent statements also appears to be looking to use TransBalkan to transit gas to markets in south east Europe, which would leave Ankara with the difficult decision of which of the two gas suppliers will use the route.