BAKU, Azerbaijan, Dec.26. Southern Gas Corridor (SGC) started transportation of Azerbaijani gas to Europe on December 31, 2020. It transports of gas from the Caspian Sea region to European countries through Georgia and Turkey.
This large-scale project is aimed at diversification of energy supply routes and sources, thereby contributing to strengthening Europe’s energy security. The project’s cost totaled $33 billion, as compared to the forecast $45 billion. Capital expenditures on the SGC project are expected to be fully reimbursed within 8-10 years.
Azerbaijan's export of natural gas to European Union market will stand at 11.3 billion cubic meters as of 2022. In 2023, it will be at least 11.6. Total export of natural gas from Azerbaijan next year will be almost 24 billion cubic meters.
On July 18, Azerbaijan and the European Commission inked "A Memorandum of Understanding on Strategic Partnership in the field of energy between the European Union represented by the European Commission and the Republic of Azerbaijan". The document envisages doubling gas supplies from Azerbaijan to EU by 2027.
State Oil Company of the Azerbaijan Republic (SOCAR) and Romania's Romgaz signed the agreement on supplying gas from Azerbaijan to Romania on December. The agreement provides for the scheduled transmission of natural gas from January 1, 2023 through the Trans Adriatic Pipeline (TAP), the European part of the Southern Gas Corridor, the Gas Interconnector Greece-Bulgaria (IGB).
Trans-Anatolian Natural Gas Pipeline (TANAP)
TANAP transports gas from Stage 2 of Azerbaijan’s Shah Deniz field from Georgian-Turkish border to Türkiye’s western border. The total cost of TANAP turned out to be lower than $7 billion.
The initial capacity of TANAP is 16 billion cubic meters of gas per year, with possibility of expanding to 31 billion cubic meters per year in the future. Around 6 billion cubic meters of gas is delivered to Türkiye, while the rest of the volume is supplied to Europe.
TANAP shareholders are as follows: Southern Gas Corridor CJSC – 51 percent, SOCAR Türkiye Enerji – 7 percent, BOTAS – 30 percent and bp – 12 percent.
Line fill began in the TANAP pipeline across Türkiye in late January 2018.
A ceremony to launch Phase 0 of TANAP took place June 12, 2018 in the Turkish city of Eskisehir. First commercial gas deliveries to Türkiye commenced on June 30, 2018. The opening ceremony of TANAP’s connecting with Europe took place on Nov. 30, 2019 in Ipsala town (Edirne province, Türkiye).
For expansion, it is necessary to add several additional compressor stations in order to achieve throughput of 24 billion cubic meters per year. To achieve capacity of 31 billion cubic meters, a total of seven compressor stations will be required.
Project status
Türkiye received 5.2 billion cubic meters of gas via the Trans Anatolian Natural Gas Pipeline as of December 1, 2022.
Türkiye and Azerbaijan have agreed to double the capacity of the Trans-Anatolian Natural Gas Pipeline.
The capacity of the Trans Anatolian Natural Gas Pipeline may be expanded to 24 billion cubic meters of gas per year with the construction of two additional compressor stations. The pipeline will need three additional compressor stations in order to be able to transport 31 billion cubic meters per year. The process of expansion, meaning the third phase may take 4 or 5 years, since it will need an investment decision, new equipment and construction work. The second phase of expansion may be implemented faster.
Currently, the possibility of transportation of hydrogen mixture via the Trans Anatolian Natural Gas Pipeline is being studied. Technically, TANAP may transport 2 percent hydrogen mixture.
Trans Adriatic Pipeline (TAP)
TAP project envisages transportation of gas from Azerbaijan's Shah Deniz Stage 2 to the EU countries. TAP is 878 kilometers in length (Greece 550 kilometers, Albania 215 kilometers, Adriatic Sea 105 kilometers, and Italy 8 kilometers).
The initial capacity of TAP is 10 billion cubic meters per year with the possibility of expanding to 20 billion cubic meters.
TAP’s shareholding is comprised of bp (20 percent), Azerbaijan’s state oil company SOCAR (20 percent), Snam S.p.A. (20 percent), Fluxys (19 percent), Enagás (16 percent) and Axpo (5 percent).
TAP can also ensure gas supply to several countries in South-East Europe, including Bulgaria, Albania, Bosnia and Herzegovina, Montenegro, Croatia and other countries by connecting to the Ionian Adriatic Pipeline (IAP).
Some large European markets, such as Germany, France, UK, Switzerland and Austria can receive gas from Italy, which is the end point of TAP.
Project status
Following the start of commercial operations on November 15, 2020, the Trans Adriatic Pipeline (TAP) AG confirmed on December 31, 2020 the commencement of gas flows from Azerbaijan. The first gas reached Greece and Bulgaria, via the Nea Mesimvria interconnection point with DESFA, as well as Italy, via the Melendugno interconnection point with SNAM Rete Gas (SRG). Total project cost for TAP stood at 4.5 billion euros.
Since the beginning of commercial operations, on 31 December 2020, until now, the Trans Adriatic Pipeline has transported 18.5 billion cubic meters of gas, of which almost 16 billion went to in Italy alone. As of 2022, TAP is expected to bring almost 10 billion cubic meters to Italy, 3 billion cubic meters more than 7 billion cubic meters in 2021. Around 25-28 million cubic meters of gas per day was delivered via TAP in the last few months at the reception terminal of Melendugno, in Puglia.
The assumptions for gas supply via the Trans Adriatic Pipeline between 1 December 2022 and 1 April 2023 are the same as September-November 2022 (4 billion cubic meters). The assumptions for summer 2023 are the same as in summer 2022 (6.9 billion cubic meters).
On 14 November 2022, the Trans Adriatic Pipeline, together with SRG and DESFA, opened the first Binding Phase of the 2021 Market Test.
The Binding Phase of the 2021 Market Test starts with the Information Phase launched on 14 November which will end on 13 January 2023.
Through the binding bidding phase of the Market Test, the Trans Adriatic Pipeline offers the opportunity to any interested party to submit their binding bids for long-term incremental capacity in the infrastructure, in line with the rules of the market test.
TAP will expand its capacity to accommodate binding commitments for long-term capacity if the accumulated requests result in economically viable outcome (in accordance with the regulatory approved TAP tariff methodology). The Adriatic Pipeline has maximized the capacity offered to the market on a day ahead basis. A final decision on expansion of the Trans Adriatic Pipeline will be taken early 2023.
The Trans Adriatic Pipeline consortium is in the process of assessing the degree to which the infrastructure can technically accommodate transporting a blend of natural gas and hydrogen. In 2023 TAP will be testing its pipe materials in an internationally recognized laboratory to fully assess the suitability of the asset to meet the forthcoming hydrogen requirements and opportunities.
The Trans Adriatic Pipeline AG will be conducting a public consultation on proposed revisions to the TAP Network Code between 20 December 2022 and 31 January 2023. The proposed revisions, the rationale for those amendments and an estimated timeframe for implementation are summarized in a Revision Proposal.
Swiss Axpo, which holds 5 percent in the Trans Adriatic Pipeline, is said to sell its stake. Milano Finanza has learned from several sources that Axpo wants to sell its TAP share for 250 million euros. The other shareholders are likely to buy this stake in proportion to what is already held in the asset. As such, SOCAR and Snam will have the largest share, followed by Fluxys and Enagás. This will allow Axpo to get considerable amount of funds for its green energy projects. Axpo refused to comment on this matter.
The Trans Adriatic Pipeline AG (TAP) was certified by TÜV HELLAS (TÜV NORD), the leading Accredited Certification Body in Greece. TÜV HELLAS inspected the TAP operating company and the pipeline facilities and certified TAP for the Quality Management System according to the international standard ISO 9001:2015; for the Environmental Management System according to the International standard ISO 14001:2015; for the Occupational Health and Safety System according to the international standard ISO 45001:2018.
Baku-Tbilisi-Erzurum (South Caucasus Pipeline)
The SCP Co. shareholders are: bp (28.8%), TPAO (19.0%), PETRONAS (15.5%), AzSCP (10.0%), NICO (10.0%), LUKOIL (10.0%) and SGC Midstream (6.7%).
In the first three quarters of 2021, SCP spent around $39 million in operating expenditure and around $8 million in capital expenditure in total.
The SCP has been operational since late 2006, transporting Shah Deniz gas to Azerbaijan, Georgia and Turkey. The expanded section of the pipeline commenced commercial deliveries to Turkey in June 2018 and to Europe in December 2020.
During the three quarters, the daily average throughput of SCP was 46.8 million cubic metres of gas per day.
On 1 August 2021 the transition of the technical operatorship of the South Caucasus Pipeline Company (SCPC) from BP Exploration (Shah Deniz) Limited to SOCAR Midstream Operations LLC was finalized. The transition process which started in March 2020 was successfully completed in July 2021. Despite the challenges caused by COVID-19 bp and SOCAR worked in close collaboration to effectively implement all the aspects of the process.
The transfer of technical operatorship was carried out in fulfilment of the obligations undertook in the revised SCPC Pipeline Owners’ Agreement, signed in December 2013 as part of the Final Investment Decision on the Shah Deniz Stage 2 and South Caucasus Pipeline Expansion (SCPX) projects.
Project status
A total of 18.897 billion cubic meters were transported through Baku-Tbilisi-Erzurum from January through November 2022 as compared to 15.923 billion cubic meters in the same period in 2021. As such, the volume of gas transportation via the South Caucasus Pipeline grew by more than 18.67 percent year-on-year. Baku-Tbilisi-Erzurum accounted for 53.8 percent of gas transported through Azerbaijan’s main gas pipelines in the first 11 months of 2022, versus 50.4 percent in the same period in 2021.
Interconnector Greece-Bulgaria (IGB)
IGB is a gas pipeline, which allows Bulgaria to receive Azerbaijani gas, in particular, the gas produced from Azerbaijan's Shah Deniz 2 gas and condensate field. IGB is connected to TAP via which gas from the Shah Deniz field is delivered to the European markets.
The pipeline’s length is 182 kilometers.
In the first stage, the pipeline capacity stands at 3 billion cubic meters of gas, of which 2.7 billion cubic meters is offered for long-term market, the remaining share of 0.3 billion cubic meters for short-term market.
In a second phase, depending on the evolution of the market, the capacity of the pipeline can be increased to 5.3 billion cubic meters of gas thanks to the addition of a compression station: 4.5 billion cubic meters of gas will be offered for long-term market and 0.5 billion cubic meters will be offered for short-term market.
Bulgarian Energy Holding EAD (BEH EAD) holds 50 percent of this project, while the remaining 50 percent is owned by Greek DEPA and Italian Edison.
In January 2014, the Trans Adriatic Pipeline AG (TAP) and Interconnector Greece-Bulgaria (ICGB) signed a Memorandum of Understanding and Cooperation (MOUC) aimed at establishing the technical cooperation in order to further develop strategic infrastructure in the region.
The total investment cost of the project is estimated at around 240 million euros (excluding VAT), of which 220 million euros account for capital expenditures.
Project status
The foundation laying ceremony of the IGB was held on May 22, 2019 in Bulgaria.
In January, ICGB signed a contract with PRISMA European Capacity Platform GmbH, Europe’s leading gas capacity trading platform, marking a major milestone in the preparations for the pipeline’s launch of commercial operation.
In February, the project company responsible for the implementation of the gas interconnector with Greece, signed a contract with RBP - one of the leading European platforms for trading capacity.
The project company ICGB, responsible for the implementation of the Greece-Bulgaria interconnector, started the certification procedure to become an independent transmission network operator, submitting relevant documents on February 16.
The entire length of the Interconnector Greece-Bulgaria and all eight block valve stations were successfully hydrotested in April. In May, testing of the gas metering station near Stara Zagora was completed as part of construction of the Interconnector Greece-Bulgaria. The Interconnector Greece-Bulgaria was successfully connected to the national gas transmission network of Bulgartransgaz. In late May, the quality and technical reliability of the 182-kilometer interconnector connecting the gas transmission networks of Greece and Bulgaria was reconfirmed by checks with a calibration inspection piston along the entire length of the pipeline.
In June, the Interconnector Greece-Bulgaria started test gas supplies.
The construction phase of the gas interconnector Greece-Bulgaria was completed in July. The event was celebrated at the gas measuring station near the Greek city of Komotini, where the pipeline connects to the gas transmission network of Greece and to the Trans-Adriatic pipeline.
In mid-July, the ICGB received the Final Joint Decision for Certification as an Independent Transmission Operator. ICGB became the second independent gas transmission operator in Bulgaria.
On July 25, the ICGB AD was granted a license for independent natural gas system for the territory of Greece.
With this decision, the company will be able to perform the activity of natural gas transmission for a period of 50 years. A similar license for a 35-year period was received by the Bulgarian energy regulator – Energy and Water Regulatory Commission (EWRC).
All facilities of the Interconnector Greece-Bulgaria were filled with gas in August.
ICGB introduced a new management model in response to the requirements to transform the project company into an independent transmission operator. After a General Assembly of the company’s shareholders (BEH and IGI Poseidon), a new Statute of the company was also adopted.
The Greece-Bulgaria interconnector got Act 15 for the territory of Bulgaria, which certifies that the facility is completed and technically sound, as the EPC contractor - the Greek company AVAX, hands it over as a completed site to the contracting entity - the independent gas transmission operator ICGB AD. In late September, IGB was issued a Permit for Use on the territory of Bulgaria and Operation Permit for the Greek section of the interconnector.
The independent transmission operator ICGB was granted a natural gas transmission permit a day before the start of commercial operation of the Greece-Bulgaria interconnector.
On October 1, the gas interconnector Greece-Bulgaria started commercial operation. The commissioning of the gas pipeline coincided with the first day of the new gas year and the start of the heating season. The first quantities of natural gas through the interconnector were transited at the beginning of the gas day from the Trans-Adriatic Pipeline.
US-based energy development company Linden Energy finalized its commitment to use 10 percent of the capacity of the Interconnector Greece-Bulgaria under a 20-year contract.
In late October, ICGB utilized the final tranche of the long-term loan under the European Investment Bank (EIB) for the implementation of the Greece-Bulgaria gas interconnector.
In early November, ICGB became a member of the European Network of Transmission System Operators for Gas (ENTSOG).
The finishing works on the gas interconnector Greece - Bulgaria are in the process of implementation and ICGB expects them to be realized within the timeline declared by the EPC contractor and in accordance with all the requirements of the technical project. The Greek construction company AVAX is responsible for the implementation of three main activities, divided into separate stages after approval by the Bulgarian Ministry of Regional Development and Public Works. They are not directly related to the commercial operation of the gas pipeline but still remain part of the EPC contract signed with the independent transmission operator ICGB and need to be performed in accordance with the requirements of the contracting authority and the approved technical design.
In late November, ICGB and the licensed gas distribution operator for the territory of the municipality of Kardzhali "Citygas Bulgaria" EAD concluded an Agreement for connection to the gas transmission network of ICGB. The contract regulates the physical connection of the networks of the two operators, which will allow access for both commercial and domestic consumers in the region to a new source of supply of natural gas.
On December 1, representatives of ICGB AD (Bulgaria), Bulgartransgaz EAD (Bulgaria), DESFA S.A. (Greece), Gastrade S.A. (Greece), FGSZ LTD (Hungary) and SNTGN TRANSGAZ S.A. (Romania) signed the renewal of the Memorandum of Understanding on the implementation of the Vertical Gas Corridor. The adopted document aims at cooperation between the companies regarding the realization of the Vertical Gas Corridor, which will connect the networks of Bulgaria, Greece, Romania and Hungary and will allow natural gas transportation.
The total amount of natural gas transported through the Interconnector Greece-Bulgaria from October 1 through November 1, 2022, amounted to 95 million cubic meters (1.1 billion kWh).
Ionian Adriatic Pipeline (IAP)
Ionian Adriatic Pipeline can be connected to the Trans Adriatic Pipeline (TAP) to transport gas to many countries in South-East Europe.
The pipeline with total length of 516 kilometers will stretch from Albania through Montenegro, and Bosnia and Herzegovina, to split in Croatia.
The capacity of the pipeline will amount to five billion cubic meters of gas per year.
TAP has already signed memorandums of understanding and cooperation with the developers of this project, in particular with companies of Plinacro (Croatia), BH-Gas (Bosnia and Herzegovina), Geoplin Plinovodi (Slovenia), as well as with the governments of Montenegro and Albania.
There has been created a TAP-IAP joint working group that gathers regularly to synchronize the timing of both pipeline projects and coordinate the technical issues of interconnection. In particular, Croatia expects to receive approximately 2.5 billion cubic meters of gas per year through the IAP.
Project status
Possible time of implementation of the project hasn’t been announced yet.
A Memorandum of Understanding (MoU) on the Ionian Adriatic Pipeline (IAP) was signed in August 2016 by Albania, Bosnia and Herzegovina, Croatia, Montenegro and SOCAR.
The construction of the Ionian-Adriatic Gas Pipeline will be led by a project company based in Split and shareholders from four countries through which the pipeline passes or is used. Pandemic and ‘other market circumstances’ delayed the implementation of one of the largest energy projects in this part of Europe. The complexity of the route, as well as the coordination of four different countries and four gas transmission system operators, affects the speed of activities and project implementation. So far, Croatia has withdrawn €3.5 million from EU funds to prepare the construction of the IAP. Montenegro and Bosnia and Herzegovina have also received money for the IAP from Brussels in the total amount of €4.2 million.
The planned capacity of the IAP is five billion cubic metres of natural gas per year. Albania will use approximately one billion cubic metres, Montenegro would take half a billion, for southern Bosnia and Herzegovina one billion cubic metres. Croatia would take over about 2.5 billion cubic metres a year for its own needs and the needs of countries in Central and Eastern Europe.
The Ionian Adriatic Pipeline will need 600 million euros worth investment.
Croatia has already issued construction permits for some of the sections of the future pipeline, while Albania and Montenegro have prepared concept projects for sections on their territories. Montenegro is considering seeking a concessionaire for the Ionian-Adriatic Pipeline on its territory.
Ighdir-Nakhchivan gas pipeline
Azerbaijan and Türkiye signed a memorandum of understanding on Ighdir-Nakhchivan gas pipeline on Dec.15, 2020.
The project will be implemented by Azerbaijan’s state oil company SOCAR and Türkiye’s BOTAS. Nakhchivan currently receives gas mainly through Iran. The supply of Azerbaijani gas through Türkiye will help Nakhchivan meet its gas demand. The Turkish section of the pipeline from Ighdir to Sadarak, Nakhcivan, will be 85 kilometers long.
Project status
The pipeline’s capacity will be 500 million cubic meters per year. Engineering works were completed in October 2020.
In January 2021, Turkish President Recep Tayyip Erdogan decided to build communication lines and carry out other work as part of the Igdir-Nakhchivan gas pipeline project. In accordance with the decision, the Turkish Petroleum Corporation (TPAO) was entrusted with carrying out this work.
Preparations for the Igdir-Nakhchivan gas pipeline between Türkiye and Azerbaijan were completed in June 2021.
It was planned to invest 100 million Turkish liras ($7.4 million) in Ighdir-Nakhchivan gas pipeline in 2022. The rest of the total 185 million Turkish liras ($13.7 million) was planned to be allocated in 2023.
Moreover, a metering station will be built in Dilucu, Ighdir as part of the project. The station, which will cover an area of 20,000 square meters, will provide the flow balance of the pipeline.
Construction of Ighdir-Nakhchivan gas pipeline will begin after completing the design and engineering and technical analysis. Currently design work is underway, as part of which the primary route of the pipeline at the interconnection on the territory of Nakhchivan-Türkiye border was inspected.
Trans-Caspian Gas Pipeline
Turkmenistan is studying the possibility of delivering its energy resources to the European market. To this end, it promotes the project for construction of the Trans-Caspian Gas Pipeline to the coast of Azerbaijan, from where the Turkmen gas can be delivered to Türkiye and further to Europe.
The Trans-Caspian Gas Pipeline project may be implemented as part of the Southern Gas Corridor.
Project status
Currently, there are no direct agreements on the implementation of the Trans-Caspian Gas Pipeline project.
Turkmenistan has expressed its readiness to supply 40 billion cubic meters annually to Europe, 10 billion cubic meters of which can be provided by the Petronas company, which operates in the Turkmen sector of the Caspian Sea. The remaining volume can be provided by the 800-km East-West pipeline, which originates from the Galkynysh field and finishes off the coast of the Caspian Sea.
In April 2015, a declaration on development of energy cooperation was signed in Ashgabat following the multilateral talks on the Trans-Caspian Gas Pipeline project between Turkmenistan, Azerbaijan, Türkiye and the EU.
Moreover, in order to consider the complex of organizational, legal, commercial, technical and other issues related to gas supply from Turkmenistan to Europe, the parties agreed to create a working group at the level of deputy ministers in charge of energy issues of Turkmenistan, Azerbaijan, Türkiye and the EU.
Islamic Development Bank is ready to study the possibility of supporting the Trans-Caspian Gas Pipeline project.
In June 2018, Georgia and the European Commission agreed to jointly finance the commercial engineering of the project.
The European Commission is conducting technical discussions with Turkmenistan to find out how and under what conditions Turkmen gas can be supplied to the EU, and also maintains close ties with Azerbaijan on this issue.
However, any possible version of the Trans-Caspian pipeline project should be built and financed by private companies.
Recently, the European Commission proposed that Turkmenistan develop a feasibility study for Turkmen gas supplies. The EU companies need the necessary guarantees from Turkmenistan for serious participation in this project.
Azerbaijan-Georgia-Romania Interconnector (AGRI)
AGRI project envisages transportation of Azerbaijani gas to the Black Sea coast of Georgia via gas pipelines. Azerbaijani gas delivered to Georgia's Black Sea coast will be liquefied at a special terminal and following this, it will be delivered in tankers to a terminal at the Romanian port of Constanta.
Further, it will be brought to the gaseous state and sent via Romanian gas infrastructure for meeting the demands of Romania and other European countries.
The project’s cost is estimated at 1.2-4.5 billion euros depending on the terminals’ capacity, which can vary between 2 and 8 billion cubic meters of gas per year.
The participants of the AGRI project are SOCAR, Georgia's Oil and Gas Corporation, as well as MVM (Hungary) and Romgaz (Romania). The parties established the SC AGRI LNG Project Company SRL with the purpose of developing the Feasibility Study.
Project status
Azerbaijan, Georgia and Romania signed on June 24, 2015 a joint declaration on supporting the development of the Azerbaijan-Georgia-Romania Interconnector project.
British Penspen engineering company presented to shareholders of AGRI the final version of the feasibility study (FS) of the project in late 2015.
Turkmenistan is highly interested in the Azerbaijan-Georgia-Romania Interconnector project. To supply this project with Turkmen gas, it is necessary to build a separate gas pipeline along the Caspian seabed to the coast of Azerbaijan or to deliver liquefied gas through the sea via tankers.
It is expected that the AGRI gas pipelines system project (Azerbaijan-Georgia-Romania Interconnector), which provides for the transportation of Azerbaijani gas to Europe, will be implemented after 2024-2026.
Presently, the shareholders of the AGRI LNG project company are discussing issues related to the further development and implementation of the AGRI project, presumably after 2024-2026, when the second stage of development of Azerbaijan’s Shah Deniz field and other fields will be completed.
Azerbaijan-Georgia-Romania Interconnector project is currently frozen.
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