Shah Deniz Consortium to Fund Trans Adriatic Pipeline Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--Shah Deniz II consortium partners agree to fund the Trans-Atlantic Pipeline (TAP). According to a statement from TAP, the fund will contribute toward continued work in several important areas during the period running up to the final routing decision, which is expected in 2013. The agreement also includes an option for the Shah Deniz shareholders to take up to 50% equity in TAP.

"The signing of this agreement is a significant vote of confidence in the quality of TAP's technical and commercial solutions from key industry players, and underpins the cooperation agreement that was signed between TAP and Shah Deniz in June," said Kjetil Tungland, TAP's managing director. "Our cooperation with Shah Deniz is now even closer and more far-reaching than before. This agreement will strengthen our continued working relationship in the run-up to the final routing decision. We remain confident of a positive outcome."

TAP will transport natural gas from the giant Shah Deniz II development in Azerbaijan, shipping it via Greece and Albania, across the Adriatic Sea to Southern Italy, and further into Western Europe. Its capacity could start at 10 billion cubic meters per year and rise to 20 billion cubic meters per year, depending on supply and demand.

TAP's shareholders are EGL of Switzerland (Geneva, Switzerland), Norway's Statoil (Oslo, Norway) and E.ON Ruhrgas (Dusseldorf, Germany).

TAP is currently competing with Nabucco West, a shortened natural gas pipeline project, which will ship gas from Turkey-Bulgaria border to Austria. Turkey and Azerbaijan signed an agreement to build the $7 billion Trans-Anatolia Pipeline, which will carry Azeri gas across Turkish territory to the country's Bulgarian border.

The Nabucco joint venture also includes Germany's RWE AG, Vienna-based OMV AG, Bulgargaz EAD and Turkey's state-owned gas company Botas (Ankara, Turkey). If the Shah Deniz partners choose to flow gas through Nabucco West, this will be the worst outcome for the TAP project.

The Southern Gas Corridor is one of the priority energy projects for the European Union, designed to diversify the routes and sources of supply and thus increase European energy security. Gas to be produced during the second phase of Shah Deniz gas field development, which is expected to start by the end of 2017, is considered as the main source for the project. Reserves of the Shah Deniz field are estimated at 1.2 trillion cubic meters. Shah Deniz II partners are BP plc (NYSE:BP) (London, England), State Oil Company of Azerbaijan (Baku, Azerbaijan) and Total S.A. (Paris, France).

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