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FSUOGM COMMENTARY FSUOGM
Europe interested in more Azeri
gas, but obstacles remain
There are both demand and supply-side challenges
AZERBAIJAN
WHAT:
The EU is interested in doubling the amount of gas it gets from Azerbaijan.
WHY:
Discussions are underway to expand the Southern Gas Corridor to handle the extra gas.
WHAT NEXT:
There are questions over whether Europe needs more gas, and whether Azerbaijan has the ability to supply it.
EUROPE is interested in doubling the amount of gas it takes from Azerbaijan to 20bn cubic metres, a senior EU official was quoted as saying by Reuters on February 28.
Azerbaijan is preparing to launch gas flows to Europe this autumn after the completion of the Trans-Adriatic Pipeline (TAP), representing the last leg of the Southern Gas Corridor (SGC) network stretching from Baku to Italy.
SGC’s first two sections – the South Caucasus pipeline expansion (SCPx) and the Trans-Ana- tolian pipeline (TANAP) – came on stream in mid-2018, pumping extra gas from the BP-op- erated Shah Deniz field in the Caspian Sea to Turkey. TAP connects with this pipeline chain at Turkey’s western border and runs through Greece, Albania and across the Adriatic Sea before making landfall in Italy.
Underpinning the SGC project was the sec- ond-stage development of Shah Deniz, which added an extra 16 bcm to the field’s annual gas supply. Turkey is contracted to take 6 bcm of this gas, while Europe will receive the remaining 10 bcm.
However, European shipments could reach 20 bcm per year if additional Azeri gas fields are brought on stream, and if SGC is enlarged to handle the extra supply.
“We are considering the possibility of expanding the Southern Gas Corridor, taking into account the potential of Azerbaijan’s new fields ... up to 20 bcm,” Klaus-Dieter Borchadt, a director of the European Commission’s energy division, told a news conference in Baku. “This has already been agreed.”
Doubts over demand
Azerbaijan is eager to ramp up its gas exports over the coming decade to offset dwindling oil revenues as its flagship Azeri-Chirag-Gunashli (ACG) oil project grows ever more mature.
Europe is the only feasible destination for this gas, given that Azerbaijan is surrounded on all other sides by major gas producers. However, there are growing doubts over whether the conti- nent’s future gas demand justifies any additional import infrastructure.
Europe will be the only region to see gas
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w w w . N E W S B A S E . c o m Week 09 04•March•2020