TANAP – largest middle segment of Azerbaijani-initiated Southern Gas Corridor- comes onstream

Fuad Muxtarlı Analysis 13 June 2018
TANAP – largest middle segment of Azerbaijani-initiated Southern Gas Corridor- comes onstream

Azerbaijan has invested over $8bn in the Southern Gas Corridor (SGC) mega gas pipeline project, with the largest amount having been allocated to the Trans Anatolian Pipeline (TANAP), the largest, middle segment of the corridor. And TANAP saw inauguration with top officials in attendance on June 12, a week ahead of Turkey's crucial presidential elections.

Turkey's political, economic stability under AK Party rule has paved the way for natural gas pipeline to go through this country towards Europe, President Erdogan told the inauguration of the historic Trans Anatolian Natural Gas Pipeline (TANAP) project in the central Turkish city of Eskisehir.

TANAP was opened by Turkish President Recep Tayyip Erdogan, Azerbaijani President Ilham Aliyev, Ukrainian President Petro Poroshenko, Serbian President Aleksandar Vucic, and Mustafa Akinci, president of the Turkish Republic of Northern Cyprus.

Speaking at the ceremony, Erdogan called TANAP the fruit of the shared vision of the countries involved in the project and said it would pave the way for similar future projects.

“The political and economic stability Turkey has ensured over the last 16 years in Turkey has played a very significant role in realizing TANAP in such a short time,” Erdogan said, referring to the era of Justice and Development (AK) Party rule.

Calling it a historic step for the countries of the region, he added: "We are opening the Trans Anatolian Natural Gas Pipeline, the backbone of the southern gas corridor, which we call the Silk Road of energy."

Erdogan said the project was made possible primarily due to good Turkish-Azeri relations, based on mutual trust. He added that the harmonization and understanding among producer, transit, and consumer countries, and companies also sped up the process.

"In this respect, TANAP is also a sign of multilateral cooperation. The understanding that we see energy not a conflict, but as cooperative ground has once again taken shape in flesh and bones thanks to TANAP," Erdogan said.

Noting TANAP’s starting capacity of 16 billion cu. m (bcm) of natural gas, he said 6bn of that will go to Turkey, while 10bn will go to Europe.

"We aim to increase TANAP's capacity to 22 bcm based on demand, and to 31 bcm immediately after with additional investments," he said. Erdogan said first gas delivery to the Greek border is set for June 2019.

"We have sent our first local and national drilling ship the Fatih to the Mediterranean. With this ship and its cutting-edge technology, we have addressed an important shortcoming of our country," Erdogan said, adding that they have boosted Turkey's renewable energy resources' installed power from 12,305 megawatts to 40,838 megawatts.

TANAP is a critical project, as it will boost the security of energy supplies, said Berat Albayrak, Turkey's energy and natural resources minister. He called TANAP a new symbol of the Turkish-Azeri brotherhood.

"The regional cooperation between Turkey, Azerbaijan and Georgia turned into global cooperation. TANAP is a project of vision, stability and strong leadership," Albayrak said.

TANAP at a glance

The opening ceremony featured the attendance of government leaders, energy company executives, and senior bureaucrats from shareholder and friendly countries.

TANAP is a natural gas pipeline stretching from the Turkish-Georgian border to the Turkish-Greek border to supply natural gas to both Turkey and also European countries.

The 1,850-kilometer pipeline is the largest section of the 3,500-km Southern Gas Corridor, which was inaugurated on May 29 in Baku.

TANAP, with around $8 billion in investment, will deliver 6 billion cubic meters of Azeri gas to Turkey and 10 billion to Europe per year. The European part of the project is expected to be operational in 2020.

The TANAP project has seen the employment of around 13,000.

The estimated investment cost was $11.7 billion at the start of the project, but this figure has been revised down to $7.99 billion.

Currently, the Southern Gas Corridor Company holds a 51 percent share, Turkey's BOTAS has a 30 percent interest, BP holds 12 percent, and SOCAR Turkey has the remaining 7 percent.

TANAP will be followed by an 878-km cross-border natural gas pipeline, the Trans Adriatic Pipeline (TAP). TAP is currently under construction, stretching from the Greek-Turkish border crossing Greece, Albania and the Adriatic Sea to Italy. At its entry point, TAP will connect to the Trans Anatolian Pipeline (TANAP) in Turkey. The European Investment Bank (EIB) in March approved €932 million ($1.15 billion) in financing for TANAP.

The opening ceremony of the Trans-Anatolian Natural Gas Pipeline (TANAP) was held in Eskişehir on June 12.

The Southern Gas Corridor (SGC) consists of three pipelines: the South Caucasus pipeline across Azerbaijan and Georgia, the TANAP pipeline across Turkey, and the Trans-Adriatic Pipeline (TAP) across Greece and Albania, with an offshore section to southern Italy.

Azerbaijan recently inaugurated a terminal that is planned to be the starting point of the SGC.

TANAP, with around $8.5 billion of investment, will deliver 6 billion cubic meters per year (bcm/y) of Azeri gas to Turkey and 10 billion bcm to Europe. The European part of the project is expected to become operational in 2020.

The European part of SGC appears more problematic since an anti-system government took office in Italy. The new environment minister Sergio Costa, who was nominated by 5-Star Movement, raised questions over the future of the TAP pipeline, saying that the project was “pointless”.

The Bulgarian press reports that Prime Minister Boyko Borissov will also attend the ceremony in Eskişehir. Bulgaria is not part of SGC, but will import 1 bcm/y of Azeri gas via an interconnector with Greece. This represents roughly one third of the country’s annual consumption. Until now Bulgaria will fully dependent of the import of Russian gas.

SGC is seen as an alternative to the Turkish Stream gas pipeline, designed to bring Russian gas to the European territory of Turkey under the Black Sea. Bulgaria is interested in both SGC and in being the entry point of Turkish Stream in the EU. The other alternative for the entry point to EU territory is Greece.

The Bulgarian newspaper Dnevnik quoted the CEO of Gazprom on its website saying that the decision on which entry point to choose will depend on the results of auctions for booking gas imports on the basis of legally binding contracts, which should be called by the Bulgarian and the Greek gas transport operators.

European Commission Vice President Maroš Šefčovič, in charge of the Energy Union, was quoted as saying:

"Today, we are turning intentions into reality and delivering another tangible result under the Energy Union.

“By helping diversify our energy suppliers and routes, the Southern Gas Corridor is strategically important for the EU's energy security, including in the most vulnerable parts, such as South-East Europe and Southern Italy.

“We all stand to gain from this 'bridge' between the Caspian region and the EU market. It is in our joint interest to make it a success.

“Our long-term objective is to create a pan-European energy market based on free trade, competition and diversified supplies, sources and routes. This shows that the Energy Union does not stop at the EU's borders and it has a strong external dimension. Only like this it can be truly resilient.

“I trust that the construction of the TAP, a European section of the Southern Gas Corridor, will continue to progress also thanks to the continuous support of the three national governments involved, so that Caspian gas reaches the EU by 2020. It will bring significant benefits to its host, transit and destination countries, including their local communities – in terms of investment, jobs as well as lower energy prices for consumers and transitioning to low-carbon economies," he concluded.