The Shah Deniz decision: More gas for Europe

GÜNTHER H. OETTINGER

Just a few days ago, we got long awaited news from Azerbaijan: the Shah Deniz Consortium – companies operating the Shah Deniz 2 gas condensate field – decided to select the pipeline bringing gas from Azerbaijan to Europe. The Trans-Adriatic Pipeline (TAP) was chosen as the European distribution pipeline for gas coming from the field. This is an historical decision, as it signals that substantial volumes of gas will come to Europe from a Caspian country. For Europe it means 10 billion cubic meters of natural gas a year starting before 2020.

Since the 2009 Ukraine gas supply crisis (and the one before that in 2006), the European Union has looked to diversify its gas supply. This meant diversifying routes, sources and counterparties. More partners to negotiate with will give Europe better chance to avoid gas cuts in the future and to secure the gas supplies needed for keeping the competitiveness of the European economy.

Azerbaijan is a door opener in this process. But there are further major sources in the Southern Gas Corridor, linking the EU to Turkey, the Eastern Mediterranean, Iraq, Azerbaijan and other countries.

With a real strategic vision, Azerbaijan’s President Ilham Aliyev, along with Turkey, has committed to building a large scaleable pipeline, called TANAP, to the European border. It will initially bring gas from Shah Deniz 2, and eventually from other fields in Azerbaijan, to the European market. What we see today is just the beginning. A decision to have TAP built first and to bring more gas later means that the route to Austria – currently Nabucco West – is still on the table. The question is not either one or the other, in the medium term both are needed. This is certain: we will need more gas in 2020, and Caspian gas is a good response to this need.

More importantly than the choice between Tap and Nabucco is the opening of the Southern Corridor. With an effective and functioning internal energy market, with the necessary infrastructure and reverse flows in place, once the gas enters the EU, it can be transported anywhere in Europe. With the internal energy market, gas interconnections, championed by the European Commission, will secure the ability of gas to reach member states who have just one or only a few suppliers, such as Romania, Bulgaria and Hungary. It is in this sense that the European Commission has been working for the past years. Our main priority is to tackle the most vulnerable countries. On Bulgaria, for instance, Europe must work harder to assist the government make the long-term strategic energy decisions necessary for its energy security.

The commission is also working with Serbia and Bulgaria to build a connection between these two, and Romania is now connected to Hungary and Bulgaria. The North-South initiative, spearheaded by the commission, has put in place many small interconnectors that create a web of interconnection in South East and Central Europe. But more is still needed, to bring competitive prices to Southern Europe.

I want to see thorough development of the resources in the eastern Mediterranean. Cypriot’s government efforts to develop a Liquefied Natural Gas (LNG) export facility on the island are part of that endeavor. From Greece, we need a swift liberalized pipeline system up to Ukraine.

And what’s in it for Azerbaijan?

What Azerbaijan has realized, and what is often missed elsewhere, is that Europe is a safe bet. European rules are stable, the returns constant and valuable. Azerbaijan is committing its future to Europe.

For Europe, the decision of the Shah Deniz Consortium marks a real breakthrough in terms of securing Europe’s energy supplies for the future. In a world of global energy markets and growing competition for resources, we will continue promoting Europe’s energy interests and engaging in comprehensive partnerships with key supplier countries. We trust that our efforts will ensure secure energy supplies for European households and businesses and will enhance Europe’s competitiveness.

Günther H. Oettinger is the European Commissioner for Energy