Europe will not notice the Southern Gas Corridor. The EU Southern Gas Corridor is becoming a reality. Russia is bypassed and away

At a time when the European Union, NATO, the United States and Russia are preoccupied with the Ukrainian crisis, a discussion of the Southern Gas Corridor project took place in Brussels.

The West and Russia, which supplies Europe with 40% of gas, again clashed with each other in the Ukrainian crisis. In an effort to get rid of dependence on Russia, the EU with a vengeance took up the search for alternative ways.

Natural gas and oil account for 50% of the income of the Russian federal budget. Again, we note that 40% of the EU's natural gas is imported from Russia, while 66% of Russian gas supplies to the EU countries are carried out through the territory of Ukraine. The gas demand of Sweden, Finland, Lithuania, Latvia, Estonia and Bulgaria is met by Russia by 100%, and by 40% for such a major European economy as Germany.

In this situation, the EU countries feel the need to look for new and alternative ways to meet their natural gas needs.

Last week in Brussels, experts focused on the Southern Gas Corridor, which involves the transportation of gas from the Azerbaijani Shah Deniz field (its reserves are estimated at 1.2 trillion cubic meters) to Europe through Turkey.

The forum, titled “Southern Gas Corridor: Opportunities and Challenges”, discussed the strengthening of the Southern Gas Corridor, designed to reduce the EU’s dependence on Russia for energy, and the possibility of supplementing Azerbaijani gas with energy resources from other sources in the Caspian region, as well as Iraq and the Eastern Mediterranean.

At the Caspian Forum, held in the capital of the European Parliament by the Caspian Strategy Institute, experts in the energy sector were unanimous in their opinion that the latest outbreak of the crisis has once again confirmed "the role of pipelines that will transport gas to Europe through Turkey."

The Southern Gas Corridor adds a new dimension to the energy geopolitics that forms the energy map of Eurasia. Brussels also discussed the opportunities that this corridor creates for Europe, as well as the project of the Trans-Anatolian gas pipeline (the most important link in the Southern Gas Corridor) and the project of the Trans-Adriatic gas pipeline, designed to transfer Azerbaijani gas from the Turkish border to Europe.

Khaldun Yavash, Secretary General of the Caspian Strategic Institute, said: “After the emergence of the crisis in Ukraine, the EU has become more aware of the importance of the Southern Gas Corridor. The crisis has once again reminded the Europeans of the need for a pipeline running through Turkey.”

The representative of the Azerbaijani state oil company SOCAR in Brussels, Vusal Mammadov, stressed that Azerbaijan has identified the sale of gas to Europe as its “strategic goal”, and continued: “The recent events in Ukraine have further increased the role of Caspian gas supplies to Europe, but even if these events had not was, this question in any case would be important. Thanks to the Southern Gas Corridor, the EU will have access to a completely new gas field.”

It is assumed that in 2018 the annual supply of natural gas from Azerbaijan to Europe through the Trans-Anatolian gas pipeline will amount to 16 billion cubic meters; Of these, 6 billion will be used for consumption in Turkey, 10 billion for sale to the EU. According to some forecasts, in 2025 this figure will increase to 25 billion cubic meters per year.

Italian MEP Vittorio Prodi stressed that having a single country to meet the demand for natural gas is strategically wrong. In order for the EU to get rid of dependence on Russian gas, it is necessary to pay attention to the Southern Gas Corridor. In this regard, Prodi noted: “The Southern Gas Corridor is a very important part of our political freedom, since we do not want to face a situation of possible supply restriction in the gas sector due to various political reasons.” At the same time, Theodoros Christopoulos, Attache of the Permanent Representation of Greece in the EU, drew attention to the fact that "diversifying the sources of gas purchases will allow the EU to ensure its energy security."

Stressing that about 74% of the world's natural gas reserves are located "around" Turkey, Deputy General Director of the Turkish company BOTAŞ Ibrahim Saeed Arinc, in a speech at the forum, noted that Turkey will play a key role in additionally meeting the EU's demand for natural gas and organizing the security of supply in the gas areas.

At the end of June, during the Azerbaijani-Polish business forum in Warsaw, President of Azerbaijan Ilham Aliyev of European and American partners that the so-called "Southern Gas Corridor" (SGC) will be built in a maximum of three years. Recall that the start of production at the Shah Deniz-2 field (the main resource base of the SGC) is scheduled for the end of 2018, and the supply of fuel to Europe will begin presumably at the end of 2020. Initially, it is planned to export 16 billion cubic meters of gas per year, 6 billion of which to Turkey and 10 billion to Europe. In the current version, the maximum throughput capacity of the gas pipeline should be a little more than 30 billion cubic meters of gas per year by 2026.

Note that the Azerbaijani leader prudently did not specify what specific volume of gas would be supplied through this artery. And such foresight is not at all unreasonable, especially if we recall the words of Deputy Energy Minister Natig Abbasov, who commented in October 2015 on the possibility of increasing the supply of Azerbaijani gas (instead of Russian) to Turkey as follows: “The reserves that we will produce have already been sold until 2040. If there was extra gas, we would take it for ourselves.” “The proven reserves of natural gas in Azerbaijan are 2.6 trillion cubic meters, and these reserves will provide gas to both the countries of the region and Europe in the coming decades,” the President of Azerbaijan said a few days ago during the XXII World Petroleum Congress in Istanbul.

Source: www.caspianbarrel.org

The French Total and the Norwegian Statoil recently withdrew from the Southern Gas Corridor, which hardly indicates the bright prospects of this initially politicized project. Recall that the gas pipeline with a total length of more than 3 thousand km (Azerbaijan - Georgia - Turkey - the Balkans with access to Italy), supported by the European Union, the United States and developed by their companies at the turn of the 1990s — 2000s, is still being built significantly behind schedule. According to the energy departments of Turkey, Georgia and Greece, no more than 15% of the entire route is in full readiness. Delays in construction are primarily due to high political and related risks in the region where the gas pipeline passes (for example, Kurdish rebels in Eastern Turkey; Albanian-Greek border disputes, including on the maritime border; seismological instability along most of the SGC route). The politicized directive to bypass Russia and include (albeit conditional) Ukraine, which was originally incorporated into the project, does not contribute to improving security and increases contradictions. The unilateral approach of the European Commission de facto discriminates between some suppliers in favor of others, distorting the basic principles of common European law.

Under these circumstances, it is difficult to count on growing foreign investment in the implementation of the project (except, of course, purely "political"). Let us recall, in this regard, that the share of "Western" investment in the total amount of capital investments in the creation of the Southern Gas Corridor is over 65%. The total investment cost of the project was estimated by I. Aliyev at about 40 billion dollars (according to the previously published data of the Ministry of Energy of Azerbaijan - about 23 billion). Thus, we are talking about the most capital-intensive gas pipeline project in Eurasia over the past 30 years.

Further, the maximum volume of deliveries through the SGC, according to the estimates of British Petroleum, the European Commission and the UN Economic Commission for Western Asia (2016-2017), will not exceed 10 billion cubic meters per year. At the same time, the capacity of the Southern Gas Corridor was originally planned to be at least 14 billion cubic meters per year. In other words, the real competition of SGC, for example, with Turkish Stream with an annual capacity of more than 20 billion cubic meters of gas, is more than doubtful . This, by the way, is also recognized by Azerbaijani authors, who draw attention to the unequal nature of the proposed gas supplies through the Southern Gas Corridor in comparison with the Turkish Stream, as a result of which “... Azerbaijani gas by itself will not be a strong competitor to Russian gas. Therefore, the European Union is interested in attracting other suppliers from the Caspian region, in particular Turkmenistan and Iran, to the Southern Gas Corridor project. We will talk about Turkmenistan ahead, but here we will pay attention to the fact that the consistently anti-Iranian position of the US administration makes the prospects for Tehran's involvement in the South Kazakhstan project more than illusory. As well as, the volumes of some deposits of which are reassessed downward.

Finally, in order to make up for its own internal deficit, Azerbaijan has been buying “blue fuel” from Russia for several years now. According to the international oil and gas information agency RCC (May 17, 2016), the state company SOCAR announced plans to approximately double the supply of Russian gas no later than 2018. We are talking about purchases of 3-5 billion cubic meters. meters of gas per year, while the current agreement (2015) provides for imports of 2 billion cubic meters. meters per year. Many experts believe that the high volumes of Azerbaijani gas supplies to Georgia, Turkey and with the use of the future SGC can make it difficult to meet growing domestic demand. Therefore, the Azerbaijani side is forced to stock up on gas from Russia in storage facilities for domestic needs.

According to the estimates of the European Commission and the UN Economic Commission for Europe (2017), in the EU gas balance, the volumes of the Southern Gas Corridor will be no more than 2% against the “Russian” 40-45%, taking into account the Turkish Stream (its construction has begun, and the pipes already go under water) and the trans-Baltic Nord Stream-2. What kind of competition is there?

Recall that at the end of the 1990s, the “pro-Western” gas pipeline project Nabucco, which made a lot of noise, came to the fore, the route of which almost coincided with the modern SGC project by almost 90%. Today, not everyone remembers that along the bottom of the Black Sea (from the Georgian terminals of Kulevi or Supsa) a branch was planned to Ukraine, then to Moldova and Romania (with a possible extension to Hungary and Austria) - the so-called "White Stream". However, due to the ultra-high capital intensity of the project and problems with gas filling, it was actually abandoned after a few years.

The thing is that NABUCCO was also planned to be filled with gas from Turkmenistan, but Ashgabat at that time (as today) disputed in Baku the ownership of a number of oil and gas bearing areas of the Caspian Sea. Therefore, laying the offshore segment of the pipe across the Caspian Azerbaijani-Turkmen border has become, at least, problematic.

In addition, already at that time, the PRC contracted over 25 billion cubic meters of Turkmen gas per year for more than 10 years, and this was accompanied by the construction of the Turkmenistan-Uzbekistan-Kazakhstan-China gas pipeline system with more than 90 percent Chinese (state and commercial) financing . The predominant part of this system was created by 2011, and it continues to expand (due to new lines through Tajikistan and Kyrgyzstan). So the problems with NABUCCO, including with the attraction of gas from the eastern coast of the Caspian Sea to the project, cannot but pass to the Southern Gas Corridor, as they say, “by inheritance” ...

Meanwhile, in Azerbaijan, a growing volume of gas production is being pumped into reservoirs to maintain the high level of oil production required primarily to fill oil pipelines from Azerbaijan to the ports of Georgia and Turkey. That is, and for this reason, the SGC runs the risk of being underloaded, including its final one - the trans-Balkan (Greek-Albanian) sector. In early June, Alexander Medvedev, Deputy Chairman of the Board of Gazprom, recalled this: “This is not a joke question, this is not a matter of choice - a matter of necessity. Oil is the main budgetary source for the Azerbaijani economy... And if in this situation TAP capacities turn out to be empty, it is again the choice of TAP participants to keep them empty or try to find some kind of understanding. For example, with us. Theory is theory and practice is practice. We are open to any options for developing business in Europe and believe that cooperation would be ideal. But we're not going to force anyone."

According to the forecast of the Ministry of Energy of Azerbaijan, in 2017 gas production will decrease to 28.39 billion cubic meters. m against 29.24 billion cubic meters. m a year earlier. At the same time, in 2016, the production of marketable gas in the country amounted to only 18.71 billion cubic meters, as the volume of gas injection into the reservoir increased to maintain production at Azeri-Chirag-Guneshli. This group of fields on the shelf of the Caspian Sea provides more than 75% of all Azerbaijani oil. According to some Russian experts as early as 2015, the peak of total gas production in Azerbaijan was reached in 2013, and commercial gas production in 2014. The peak of SOCAR's production was reached in 2014. Marketable gas production from Azeri-Chirag-Gunashli has generally been on the decline since 2009 (with some exceptions). At the same time, as mentioned above, gas consumption is growing, despite the fact that it is not possible to draw up a reliable balance (sales gas, consumption, exports). New, in addition to Shah Deniz-2, gas production projects in Azerbaijan (Absheron, Umid, Babak, Shafag-Asiman, Nakhichevan, etc.) are unlikely to change the emerging trend of its decline. The inability to fulfill the numerous obligations it has assumed to third players (in particular, to Turkey) makes Azerbaijan not a competitor in the gas sector, but rather an ally of Russia, interested in constructive partnership relations with it.

It seems that the US administration understands the circumstances mentioned, but at the same time they try to make political overtures to Baku and, in general, put a good face on a bad game. Namely, they are closely following the progress of the Southern Gas Corridor, and Washington's support for it remains stable and long-lasting. In any case, this is exactly what US Ambassador to Azerbaijan Robert Sekuta assured Energy Minister Natig Aliyev in April, who, in turn, expressed concern about some difficulties with the implementation of the TAP project in Italy, which could affect the launch time of the project.

Within the framework of the XX World Petroleum Congress mentioned at the beginning of the article in Istanbul, on July 12, the Azerbaijani leader met with US Secretary of State Rex Tillerson, during which the American side was informed about the progress of the project.

Earlier, a well-known US expert on Caucasian issues and energy policy, ex-ambassador to Azerbaijan Matthew Bryza cheerfully reported that “the SGC project is already being implemented, everything is going according to schedule .The only problem is whether the SGC will be expanded.And will Azerbaijan be able to increase suchvolume of gas? However, "... in Trump's letter to President Aliyev, the United States expresses its full support for the implementation of the Southern Gas Corridor." And this is by no means the only statement designed to support the ambitions of official Baku to become a key producer and transiter of natural gas to Turkey and further to Europe. However, in another place, Mr. Bryza is visibly nervous, accusing Russia of trying to "weaken" the Southern Gas Corridor or completely pull the project apart.

However, all these statements, including the active lobbying PR in relation to the Southern Gas Corridor, are nothing more than a political and opportunistic "demonstration" before Russia of the largely ephemeral ability of some CIS neighbors to press it on the EU energy market. And at the same time - an attempt to promote another geopolitical bluff based not on commercial efficiency, but on artificially inflated phobias about the mythical Russian "energy imperialism".

Alexey Baliev, Andrey Areshev

At the Azerbaijani Shah Deniz gas field, fuel production has been established at the level of 9 billion cubic meters per year, in the future it is planned to increase production by another 16 billion cubic meters. This was announced by the President of the State Oil Company of Azerbaijan Republic (SOCAR). RT) Rovnag Abdullayev, speaking on September 12 at the International Oil Summit in Baku. There will be no problems with the sale of the produced fuel: according to Abdullayev, "all segments of the Southern Gas Corridor project are being implemented on schedule."

Recall that the Southern Gas Corridor (SGC) energy project involves the launch of two gas pipelines: the Trans-Anatolian gas pipeline (TANAP) and the Trans-Adriatic (TAP). TANAP will stretch to Europe from Azerbaijan through Georgia and Turkey, TAP - through Greece, Albania and Italy. Both branches will supply gas from the Azerbaijani Shah Deniz field.

It is planned that the supply of Azerbaijani gas to Turkey in the amount of 6 billion cubic meters through the Southern Gas Corridor will begin in 2018, and gas pipelines will reach the European territory by 2020. Baku plans to sell 10 billion cubic meters of gas per year on the European market. For comparison, in 2016, Gazprom sold 178.3 billion cubic meters of gas in European countries.

Construction of the Trans-Anatolian Gas Pipeline (TANAP) is ahead of schedule. Turkish Minister of Energy and Natural Resources Berat Albayrak said that if the current pace of construction is maintained, the project will be completed ahead of schedule.

“Next year, we expect the completion of work on the construction of the Turkish section of TANAP, and in 2020, the Trans-Adriatic Gas Pipeline (TAP). Then we will witness the delivery of Azerbaijani gas to Europe. For its part, Turkey will do everything possible to implement the project, ”Anadolu agency quotes the minister.

In September 2017, the work was completed by 80%. The First Vice-President of the State Oil Company of Azerbaijan (SOCAR) Khoshbakht Yusifzade announced this earlier.

Potential members

Azerbaijan has relatively small reserves of natural gas - the capacity of proven fields, according to the State Oil Company of Azerbaijan, is 2 trillion 550 billion cubic meters.

In 2016, the country produced 18.71 billion cubic meters of gas, in 2015 the production volume amounted to 19.72 billion cubic meters. At the same time, the consumption of natural gas by the EU countries reached 531 billion cubic meters in 2016.

Also on topic

The European Commission (EC) is asked to abandon the construction of the Trans-Adriatic gas pipeline, which could ensure the transportation of gas ...

The significance of the Southern Gas Corridor for Europe may increase if Iran and Turkmenistan join the project. Recall that the proven gas reserves in Iran are about 34 trillion cubic meters, Turkmenistan - about 10 trillion cubic meters. Both states are included in the list of countries with the largest natural gas reserves. Also, according to Azerbaijani Energy Minister Natig Aliyev, Baku and Ankara are ready to use the pipeline under construction for gas transit from Iraq, Israel and Cyprus.

Despite the fact that the design capacity of the branches of the Southern Gas Corridor is only 30-31 billion cubic meters of gas per year, the capacity of the pipelines can be increased to 60 billion in the future, Vitaly Beglyarbekov, Vice President for Investment and Marketing of SOCAR, said earlier.

These capacities can be used, in particular, for the transit of Iranian gas: after the lifting of sanctions, Tehran is actively increasing hydrocarbon production. The Iranian Ministry of Oil plans to increase gas production to 1 billion cubic meters per day by the end of 2017. For comparison, Gazprom's daily gas production is 1 billion 382 million cubic meters.

“After the decision to lift sanctions from Iran, the relevance of TANAP has grown even more. Iran will increase gas production, and apart from TANAP there is no other alternative for Iranian gas to enter world markets,” said SOCAR President Rovnag Abdullayev.

Tehran's plans to join the TANAP gas pipeline project were previously announced by Iranian Oil Minister Bijan Zanganeh.

• Iranian Oil Minister Bijan Zanganeh.
• Reuters
• Heinz-Peter Bader

Tel Aviv may also join the TANAP project, Israeli Ambassador to Azerbaijan Dan Stav said. Israel has reserves of natural gas in the amount of about 0.2 trillion cubic meters.

Israeli Minister of National Infrastructure, Energy and Water Supply Yuval Steinitz said that Israel and Turkey are planning to build a gas pipeline in the future that will link the Israeli Leviathan gas field and TANAP.

In addition, Ankara and Baku are trying to secure the consent of the Turkmen authorities to the transit of Turkmen gas through the Southern Gas Corridor. This issue, in particular, was discussed during the trilateral meeting of the Foreign Ministers of Turkey, Turkmenistan and Azerbaijan in 2015.

At the same time, Ashgabat completed the construction of the East-West gas pipeline, which connected the fields of the eastern regions of the country. The gas pipeline ends on the coast of the Caspian Sea, the capacity of the branch is 30 billion cubic meters. It was originally planned that the pipeline would become part of the Nabucco gas pipeline, through which Turkmen and Azerbaijani gas could be supplied to Europe. However, the project was subsequently closed.

Experts are skeptical about the prospects for connecting large natural gas exporters to TANAP.

“Turkmenistan may face serious difficulties: in order to join TANAP, Turkmen gas must cross the Caspian, the legal status of which has not been resolved, in addition, Turkmenistan has a contract with China, which is far from being fully fulfilled. Turkmenistan does not have free volumes of gas, therefore, to participate in the Trans-Anatolian gas pipeline, Ashgabat will need additional investments in field development, ”Alexey Grivach, Deputy Director General for Gas Problems of the National Energy Security Fund, explained in an interview with RT.

Everything is also very difficult with Iran, the expert believes. Iranian gas cannot reach Europe for more than 40 years - contracts for its import were signed in 1975, but so far Europe has not received a single cubic meter of Iranian fuel.

“The international situation also contributed to this, but we are also talking about competitiveness and the ability to implement investment projects in Iran,” Grivach added. - In addition, Iran has many neighbors, which can be supplied with gas at a lower cost. For example, Pakistan, where consumption of liquefied natural gas is growing, or India, which dreams of pipeline gas supplies. Europe is not an absolute priority for Tehran, especially since Iranian gas is not cheap.”

A similar point of view is shared by the director of the Energy Development Fund Sergey Pikin - according to the expert, it is too early to talk about the participation of large gas producers in TANAP.

“TANAP is just one of the directions of European imports, but there is no need to talk about serious competition. As for the possible accession of Iran or other major exporters to the project, so far there is no certainty in this direction. This is a question of the second half of the next decade, not earlier, ”Pikin emphasized in an interview with RT.

The illusion of competition

Baku and Ankara have stepped up negotiations on the TANAP gas pipeline against the backdrop of a crisis in Russian-Turkish relations. Since December 1, 2015, the joint project of Russia and Turkey for the construction of the Turkish Stream transit gas pipeline has been suspended. Turkish President Recep Tayyip Erdogan accused Moscow of failing to fulfill obligations under the contract and promised to find new fuel suppliers.

At the same time, the Turkish side agreed with Baku on the accelerated construction of the Trans-Anatolian gas pipeline (TANAP) - the parties decided to complete the work before 2018, although it was originally planned to put the pipeline into operation in 2019.

The Azerbaijani side reacted with jealousy to the resumption of the Russian-Turkish project "Turkish Stream" in October 2016.

“No other regional energy projects simply objectively can compete with TANAP, because we have already sold gas,” Azerbaijani President Ilham Aliyev commented on this news in an interview with Dmitry Kiselev, General Director of the Rossiya Segodnya International Information Agency.

“We signed contracts to increase production, which will start in 2018 and should peak in 2020-2021,” Aliyev added.

• The operation of the Pioneering Spirit pipe-laying vessel in the Anapa region, where the Turkish Stream gas pipeline is being laid.
• RIA News
• Sergey Guneev

Saltuk Duzyol, Chairman of the Board of Directors of the TANAP consortium, said that TANAP and Turkish Stream will not compete until the Trans-Anatolian gas pipeline starts operating at full capacity. It is assumed that the capacity of TANAP will reach 31 billion cubic meters of gas per year by 2026. The capacity of each of the two lines of the Turkish Stream will be 15.75 billion cubic meters of gas.

It should be noted that the Azerbaijani project "Southern Gas Corridor" enjoys the support of Washington. As Amos Hochstein, Special Representative and Coordinator of the US State Department for Energy Affairs, said in December 2016, Europe will be able to get rid of Gazprom's monopoly with the help of the SGC project.

The Donald Trump administration shares this approach: during a meeting with the President of Azerbaijan in July 2017, State Department Secretary Rex Tillerson confirmed the White House's support for the SGC project. The same was stated earlier by US President Donald Trump, speaking at the Caspian Oil and Gas 2017 conference in Baku.

• Donald Trump.
• Reuters
• Joshua Roberts

However, according to experts, Washington's hopes that the Southern Gas Corridor will significantly affect the volume of Russian gas supplies to Europe will not come true.

“Building a pipeline is not all; we still need to prepare a resource base. And in the case of TANAP, it is rather weak, this is due to a number of factors, ”Sergei Pikin, director of the Energy Development Fund, explained in an interview with RT. “If the operators brought the first stage of the Shah Deniz field to a design capacity of 9 billion cubic meters within seven years, the commissioning of the second stage may be delayed even more.”

Cloudless relationship

At the same time, it is possible that Gazprom will also be able to take part in the project in the future, Pikin believes. According to the expert, this may be indicated to some extent by negotiations on possible deliveries of Russian gas to Azerbaijan. Recall that in August 2017 in St. Petersburg, a working meeting was held between Gazprom CEO Alexei Miller and SOCAR President Rovnag Abdullayev. The parties discussed issues related to the supply of Russian natural gas to Azerbaijan.

The party that will benefit from the launch of both the Turkish Stream and TANAP will be Turkey, experts are sure.

By becoming a gas hub for Southern Europe, Turkey will not only be able to earn on gas transit, but also influence pricing, Sergey Pikin believes. “This will lead to an increase not only in the economic importance of Ankara for the EU, but also in the political one,” the expert emphasized.

A similar point of view is shared by Alexei Grivach.

“If Turkey closes on itself significant volumes of gas transit, this may become an additional challenge for Europe, which will have to reckon with the opinion of the Turkish side,” the expert summed up.

The ambitious project of delivering Azerbaijani gas to Europe through Turkey and the Balkans "Southern Gas Corridor", in theory, should enter a decisive phase of implementation. However, its main concessionaire, the state of Azerbaijan, may not have enough money or gas to implement the plan, the PRIME agency notes. And if Europe, which is interested in limiting the role of Gazprom in its market, can help financially, then who will help with filling the future gas pipeline is unclear.

Europe, give me 10 billion!

Azerbaijan's current financial woes are not surprising after more than two years of low oil prices. The country's economy is firmly tied to the export of hydrocarbons. Until 2014, the oil and gas industry provided 85% of state budget revenues, up to 78% of GDP and over 90% of exports.

The fact that Azerbaijan is now having a hard time can be visually confirmed at least by the statistics of the country's gold and foreign exchange reserves (GFR). The Azerbaijan Central Bank testifies that in mid-2014, gold reserves exceeded $15 billion, and at the end of 2016 they were already short of $4 billion. As a result, Baku was forced to take tight control over the financing of projects abroad, including "Southern Gas Corridor".

Meanwhile, Azerbaijan's investment contribution to this project is estimated by specialists at about $10.5 billion. This amount was calculated by adding up the shares of the State Oil Company of the Republic of Azerbaijan (SOCAR) in various components of the Southern Gas Corridor.

SOCAR owns 16.7% of the shares of the Shah Deniz-2 gas field - the raw material base of the future pipeline, 58% in the Trans-Anatolian (TANAP) and 20% in the Trans-Adriatic (TAP) gas pipelines. The total volume of investments in the development of the second phase of Shah Deniz (together with the expansion of the South Caucasus pipeline Baku-Tbilisi-Erzurum), according to data, is $23 billion. The minister estimated the cost of TANAP at $9.3 billion, TAP at $6 billion. The entire Southern Gas Corridor was previously estimated at $45 billion, but Natig Aliyev said six months ago that it actually costs only $39 billion.

Of course, out of the $10.5 billion mentioned, Azerbaijan has already invested some. Thus, according to SOCAR at the end of last year, the Shah Deniz-2 project was already implemented by 87%. The situation is worse with the promotion of TANAP and TAP.

Europe will help find the missing funds. Not without reason, in early February, the president of the country, where he met with the entire top of the European Council and the European Commission. From leading EU politicians, Aliyev received assurances of full support for the Southern Gas Corridor. Now he naturally expects money from the European Investment Bank and the European Bank for Reconstruction and Development.

Of course, other shareholders will not leave the Southern Gas Corridor without financial support, among which the mighty British BP stands out. Their ranks, however, have recently thinned somewhat. A year and a half ago, the Norwegian oil and gas giant sold its shares in Shah Deniz, the South Caucasus gas pipeline and TAP.

Where to get 16 billion cubic meters?

The Southern Gas Corridor is to transport 16 billion cubic meters of gas per year. Of these, 6 billion is owed to Turkey, the remaining 10 billion will go further, to Southern Europe. According to preliminary schedules, 8 billion cubic meters per year will be exported to Italy, Greece and Bulgaria will receive 1 billion each.

However, Azerbaijan may not have such an amount of fuel. The trouble is that gas production in the country has been falling lately. After all, due to a decrease in oil production (by 20% compared to 2010), the volume of methane injection into the reservoir is growing.

Last year, natural gas production in the country amounted to 29.33 billion cubic meters - 3.9% less than the year before. At the same time, commercial gas accounted for only 18.71 billion cubic meters. The entire remaining volume had to be pumped into the reservoir at the Azeri-Chirag-Guneshli block, where more than 3/4 of Azerbaijani oil is produced.

According to the information resource Natural Gas World, the total gas export from Azerbaijan in 2016 amounted to 7.78 billion cubic meters against 8.4 billion in 2015. That is, the gas export potential of the country is currently limited. Although the head of the Ministry of Energy, N. Aliyev, ordered to increase fuel production this year, even he modestly assesses the possibilities of Azerbaijan. According to the plan, the increase in gas production in the country should be only 1%: in 2017, 29.561 billion cubic meters should be extracted from the bowels, including 10 billion at Shah Deniz.

So, who will help Azerbaijan with filling the "Southern Gas Corridor"? Initially, Baku hoped for neighbors in the Caspian Sea, Iran and Turkmenistan, but no specific proposals have yet been received from there. About a year ago, he expressed his desire to pour his fuel into the future gas pipeline, referring to his offshore Leviathan superfield. But since then there has been no word from Tel Aviv on this topic.

However, Azerbaijan still has time. The start of production at Shah Deniz-2 is scheduled for the end of 2018. The supply of fuel to Europe via the Southern Gas Corridor will tentatively begin at the end of 2020. :///

The Southern Gas Corridor, which will be an alternative to Russian gas supplies to Europe, will be partially launched next year. At the same time, European experts doubt the expediency of the project both in terms of gas supplies and financial costs, which are half provided by EU banks.

The Trans-Anatolian Gas Pipeline (TANAP), which is the longest section of the Southern Gas Corridor, will be launched early next year. This was announced to the Turkish Daily Sabah by the general manager of the project. Saltuk Duzyol. According to him, in June 2018, Turkey will start receiving gas from Azerbaijan via the pipeline. A year later, in mid-2019, the construction of the Trans-Adriatic gas pipeline (TAP) to Greece and Italy will be completed and gas supplies to the EU will begin in March 2020.

Southern Gas Corridor. Photo: tap-ag.com.

According to Saltuk Duzyol, the cost of TANAP has been reduced to $7.9 billion and the 1,350-kilometer highway through Turkey has already been built by 93%.

"Now we are waiting for the approval of a loan of $ 1.3 billion from the European Investment Bank," the general manager of TANAP said. In total, the project attracts loans for $ 3.95 billion. European banks are the main creditors. The European Investment Bank is a state financial and credit institution of the European Union. From 2020, EU consumers should receive annually 10 billion cubic meters from Azerbaijan and Brussels actively supports the project, considering the Southern Gas Corridor an alternative to Russian gas supplies. Today, 10 billion cubic meters - 2.5% of gas consumption in the EU, and European experts are not sure that the project will really be able to reduce Europe's dependence on Gazprom and is worth the money invested in it.

Lead Analyst, Oxford Institute for Energy Studies Simon Pirani told Climate Home News that dreams of additional gas through the pipeline are unlikely to come true.

“I have doubts about the significant volumes of additional gas that can be supplied to the Southern Gas Corridor, because it is not clear from which field in the Caspian Sea they will come,” Simon Pirani said. - There is a field developed by the state company SOCAR together with Total, but it will not be able to produce significant volumes of gas and both companies have already agreed to supply the produced gas to the domestic market. And there are no other fields for gas production for export. Therefore, the volume that Azerbaijan can give to Europe in reality is quite small.”

Europe hopes for diversified sources of supplies via the gas pipeline, however, according to a leading analyst at the Oxford Institute, hopes are unlikely to come true: "Turkmenistan is more interested in exporting to China, and there are not enough gas volumes in northwestern Iran to supply Europe."

Another bad news for the planned expansion of the Southern Gas Corridor may be reports that one of the largest LNG traders, Shell, is in talks to buy 5 billion cubic meters of gas annually from Israel's Leviathan field to be liquefied in Egypt. Offshore fields in Israel, as you know, are also considered as an additional source of gas supplies to the Southern Gas Corridor. Instead of Israeli gas, there may be gas from Iraqi Kurdistan. However, we wrote that this project with the participation of Rosneft now has too many political risks.

Climate Home News noted that the cost of the Southern Gas Corridor (it was estimated at $ 45 billion) is comparable to all EU investments in the transition to clean energy in 2014-2020. In addition, the publication recalled the scandal with the laundering of funds by Azerbaijan and the bribery of European politicians. Thus, a member of the Board of the European Bank for Reconstruction and Development (EBRD) from Bulgaria Kalin Mitrev received $500,000 from Baku, and the EBRD is the creditor of the Southern Gas Corridor. Kalin Mitrev himself said that he received money for consulting services.

Earlier, Deputy Chairman of the Board of Gazprom, Alexander Medvedev, said that Azerbaijan does not have enough gas, as it is forced to pump it back into the fields in order to support oil production. This is also why Gazprom and the state-owned company Socar have been negotiating to increase Russian gas supplies to Azerbaijan. Now the Russian holding has a contract for the supply of up to 2 billion cubic meters of gas per year. Socar is interested in increasing the volume by another 3-5 billion rubles.

Another indication that even with the planned deliveries through the Southern Gas Corridor, not everything is so smooth, may be the statement of the Turkish Foreign Minister. Last year Mevlut Cavusoglu said that the first line of the Turkish Stream gas pipeline will annually receive 16 billion cubic meters, and the surplus - what is not in demand by Turkey - will go to TANAP.

“I believe that even 10 billion from Azerbaijan is not guaranteed to Europe in the foreseeable future,” says Deputy Director of the National Energy Security Fund (NESF) Alexey Grivach. - The deepwater part of the Shah Deniz-2 field, which is planned as a resource base for the Southern Corridor, is a very difficult project in terms of technology, geology and climatic conditions. Therefore, Azerbaijan may be very interested in insurance from Russia, so as not to get fined for incomplete or untimely fulfillment of obligations.”