Caspian Report - Issue 06 - Winter 2014

The BP-led consortium working at the
field in the Azerbaijani sector of the
Caspian Sea pledged 28 billion USD
to ramp up production and for the
construction of a new pipeline across the
Caucasus.
At a signing ceremony attended by
ministers and energy officials in Baku
on 17 December 2013, the final investment
decision was taken to launch the
second phase of the development of
the Shah Deniz gas field. The BP-led
consortium working at the field in the
Azerbaijani sector of the Caspian Sea
pledged 28 billion USD to ramp up production
and for the construction of a
new pipeline across the Caucasus. This
will enable the annual delivery of an additional
6 billion cubic meters (bcm) of
gas to the Turkish market by 2018, and
a further 10 bcm to consumers in Europe
by 2019. Both the EU Commission
President, Jose Manuel Barroso, and the
EU Energy Commissioner, Günther Oettinger,
attended the ceremony together
with the Azerbaijani President Ilham
Aliyev. Barroso declared that the occasion
marked a “major milestone” for the
diversification of the EU’s energy supplies.
Oettinger noted the importance
of the ceremony for the development
of the so-called Southern Gas Corridor
(SGC), which he said could eventually
meet up to 20 percent of the EU’s gas
requirements.
BARROSO
DECLARED THAT
THE OCCASION
MARKED
A “MAJOR
MILESTONE”
FOR THE
DIVERSIFICATION
OF THE EU’S
ENERGY
SUPPLIES.
Clearly, the decision to expand production
at the Shah Deniz gas field is an
important step towards the realization
of the SGC. Work will also now proceed
on other legs of the SGC, namely
the Trans Anatolian Natural Gas Pipeline
(TANAP) and the Trans Adriatic
Pipeline (TAP). However, a number of
issues still need to be resolved with
regard to the future of the SGC. Will
the capacity of the corridor eventually
expand to meet 20 percent of the
EU’s gas demand Will the authorities
in Baku permit the use of Azerbaijani
territory for the transportation gas
from other sources such as Turkmenistan
in the future And how will the
gradual development of the SGC affect
Turkey’s energy needs and its ambitions
to become a key energy transit
state and major energy hub This article
will attempt to respond to these
and other questions in examining the
future prospects for the SGC.
THE SOUTHERN GAS CORRIDOR
EU member states have historically
imported gas along three corridors.
Gas is delivered by pipeline from Russia,
Norway and North Africa along the
eastern, northern and Mediterranean
corridors respectively. Identified as
a “priority project” by Brussels, the
SGC would transport gas from the Caspian
Basin, Central Asia, the Middle
East and the Eastern Mediterranean
to Europe. With European consum-
17
CASPIAN REPORT, WINTER 2014