Bloomberg News

Total Weighs Stake in Gas Pipeline to Europe From Caspian Sea

April 03, 2012

Total SA (FP), Europe’s third-largest energy company, may join a pipeline to carry Caspian natural gas across Turkey as the European Union seeks to cut dependence on Russian fuel.

Total was invited to participate in the Trans-Anatolia pipeline project, or Tanap, planned by Turkey and Azerbaijan, as were BP Plc (BP/) and Statoil ASA (STL), its partners in Shah Deniz, the biggest Azeri gas deposit. It will take the Shah Deniz partners “several months” to decide on a route, said Christian Giudicelli, general manager of Total E&P Azerbaijan.

“We are evaluating the Tanap proposal very seriously,” Giudicelli said in an interview in the Azeri capital of Baku.

Nabucco, a 7.9 billion euro ($10.5 billion) pipeline project backed by the EU to import Caspian fuel, will consider whether to link up with Tanap as it prepares to make a final investment decision next year. The decision has been repeatedly delayed as Nabucco vies with competing links for Azeri and other Caspian region gas resources.

Turkey and Azerbaijan signed a memorandum of understanding in December on building the 2,000-kilometer (1,240 mile) Tanap pipeline from eastern Turkey to its European Union border. The link may carry 10 billion cubic meters of gas a year to the EU from Shah Deniz, while Turkey will buy 6 billion cubic meters.

A further agreement on Tanap was delayed from late March as Turkish and Azeri companies work out their stakes. Turkey wants as much as 50 percent, the non-state Azeri news service Turan reported last week, citing unidentified Turkish officials.

Tanap Stakes

State Oil Co. of Azerbaijan, also known as Socar, plans to start with about 80 percent of Tanap, which may cost $5 billion to $7 billion, according to a preliminary feasibility study, Socar President Rovnaq Abdullayev said in an interview in February. The Istanbul-based state pipeline company Boru Hatlari Ile Petrol Tasima AS, or Botas, and oil and gas producer Turkiye Petrollari AO will get a combined 20 percent.

Turkey may increase its stake in Tanap if it has the financial resources, the Azeri government-funded 1news.az website reported yesterday, citing Industry and Energy Minister Natiq Aliyev.

Socar plans to keep control of Tanap, while offering part of its holding to BP, Total and Statoil, Abdullayev said.

The Shah Deniz partners plan to almost triple the capacity of the 692-kilometer South Caucasus Pipeline, or SCP, that connects the Sangachal terminal near Baku to the eastern Turkish city of Erzurum via Georgia, Total’s Giudicelli said.

Absheron Gas

The capacity will be increased to 24 billion cubic meters a year from 8.8 billion cubic meters by adding compressor stations and building a link parallel to the existing one, Giudicelli said. The expansion will be completed before the planned second phase of Shah Deniz starts in 2017, he said.

Total is continuing exploration of the Absheron development with Socar and France’s GDF Suez SA after reporting a gas discovery there in September.

“Our initial estimate of Absheron’s reserves is several trillion cubic feet of gas,” Giudicelli said. “The range of the evaluation is still large because we have only one well at the moment.”

Socar has said Absheron may contain 300 billion cubic meters of gas and 45 million tons of condensate. Total and Socar each hold 40 percent, and GDF Suez (GSZ) has 20 percent.

Production at Absheron may start “somewhere in the 2020s”, Giudicelli said. The partners will invest “several billions of dollars” to develop the field.

Total, which has been in Azerbaijan for the past 15 years, is looking to expand its presence, Giudicelli said. “We are interested in growing in Azerbaijan,” he said. “We can offer our experience and knowledge in developing other prospective structures in Azerbaijan.”

To contact the reporter on this story: Zulfugar Agayev in Baku at zagayev@bloomberg.net

To contact the editor responsible for this story: Hellmuth Tromm at htromm@bloomberg.net


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