Bloomberg News

Azerbaijan, Turkey to Sign Delayed Tanap Pipe Deal End of June

May 01, 2012

Azerbaijan and Turkey plan to complete delayed talks on the proposed Trans-Anatolia pipeline that will carry Azeri natural gas across Turkey to Europe by the end of the month.

“We aim to complete talks this month and sign the inter- governmental agreement by June 30,” Elshad Nasirov, vice president of State Oil Co. of Azerbaijan, known as Socar, said today in an interview in the capital of Baku. The deal was held up issues over tax and the investment regime, according to Nasirov.

The two sides signed a memorandum of understanding in December on the 2,000-kilometer (1,240-mile) pipeline known as Tanap that will transport gas from the BP Plc-led Shah Deniz field in Azerbaijan’s section of the Caspian Sea. Socar has an 80 percent stake, while Turkey’s state pipeline company Boru Hatlari Ile Petrol Tasima AS, or Botas, and oil company Turkiye Petrolleri AO have a combined 20 percent.

At an estimated cost of $5 billion to $7 billion, the partners plan to build Tanap before the start of production from the second phase of the Shah Deniz project, due in 2017 or 2018. It will link up with other proposed pipelines, such as Nabucco West, that are vying for the rights to deliver the fuel on to the European Union from the Turkish border.

Size of Stakes

The delay in agreeing a deal wasn’t caused by disagreements over the size of stakes in the project, according to Nasirov. The Azeri news agency Turan cited unidentified Turkish officials in March as saying that Turkey wanted to boost its stake in Tanap to as much as 50 percent.

“We have not received any proposal from the Turkish side on this,” Nasirov said today.

Tanap will initially be able to carry 16 billion cubic meters of gas a year, with capacity rising to more than 30 billion cubic meters as and when additional sources are found, Nasirov said.

The Shah Deniz group will choose between Nabucco West, a revised version of the EU-backed project, and BP’s South East Europe Pipeline option, or SEEP, “no later than June 30,” he said.

While Nabucco is a “fantastic” project even though it has financial difficulties, SEEP is less advanced, according to Nasirov.

The winner of the Central European route will then compete with the Trans-Adriatic Pipeline, or TAP, that’s being developed by EGL AG, Statoil ASA (STL) and EON Ruhrgas AG. The Shah Deniz partners will make a final decision by mid-2013, he said.

Azerbaijan can supply 10 billion cubic meters of gas to Europe for at least 25 years, the executive said.

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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