IHS Global Insight Perspective | |
Significance | The new Azerbaijan-Georgia-Romania Interconnection (AGRI) gas transport corridor envisages a hybrid supply route relying on pipelines and LNG deliveries to connect Caspian-region gas supplies to the European market. |
Implications | The AGRI project, together with a separate proposal to deliver CNG from Azerbaijan to Bulgaria via Georgia and the Black Sea, has gained momentum largely as a result of the stalemated dispute between Turkey and Azerbaijan over gas prices and transit, thus threatening to torpedo the Nabucco gas pipeline project. |
Outlook | Azerbaijan, Georgia, and Romania have agreed to set up a joint company to undertake a feasibility study on the AGRI project, which itself could prove damaging to Nabucco's prospects. |
Another Day, Another Option
To the casual observer—and perhaps even to those with more than a passing interest—the variety of projects that have been proposed to bring Caspian-region gas to Europe is surely somewhat mystifying. Even European energy officials can be forgiven some confusion, as every day seems to bring another option for carrying new gas supplies to the continent via the nebulous "southern corridor", be it South Stream, Nabucco, White Stream, Blue Stream (or rather, Blue Stream-2), not to mention TAP, ITGI, IGB, Bulgaria CNG, Romania LNG or any of the mooted options to bring gas from the Middle East.
Yesterday another of the "acronym" projects received a shot in the arm, as representatives from the governments of Romania, Georgia, and Azerbaijan gathered in the Romanian capital, Bucharest to sign a deal to support the development of a new gas transportation corridor connecting their countries. Hence, the Azerbaijan-Georgia-Romania Interconnection—the so-called AGRI project—was given a boost in the increasingly crowded race to deliver gas from the Caspian region into south-eastern Europe (see "Related Articles"). The trilateral agreement was initialed by the Ministry of Economy, Commerce and Business Environment of Romania, the Azerbaijani Ministry of Industry and Energy, and the Ministry of Energy of Georgia.
The AGRI project envisages the construction of two LNG terminals, one in Georgia and one on the Romanian Black Sea coast. Construction of the two LNG terminals would allow gas from Azerbaijan to flow by pipeline across the Caucasus to Georgia, where gas would then be liquefied at a planned terminal at Kulevi (where Azerbaijan's state-run oil and gas firm SOCAR already has an oil export terminal), then shipped in tankers across the Black Sea to Constanta on the Romanian coast. There the LNG would be regasified, pumped into the Romanian gas grid, and delivered into the wider European market.
Preliminary estimates for construction of the two LNG terminals put the cost at 4–6 billion euro (US$5.4–8.1 billion), although Romanian deputy economy minister Tudor Serban assessed the project at around 2–4 billion euro. The AGRI route would be expected to transport up to 7 bcm/y of gas, according to government estimates, although the actual construction costs and export volumes would be determined by subsequent feasibility studies. Serban said that the three governments will set up a Bucharest-based joint company to conduct these studies, but he added that the proposed project could be finalised in as little as three years.
Outlook and Implications
Indeed, speed of implementation in converting idea to reality is one of the selling points of AGRI, if Serban's proposed timetable is to be believed as realistic. Over the course of the past five years, a plethora of southern corridor gas projects have been proposed and promoted, but other than the Turkey-Greece interconnector, none has yet moved from drawing board to actual investment in physical construction. "From my point of view this is the fastest and one of the most efficient projects…to bring Caspian gas to the EU", Romanian economy minister Adriean Videanu told reporters following the signing of the trilateral deal.
In many respects, the AGRI proposal—similar to the proposed project to deliver compressed natural gas (CNG) from Azerbaijan to Bulgaria via Georgia and the Black Sea—is the direct result of the slow pace of progress on the main (at least as far as the European Union is concerned) southern corridor project: the Nabucco pipeline. The as-yet-unresolved dispute over gas prices and transit tariffs between Azerbaijan and Turkey remains a major stumbling block for Nabucco, even as the international consortium behind that project (which includes Romania's state-run Transgaz) plans to move to an open season capacity allocation later this year.
Thus, Azerbaijan, frustrated with Turkey's intransigence and annoyed (in private if not publicly) at being held at arm's length by Nabucco supporters as a mere supplier rather than being included in the consortium, has pushed ahead in its own interests, striking agreements to supply gas to Russia and Iran as well as pursuing supply deals with both Bulgaria and Romania. Nabucco has also been slowed by the undeclared competition with the Gazprom-supported South Stream project, which has split the loyalties of a number of governments in south-eastern Europe, as well as questions over its ability to secure adequate supplies.
However, perhaps it is the uncertainty over the extent by which the North American shale gas revolution can be replicated in Europe that is casting the biggest cloud over Nabucco. Questions over the economic viability of either of the two "mega-projects" (Nabucco and South Stream) have been raised in the context of weaker European gas demand and the prospect of increased domestic gas production from unconventional gas sources in Eastern and Central Europe. This, in turn, has spawned yet more proposals for bringing Caspian gas to Europe, albeit on a smaller scale and with less investment risk, such as AGRI and the Bulgaria CNG proposal.
Videanu told reporters that the AGRI project would be "complementary" to Nabucco, but this Azerbaijan-Georgia-Romania scheme could have the opposite effect, pulling support from Europe's signature Caspian-gas-to-Europe project if Romania opts to put its focus on AGRI. Azerbaijan's potential commitment of gas for the AGRI route would also take away possible gas throughput volumes for Nabucco as well. Then again, the AGRI route has its own drawbacks—namely, questions about the viability of what amounts to a "closed" Black Sea LNG market involving just Romania as buyer and Azerbaijan as seller—and if the proposal itself helps push Turkey and Azerbaijan closer to a resolution in their dispute by putting increased pressure on Turkey, then AGRI will indeed be "complementary" in helping Nabucco push forward.
Related Articles
- Italy - Russia - Europe: 13 April 2010: Gazprom, Eni Agree to Expedite South Stream amid Signs of Friction
- Azerbaijan - Romania: 3 February 2010: Azerbaijan, Romania Sign MoU on Energy Co-Operation
- Azerbaijan: 1 February 2010: Azerbaijan in Favour of Georgia Black Sea LNG Plan
- Azerbaijan: 29 January 2010: President of Azerbaijan Says Doubts Linger About Nabucco Gas Pipeline
- Georgia: 28 January 2010: Georgia Proposes Alternative Route for Caspian Gas to Europe
- Europe: 18 January 2010: South Stream vs. Nabucco – the Battle for the "Southern Corridor"
- Azerbaijan - Turkey: 24 November 2009: SOCAR Eases Stance in Gas Dispute with Turkey, Offers Potential Price Discount
- Azerbaijan - Bulgaria: 16 November 2009: Azerbaijan, Bulgaria Sign Gas Deal to Bypass Turkish Transit "Bridge"
- Turkey - Azerbaijan: 29 October 2009: Turkey Willing to Compensate Azerbaijan in Gas Price Dispute
- Romania - Azerbaijan: 29 October 2009: Romania, Azerbaijan Sign Energy Transport Co-Operation Accord