TAP CEO optimistic about Azerbaijani gas export to Europe and potential expansion of SGC [INTERVIEW]

TAP CEO optimistic about Azerbaijani gas export to Europe and potential expansion of SGC [INTERVIEW]

Azerbaijan turned out to be a reliable partner for Europe and managed to increase gas exports in a short time in this direction. In the context of recent world events and gas crises, Azerbaijan plays an important role in ensuring Europe’s energy diversification. In turn, Europe has also repeatedly expressed a desire to increase Azerbaijani gas supplies through the Southern Gas Corridor.

With the completion of the construction of the Trans-Adriatic Gas Pipeline on December 31, 2020, Azerbaijan has started commercial gas supply to Europe through the Southern Gas Corridor. Last year TAP transported 8.1 billion cubic meters of gas to Europe, by the end of 2022 Azerbaijan plans to increase gas supply to 9.1 billion cubic meters and 11 billion cubic meters in 2023.

Azernews’ Ayya Lmahamad presents an exclusive interview with Luca Schieppati, Managing Director of the Trans-Adriatic Pipeline (TAP), on the role of Azerbaijan and the Southern Gas Corridor in diversifying gas supply to the Europe, the export of Azerbaijani gas, the potential expansion of SGC and the possibility of supplying hydrogen.

– With Russia’s war in Ukraine raging for more than 100 days with no end in sight, pessimistic predictions abound that global economies will deteriorate as sanctions begin to bite Russia. Do you think Europe can refuse Russian gas if the Kremlin continues its war? In such a negative scenario, how do you assess the role of Azerbaijan and the Southern Gas Corridor in more or less guaranteeing Europe’s continuous gas supply?

The TAP plays a key role in strengthening Europe’s energy security, supply diversification and decarbonisation goals. In the future, it could play an even more important role in terms of substantial supply for this market and contributing to the reduction of carbon emissions in line with EU objectives.

Part of the Southern Gas Corridor, TAP is an independent transmission network operator, owned by several shareholders. Regarding relations between sovereign states, TAP is not in a position to comment.

– What is the volume of Azerbaijani gas transported via SGC so far and what volumes are expected to be transported this year and the coming years?

Since we started transporting gas on the last day of 2020, TAP has delivered over 13 billion m3 in Europe.

TAP’s initial firm long-term capacity, around 10 bcm/a, was allocated to shippers on the basis of long-term gas transport contracts signed in 2013 for 25 years, which was necessary to support investment.

At the same time, capacities corresponding to approximately 5% of the initial capacity are available for short-term reservations through auctions in accordance with European regulations via the PRISMA capacity reservation platform. Lately, TAP has been close to full utilization, with significant short-term bookings to Italy in addition to long-term commitments since mid-February. We expect 2022/early 2023 to see continued high capacity utilization, both long-term and short-term. During 2021, mainly thanks to the contribution of TAP, Italy started to export gas to Northern Europe.

That said, TAP could double its current capacity in the future.

– Is the expansion of SGC planned in the future? If so, what scenarios are on the table? If not, what does that mean, a refusal to increase gas from the Caspian Basin?

About a month ago, the European Commission published the REPower EU plan to significantly accelerate its transition to clean energy and increase Europe’s energy independence. In this plan, the European Commission announced its intention to intensify cooperation with Azerbaijan in light of the strategic importance of the Southern Gas Corridor. According to the European Commission’s proposal, “increasing TAP’s capacity would increase gas supplies to the EU and the Western Balkans”.

TAP could double its current capacity in incremental steps to further support Europe’s energy supply security. Doubling the capacity of the TAP is something that has been thought of since the design phase of the project. More specifically, TAP’s current capacity can reach just over 20 bcm per year.

TAP’s expansion capability is offered to the market through regular market testing in an open, transparent and non-discriminatory manner. Thus, TAP offers the possibility to any interested party to submit its binding offers for additional long-term capacity in the infrastructure.

The TAP Market 2021 test is currently underway. Between January 18 and March 18, 2022, TAP, in collaboration with SRG and DESFA, organized a public consultation on the draft project proposal for the 2021 market test. Following the comments received during the public consultation and recent developments in the gas market, TAP, SRG and DESFA have recently announced their intention to offer a first binding phase in November 2022 and, ultimately, a second binding phase in 2023, to complete the allocation of all levels of ‘offer.

If market demand exists in the form of firm commitments from shippers, sufficient to make the expansion economically feasible, TAP can double its capacity by installing additional compressors to accommodate these volumes.

– How do you assess the possibility of supplying hydrogen via SGC?

We are fully committed to a sustainable future. Now that the entire industry is focused on hydrogen as the most likely way to eventually achieve carbon neutrality by 2050, TAP was quick to embrace this notion from the start. We are currently assessing to what extent TAP can technically adapt to transporting a mixture of natural gas and hydrogen. In 2021, an initial hydrogen readiness study confirmed that TAP has the potential to carry hydrogen mixtures in the future.

TAP continues to grow and works closely with its shareholders, key suppliers and the industry, as the investment in facility upgrades and the percentage to be transported will likely be developed incrementally over time to meet the demands of the hydrogen market and in accordance with the relevant requirements. regulations.

TAP is also participating in the joint industry project H2Pipe for the development of the world’s first guideline for the transport of hydrogen gas in existing and new offshore pipelines, which will benefit not only TAP, but also other transnational interconnectors.

In fact, we are currently testing our piping materials in an internationally recognized laboratory to ensure that the asset meets future hydrogen requirements and opportunities.

Ayya ​​Lmahamad is the journalist of AzerNews, follow her on Twitter: @AyyaLmahamad

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Mary I. Bruner