Corridor to Europe
The Turkish leadership believes that in the future TANAP will allow to supply to Turkey and Europe not only Azerbaijani gas but also gas from the Middle East. The administration did not specify which countries are willing to supply through this pipeline.
Project TANAP's capacity is 16 billion cu m/g – 6 bcm/y destined for Turkey and 10 bcm/y for consumers in southern Europe. Now the resource base is the only gas produced in the Azerbaijani shelf of the Caspian sea in the framework of the project "Shah-Deniz-2". Already, many experts in the West have questioned the ability of Azerbaijan to deliver gas to the amount claimed for an extended period of time.
The TANAP gas pipeline is an integral part of the project "southern gas corridor", which also includes the second stage development of the field Shah Deniz, expansion of the existing South Caucasus gas pipeline Baku – Tbilisi – Erzurum and the construction of the TRANS Adriatic pipeline (TAP). The cost of creating a "southern gas corridor" over 40 billion euros. The cost of Baku is estimated at 12-13 billion euros. Calculations show that if the current price of gas in Europe is $200-210/thousand cubic meters of Azerbaijan will be able to recoup the cost of the "southern gas corridor" after 20 years.
In the West recognize that the "southern gas corridor" was very expensive and the volume that will receive the Europe, small. However, the project is seen as an alternative to Russian gas supplies to Europe, so has the support from the EU and the USA.
Gloomy prospects for export in the "southern gas corridor" became the reason of leaving the project, the French Total and the Norwegian Statoil.
Rising stocks and falling production
"Proven natural gas reserves of Azerbaijan total 2.6 trillion cubic meters, and these stocks will provide gas as the countries of the region and Europe in the coming decades," said President of Azerbaijan Ilham Aliyev, speaking at the XXII world petroleum Congress in Istanbul. Earlier, representatives of the Azerbaijani government estimated the country's reserves of 2.5 trillion cubic meters.
The experts are much more modest. According to BP Statistical Review of World Energy, total gas reserves in Azerbaijan by the end of 2016 amounted to 1.1 trillion cubic meters.
Last month, the Azerbaijani state company SOCAR announced that in January–may of 2017, gas production in the country declined by 6% compared to the same period of the previous year to 11.72 billion cubic meters.
According to the forecast of Ministry of energy of Azerbaijan, in 2017, oil production will decrease to 28.39 billion cubic meters against 29,24 billion cubic meters a year earlier. Thus in 2016 the production of commodity gas in the country was only 18,71 billion, as increased volumes of gas injection into the reservoir to maintain production from the Azeri-Chirag-Guneshli. This group of fields on the shelf of the Caspian sea gives more than 75% of all Azerbaijani oil.
Despite the negative forecasts from the Ministry of energy, in early June during the international conference in Baku at Caspian Oil & Gas-2017 Aliyev announced plans to increase gas production in the country to 44.5 bcm/y in 2020. The "Shah Deniz-2" should provide the increase in the amount of 16 billion cubic meters/year Production of associated gas in Azeri-Chirag-Guneshli by 2020 should reach 12 billion cubic meters/year.
Israel on the gas map of Europe
By the end of this year, Turkey and Israel plan to sign an intergovernmental agreement on the construction of a pipeline for gas supplies to the EU, said the Minister of national infrastructures, energy and water of Israel Yuval Steinitz. This statement was made after negotiations between Steinam and his Turkish counterpart Berat Albaraka during the Congress in Istanbul.
The Israeli Minister also said that negotiations on the construction of a gas pipeline between the two countries were long, and the decision was taken after four rounds of negotiations.
It is planned to build a pipeline from the Israeli Leviathan field offshore in the Mediterranean sea to the coast of Turkey and on to TANAP pipeline. Israel is also considering the construction of a second pipeline through Cyprus and Greece to Italy. Steinitz says that Israel has the necessary resources to download the two pipelines.
Opened in 2010, the Leviathan field is located offshore Mediterranean sea, in 130 km from Haifa. The gas lies at a depth of more than 5 thousand meters, the sea depth in the field area reaches up to 1645 meters. Leviathan is the largest gas field in Israel. Initially, its reserves are estimated at 620 billion cubic meters, but later the rating was lowered to 500 billion cubic meters.
The commercial production in the amount of 9 bcm/y planned for the end of 2019, when we will complete the first stage of field development. During the implementation of the second stage is planned to increase production to 21 billion cubic meters/year cost of implementation of the first stage are estimated at $3.75 bn, the second in $5-6 billion.
All of the gas produced in the first stage, to consumers in Israel and Jordan, which already signed the relevant treaties. Jordan to buy Israeli gas at a price of $5.5 to 6.5/million BTU. If the Israelis to supply gas to the EU via TANAP, given the transport costs it cost in Italy will exceed $8/million BTU (about 300 meters), which makes Israeli gas is not competitive even compared to LNG.
After completion of the second stage of the development of Leviathan, the export potential of Israel will be about 12 billion cubic meters. m/g. However, the country has seen a rapid growth in demand for gas from industry, power plants and transport. According to BP Statistical Review of World Energy, over the last 10 years gas consumption in Israel has increased more than 4 times, reaching 8.7 billion cubic meters in 2016. According to conservative estimates, in 2020 the consumption will exceed 10.5 billion cubic meters, and by 2040 will reach 20 billion cubic meters.
Despite the agreements reached between Israel and Turkey, gas export is questioned from an economic point of view. Many Israeli experts and economists believe that own gas resources should be used primarily inside the country, and shipments abroad should be limited to neighboring countries.
In search of suppliers
The EU understands that the gas resources of Azerbaijan are not enough to ensure efficient operation of the "southern gas corridor" and reduce dependence on Russia. In this regard, a search for other potential suppliers.
Iraqi Kurdistan, whose leadership pursues a friendly policy toward Turkey, could be one such supplier.
In 2015, DOR Organization for Kurdistan Oil and Gas Information provided report on oil and gas reserves in the region. According to the report, Iraqi Kurdistan has proven oil and gas reserves in the amount of 50 billion barrels and 8-10 trillion cubic metres, respectively, and is the eighth largest country in the world reserves of hydrocarbons.
However, appraisal drilling on the majority of the fields in Kurdistan, has not confirmed these data, and supplies many of the fields were revised downwards.
Assessment of the stocks of the largest operating field Тaq Taq Kurdistan has fallen by half to 356 million barrels. Market capitalization of the company Genel Energy, which leads the development of the field has decreased by more than a third.
Executive Director of Genel Energy and former head of BP Tony Hayward stated that "the decrease in reserves was a great disappointment for us and for the Kurdistan regional government".
Revaluation of inventory has led to reduced investment and reduced production of oil and gas. Moreover, the Kurdistan regional government owes huge amounts to oil companies, which is not conducive to improve the investment attractiveness of the region.
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