Turks, Azeris Getting New Gas Pipe

Turks, Azeris Getting New Gas Pipe

Gordon Feller
Jan 24, 2017

The World Bank’s Board recently approved the Trans-Anatolian Natural Gas Pipeline Project (TANAP). The project’s objective is to diversify Azerbaijan’s gas export markets and improve the security of the energy supply in Turkey and Southeastern Europe.

This is the first realization of the southern gas corridor infrastructure projects aimed at improving the security and diversity of EU energy supply by bringing natural gas from the Caspian region to Europe.

TANAP Natural Gas Pipeline Co. was established to implement the TANAP project. It will own and operate the pipeline system, upon the project's completion.

Turkey’s national gas company BOTAŞ holds a 30% share in TANAP.  Azerbaijan’s Government and the State Oil Co. of the Azerbaijan Republic (SOCAR) established the Southern Gas Corridor Co. (SGC) as their joint investment vehicle for the Southern Gas Corridor. SGC holds a 58% share in TANAP.

The remaining 12 percent is held by BP. 

The World Bank’s loan is being made in two parts:

  • $400M to the Southern Gas Corridor Co., with the guarantee of Azerbaijan’s government;
  • $400M to BOTAŞ, with the guarantee of Turkey’s government.

At 1,850 km (1,149 mi.), TANAP accounts for more than half of the 3,500 km (2,174 mi.) pipeline system from Azerbaijan to Italy. TANAP will begin at Turkey’s border with Georgia, in the Turkish village of Türkgözü in the Posof district of Ardahan province, and will end at the Greek border in the İpsala district of Edirne province.

At that point, TANAP will connect to TAP, which conveys gas to EU markets. TANAP will connect to the Turkish natural gas network in two locations, at Eskişehir and Thrace, for the delivery of 6 Bcm for the Turkish gas market.

The European Commission's 2008 "Second Strategic Energy Review-An EU Energy Security And Solidarity Action Plan" states that “a southern gas corridor must be developed for the supply of gas from Caspian and Middle Eastern sources, which could potentially supply a significant part of the EU's future needs. This is one of the EU's highest energy security priorities."

Political agreement followed in 2009 at the Southern Corridor Summit in Prague. A declaration was signed by the Presidents of the European Council and the European Commission for the EU, the Presidents of Azerbaijan, Georgia and Turkey and the Energy Minister of Egypt.

This is Azerbaijan's most important energy initiative. Azerbaijan’s Shah Deniz 2 gas field is being developed to produce 16 Bcm/annum, all for export. BOTAŞ has contracted 6 Bcm for Turkey’s market; several gas traders have contracted the remaining 10 Bcm for EU markets, mostly Italy.

Around $28 billion in capital investment is planned for producing the gas and transporting it to the Georgia-Turkey border. From there, additional pipeline systems will deliver 6 Bcm/annum to Turkey and a further 10 Bcm/annum of gas to EU markets via SGC.