While Turkey’s vital role as a hydrocarbons transit corridor will one day be a reality, which pipeline projects get off the ground remains to be seen. Of all the contenders competing to take gas from Azerbaijan’s Shah Deniz II reservoir via Turkey, only the Trans Adriatic Pipeline (TAP) and Nabucco West remain. The Shah Deniz Consortium plans to make a final selection between the two by June 2013, and this decision will determine the final route of Caspian gas to Europe.

Gas Lines

The Nabucco project has run into delays, cost overruns and a lack of willing suppliers. All that remains of the originally proposed 3300-km route from Azerbaijan to Austria is Nabucco West, the European leg, that now plans to connect to the proposed cross-Turkey Trans-Anatolian Pipeline, or TANAP.

The separate TAP project has proposed an alternative route that would carry gas from TANAP about 860 km from Turkey to Greece, Albania and southern Italy.

Intended as a transit link for Caspian gas across Turkey, TANAP will bring 16bn cu metres per year from Azerbaijan’s Shah Deniz II development, in which Turkey has a 9% stake, with 6bn cu metres for Turkey and the rest for Europe. The route would be an 80:20 joint venture between SOCAR, the Azeri state energy company, and Turkey’s pipeline operator, BOTAŞ.

Significant progress was made by both the Nabucco West project and the TAP project in 2012 and early 2013. The proponents of each route reached similar funding agreements with the Shah Deniz Consortium, whereby the consortium agrees to help fund project development until the winning route is selected. In return, the consortium receives the option to acquire a 50% investor equity stake in the selected pipeline. Furthermore, in early 2013, both projects announced the start of the prequalification process for steel pipe producers, which will precede the launch of a tender.

Further significant progress was made when Nabucco and TAP signed memoranda of understanding (MoUs) with TANAP, agreeing to cooperate on the development of the Southern Gas Corridor. The MoUs stipulate for the exchange of technical and strategic information, and highlight the need to further diversify natural gas transportation routes.

The winning project (either TAP or Nabucco West) and TANAP will require significant efforts from all sides if they are to succeed. Frank Siebert, the CFO of Nabucco, said, “In the coming months, all parts of the value chain connecting Shah Deniz gas to European consumers will work together to align project schedules in order to achieve the maximum commercial benefits for all stakeholders.” Kjetil Tungland, TAP’s managing director, added, “It is one of the most complex gas value chains ever developed in the world, consisting of multiple separate energy projects with a total investment of approximately $45bn.”

Another pipeline project in the region, the Gazprom-led South Stream pipeline, does not look likely to happen. The $32bn project plans to transport Russian fuel under the Black Sea to Bulgaria before it separates into two spurs: one to Serbia, Hungary, Slovenia, Austria and Italy and the other to Croatia, Macedonia, Greece and Turkey. A ribbon was cut in December 2012 on Russia’s Black Sea coast to herald commencement of the project, but no pipe-laying barge has been hired, no route supplied to the end customer, Europe, and no final investment decision has been made.

Crude Links

There are also plans for new oil links. Presently, two major oil pipelines transit Turkey, both terminating in the Mediterranean port of Ceyhan. BP’s 1760-km Baku-Tbilisi-Ceyhan line carries up to 1.2m barrels per day (bpd) of Azeri crude. From Iraq’s northern fields, the 986-km Kirkuk-Ceyhan pumps about 300,000 bpd, well below its capacity of 1.6m bpd, due to aging infrastructure and attacks by insurgents on the border.

Turkey wants Russia to supply oil to the planned $3bn TANAP from the Black Sea port of Samsun to Ceyhan. The venture between Turkey’s Çalık Holding and Italy’s Eni aims to carry 1.5m bpd, but the Turkish government has said it will cancel all project’s with Eni over the Italian firm’s investments in Cyprus, creating uncertainty.