Southern Gas Corridor Hits Halfway Point
It’s half-time in the giant $40bn project to construct the southern gas corridor (SGC) designed to carry an initial 16bn m³/yr of Azerbaijani gas to Turkey and Europe and which is designed to eventually carry twice that volume. In physical terms, the system is already more than half completed so that it may well start to deliver its initial 6bn m³/yr to Turkey and 10bn m³/yr to the European Union well ahead of schedule – as long as the Italian olive trees may be uprooted and replanted in time.
Although the project dates back almost a decade, the final go-ahead can be dated precisely to December 17, 2013, which was when the final investment decisions were taken for two of the three core elements: the second phase upstream development of the Shah Deniz gasfield (which includes expanding the existing South Caucasus Pipeline from Azerbaijan to Georgia’s border with Turkey) and the giant Trans-Anatolian Pipeline (Tanap) across Turkey.
The resolution to build (equivalent to an FID) the third core element, the Trans-Adriatic Pipeline (TAP) from the Greek-Turkish border to Italy, had been taken a few weeks earlier once it was clear that the other two FIDs would go ahead.
As for the completion date, Tanap was originally due to deliver gas to Turkey by the end of 2018, but now looks set to open around mid-2018. As for TAP, its EU certification requires it to enter commercial service by December 31, 2020, but in practice TAP’s schedule is aimed at delivering gas from around the start of 2020. Moreover, Tanap’s head, Saltuk Duzyol, briefing journalists during field trip on December 8, said Turkey’s state gas gas company, Botas, would receive its first deliveries from Tanap in June 2018 and that deliveries from Tanap to TAP will start in June 2019.
Beating the Clock
Construction progress to date makes such an early delivery quite feasible. “In Azerbaijan and Georgia, we’re pretty much on schedule and on budget – even a little ahead of schedule,” BP Azerbaijan vice-president Bakhtiyar Aslanbeyli told NGW earlier this month. He said that for the elements for which BP, as Shah Deniz operator was primarily responsible – the upstream works at SD2 and the SCP Expansion (SCP-X) pipeline work – were now 82% completed in terms of procurement, design and engineering.
The platforms, jackets and top decks for the giant offshore platforms at which the SD2 gas will be produced were 93% ready, he added. This is a particularly complex activity, since what is officially a single platform will, to the layman, consist of two platforms linked by a bridge, with one used for working and the other for living.
The jacket for the first platform was delivered to the field in September 2016, the jacket for the second will be delivered in the first quarter of 2017 and the bridging platform will sail off to the field in the second quarter of 2017. “So, by summer all top decks and jackets will be place,” Aslanbeyli said. Overall, he continued, “construction activities will be pretty much completed by summer of 2017 – and pretty much under budget.”
In December 2013, the SCP partners – a group dominated by BP, Azerbaijan’s Socar and the state Turkish companies who are shareholders in SD2 and Tanap – anticipated that overall spending would amount to around $45bn, of which some $28bn would be required for works being carried out directly by the SD2 consortium in Azerbaijan and Georgia. Now, however, Aslanbeyli told NGW, “we think it will be close to $40bn.”
In Georgia itself, Gvaladze Gia, external affairs director at BP Georgia, told NGW that work was going very well and should be completed by the third quarter of 2017. This should be sufficient to ensure initial deliveries of gas to Turkey, for which just 2bn m³ are planned in the first year of operation. At Tsalka, high in the South Caucasus at close to 1,500 metres, a second Georgian compressor station is being installed to push larger volumes of gas to Turkey, as well as the 10bn m³/yr bound for the EU, through an existing stretch of the South Caucasus Pipeline. “It’s been a harsh winter,” Gvaladze said, “but the work is going very well with completion expected in 2018.”
In Turkey, Duzyol said on December 8 that construction work on Tanap was 55% complete. He also said costs had fallen dramatically. Briefing journalists he said: “When designing the construction of the Trans-Anatolian Pipeline, its cost was estimated at $11.7bn. Its cost dropped below $10bn as a result of changes in the market.” Indeed some reports put the revised cost for Tanap as low as $8.6bn.
Yet while work on these core elements is progressing, there are still some doubts concerning the final element: the Trans-Adriatic Pipeline which will carry gas headed for Europe onwards from a connection with Tanap at the Turkish-Greek border.
The contracts for all TAP’s sections, including the 105-km subsea link from Albania to Italy, have all been let with the bulk of the pipes required for construction in Greece and Albanian already delivered and ground works and pipe-welding under way.
But there is still one outstanding issue to be resolved. This concerns the need to secure permission from the local authorities in southern Italy to temporarily relocate perhaps as many as 2,000 olive trees in order to allow the final 8 km of pipeline to be laid between the point at which the subsea section comes ashore at San Foca and a planned junction with Italy’s Snam-Rete gas transmission system.
“In Italy we got approved the ‘single authorisation’ and the EIA. (environmental impact assessment,” required to develop the project, Aslanbeyli told NGW. “But we need to get necessary permits from the regional government for the relevant olive trees, which is required to start construction. So far, we have not got that.”
Whether the change in prime minister, in the wake of the recent Italian referendum, will change matters is not clear. As a result, Aslanbeyli said, “it is difficult to give any timing and details.” Meanwhile TAP is working continuously with the regional authorities to try to sort out the issue. However, Aslanbeyli added, “If we don’t get permits by early January, then this will impact – delay – the construction schedule.” If the delays extend beyond early January, the concern is that the underlying timetable will be affected, since there are season-related requirements concerning the replanting of olive trees.
Nonetheless, said Aslanbeyli, “the schedule is still to deliver first gas to Europe in 2020.” And it’s a schedule that has to be met, since European certification for TAP states explicitly states that “commercial operations are scheduled to begin not earlier than 1 January 2020 and not later than 31 December 2020.”
Source: Natural Gas World