Azerbaijan has always advocated diversified supply of hydrocarbons: economic expert

Day.Az: How do you comment a statement by Azerbaijani Industry and Energy Minister Natig Aliyev who said that the country will study a new directions of export of Azerbaijani hydrocarbons, namely, transport of compressed gas by special tankers via the Black Sea?

Vagif Sharifov: Azerbaijan has always advocated a diversified supply of its hydrocarbons. This principle provides the most efficient price for per ton of conventional fuel and ensures secure and interrupted supply of hydrocarbons. While there is such number of oil and gas pipelines, Azerbaijan and foreign investors are confident that the volume extracted will be supplied to the world market on time and effectively sold out.

The idea of a gas transport across the Black Sea till the shores of Bulgaria and Romania is quite interesting. The world has much experience of compression of gas at terminal and its marine transportation over long distances with subsequent regasification. Gas, which is compressed by 250 times at a terminal, can be delivered, for example, to the shores of Bulgaria till Varna and sold in this country.

Over the past 10 years, Bulgaria’s demand for gas has grown nearly 50 percent. In recent years, average consumption of gas in this country has totalled nearly 5.5 billion cubic meters a year. The country imports almost all this volume. The situation is somewhat different in Romania: average gas annual consumption is nearly 18 billion cubic meters, 65-67 percent of which is secured at the expense of domestic production.

But gas delivered by tankers across the Black Sea can be distributed also in other European countries via the territory of Bulgaria and Romania. Demand for gas in Europe is constantly growing.

Q: The minister also said  Azerbaijan has another option to export hydrocarbons to world markets, namely, the Southern Corridor. Which one is advantageous for Azerbaijan - transport of compressed gas across the Black Sea or participation in the Southern Corridor project?

A: These are very different projects with very different volumes and investments. The European Union is strictly interested in creating such a corridor. The Southern Corridor is very important for Azerbaijan in terms of diversified supply of gas.  

Southern Corridor, main component of which is Nabucco gas pipeline, will ensure 10 percent of Europe’s gas demand by 2020.

Actually, tens of billions of cubic meters of gas per year is a huge figure. This project, along with transport of Azerbaijani gas across the Black Sea, is very important in terms of diversification of energy supply routes to Europe.

The EU needs to make maximum efforts to get the Southern Corridor and Nabucco projects implemented as soon as possible as EU's dependence on imported gas will reach 70 percent against the current 50 percent by 2013.

Q: The energy minister admitted that Nabucco projecy has many unresolved problems including the one related to the resource base. Will this problem be solved and by what means?

A: Indeed, today Azerbaijan is the only real resource base to fill up the Nabucco gas pipeline. As for other potential suppliers, there is a lot of internal and external issues. But the complexity of realization of the Nabucco project is not confined to the resource base. Documents on investment have not been signed yet.

Nabucco Gas Pipeline marketing company has launched detailed negotiations with potential lenders including the European Investment Bank EBRD and credit-export agencies. But the final investment decision on the project is expected to be adopted a year later, that is, in the fourth quarter of 2010. I do not rule out that the issue of investment and  volumes of gas for Nabucco will be resolved, too.But I think consortium could have resolved these important elements for the project long ago and launch the pipeline not in 2014, but much earlier. Thus the EU would create a more diversified sources of energy imports.

Q: On Oct. 14, SOCAR and Gazprom signed a gas contract for period of 2010-2014. Under the contract, Azerbaijan will annually supply 500 million cubic meters of gas to Russia. It is interesting that the contract does not specify an upper limit of the volume of gas supplies. Does it mean that under certain circumstances Russia may buy the entire volume of Azerbaijani gas?

A: Well, let's start with the fact that Azerbaijan-Russia infrastructure is unable to transport the huge volumes of Azerbaijani gas. I think that the absence of a ‘ceiling’ in the contract allows the sides to work more freely not limited by a maximum figure. Contract with Gazprom allows Azerbaijani gas as find new markets and expand network of diversified energy supply.

The more diversified routes the country has, the better price will be and the more uninterrupted supply will be ensured. As for the benefits for European consumers, the effective geographic location of Azerbaijan allows a country to carry out trade operations with many nations. In terms of acceleration of the project Nabucco, Europe needs to take into account that in addition to direct European, there are also neighbor markets to export energy.

Day.Az