Statoil and Total have decided not to exercise their option to acquire stakes in the Trans-Anatolian Natural Gas Pipeline, or Tanap, according to people familiar with the matter. Statoil was to have taken a 12 per cent interest and Total 5 per cent.
Tanap is part of an ambitious plan to bring gas from a massive field off the coast of Azerbaijan called Shah Deniz 2 into the heart of Europe.
It has long figured prominently in EU plans for a southern energy corridor that would help reduce the continent’s heavy reliance on imported gas from Russia.
Tanap has strong political support in Turkey, which is keen to secure new supplies of gas to meet growing domestic demand, and Azerbaijan, which wants to diversify its export routes and gain direct access to the European market.
But Tanap’s estimated construction costs have soared from $7.5bn to about $12bn, increasing the financial risks to the partners. The pipeline was to have started delivering gas to the Turkish market by 2018 and to Europe by 2019, but analysts believe that timetable could slip.
The BP-led consortium developing Shah Deniz 2 will announce on Tuesday that it has taken a final investment decision on the project, which is expected to cost more than $40bn.
That includes the pricetag for Tanap, which will run the length of Turkey, and the Trans-Adriatic Pipeline or TAP, which will connect to Tanap and bring the gas into Italy.
A person familiar with Tanap said what mattered was not the ownership structure of pipeline, but the gas transportation agreement, also due to be signed on Tuesday, which he called the “commercial underpinning of the whole project”.
That deal will establish the right of the Shah Deniz partners to ship their gas through Tanap and also set out the tariffs they must pay to use it. He said Statoil and Total’s withdrawal “will in no way impact the viability” of the pipeline.
Statoil and Total’s stakes will now be distributed among the existing shareholders in the project – Socar, Azerbaijan’s national oil company, BP, and two state-owned Turkish companies, Botas and TPAO. BP, Statoil and Total declined to comment.
Shah Deniz 2 is designed to export 16 billion cubic metres of gas a year, with 10 bcm/y of that going to Europe and 6 bcm/y to Turkey. Some 10 bcm/y of gas from the project has already been sold into Europe on contracts worth a total of $100bn.
Despite their decision to withdraw from Tanap, Statoil and Total will retain their interests in TAP.
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