UK expert warns gas exporters of toughening competition in Europe

Turkey’s demand for Azerbaijani gas can significantly exceed 6 billion cubic meters per year, the volume which Turkey will receive as part of the second phase of development of Azerbaijan’s Shah Deniz field, Simon Pirani, senior researcher at the UK Oxford Institute for Energy Studies, said in Baku.

Pirani made the remarks while delivering a report during the Caspian Oil & Gas-2016 conference in Baku.

Currently, Russia remains the primary exporter of gas to Turkey, as it accounts for over a half of Turkey’s gas import, said the UK expert.

He pointed out that over the last two years Azerbaijan has gradually increased the gas export to Turkey by bringing the volume of sold gas to the maximum level reflected in the contract.

Turkey’s policy regarding the import from Russia will be one of the decisive factors, according to Pirani.

Further, he noted that another important direction of Azerbaijan’s gas import is Europe.

“Azerbaijan not only sells gas to Georgia and Turkey from the first phase of development of the Shah Deniz gas and condensate field, but also secured its future by signing a contract for the sale of gas to Turkey and Europe within the second phase of the Shah Deniz field’s development,” said Pirani.

But it is worth considering that Europe’s demand for gas is gradually reducing, he added.

“If Europe’s demand was 560 billion cubic meters of per year in 2010, this figure dropped to 469 billion cubic meters per year at the end of 2015,” explained Pirani.

On the other hand, the Russian gas continues to dominate in imports of European countries, and now it is worth to see how it will compete with the US’s liquefied natural gas (LNG), he noted.

The expert also said Azerbaijan will have to conduct the right pricing policy, as it will play an important role in the European market.
“Today the average price of natural gas is $154.4 per thousand cubic meters, and by 2018, the average price is forecasted at the level of $176-206 per thousand cubic meters,” said Pirani. “Thus, in order to compete with the US LNG, Russia can sell its gas for $140 per thousand cubic meters.”

Therefore, in order to get its share of the European market, Azerbaijan should consider these players, the expert believes.

Shah Deniz- 2 project envisages drilling 26 subsea wells, construction of two platforms, underwater pipelines for gas and condensate, expansion of the oil and gas terminal in Sangachal township, construction of two gas compressor stations and connection of this infrastructure to the South Caucasus gas pipeline.

As part of the Stage 2 of the Shah Deniz development, the gas will be exported to Turkey and European markets by expanding the South Caucasus Pipeline and the construction of Trans-Anatolian Natural Gas Pipeline and Trans-Adriatic Pipeline.

Source: Trend