Competition is increasing among pipeline projects aspiring to bring Caspian gas to the European market. According to BP Azerbaijan, the main partners in the development of Azerbaijan’s Shah Deniz field, including BP, aim to participate in each pipeline project transporting gas to Europe: “That includes the South Caucasus Pipeline, TANAP and TAP/ Nabucco West,” according to a BP representative.

On August 9, TAP and its existing shareholders EGL, Statoil and E.ON Ruhrgas reached an agreement with members of the Shah Deniz Consortium to secure funding for the TAP project. These funds will contribute to continued work in several important areas during the period running up to the final routing decision, expected in 2013. The agreement also includes an option for the Shah Deniz shareholders to take up to 50 percent equity in TAP. “The signing of this agreement is a significant vote of confidence in the quality of TAP’s technical and commercial solutions from key industry players, and underpins the Cooperation Agreement that was signed between TAP and Shah Deniz in June,” said Kjetil Tungland, TAP’s Managing Director in a statement. “Our cooperation with Shah Deniz is now even closer and more far-reaching than before. This agreement will strengthen our continued working relationship in the run-up to the final routing decision. We remain confident of a positive outcome.”

TAP is designed to transport natural gas from the giant Shah Deniz 2 development in Azerbaijan, shipping it via Greece and Albania, across the Adriatic Sea to Southern Italy, and further into Western Europe. Designed to expand transportation capacity from 10 to 20 billion cubic meters (bcm) per year, TAP will open up the so-called Southern Gas Corridor. Shah Deniz II is expected to add roughly 16 bcm of annual production, 10 bcm of which would be ready for export to the EU.

BP and Statoil both own 25.5 percent stakes of Shah Deniz. Azerbaijan’s SOCAR, Russia's OAO Lukoil Holdings, Total and National Iranian Oil Co. all own 10 percent each, while Turkey’s TPAO owns 9 percent. The Greek and Italian governments have agreed to back the Trans-Adriatic Pipeline in a long contest. Greek Deputy Energy Minister Makis Papageorgiou and his Italian counterpart reached a “close cooperation agreement” to jointly support the pipeline that would run through their countries, the Greek ministry said in a statement.

Athens and Rome decided to back the project after Azerbaijan’s Shah Deniz 2 consortium chose TAP for transporting gas to Western Europe. Nabucco West remains an alternative route through the Balkans, a spokesman for the Italian Foreign ministry said. TAP External Affairs Director Michael Hoffmann said that “this confirms the progress we have been making in discussions with the Italian and Greek authorities,” adding he hoped to sign an agreement with the relevant governments in September. Another rival, the Nabucco pipeline, has moved a step forward after Hungary became the first country to finish its permitting process.

On August 14, an executive of Nabucco West stated that Hungary granted a necessary Environmental Permit. “The granting of this permit is a substantial step forward in Hungary and signifies the advanced stage of development of Nabucco West,” said Reinhard Mitschek, Managing Director, Nabucco Gas Pipeline International GmbH, in a statement. “Based upon the Intergovernmental agreement, the cooperation with the Hungarian authorities has been exemplary. We are committed to following best practices in line with national and international regulations,” he added. 

Gábor Bercsi, Managing Director of the Nabucco National Company in Hungary, noted that the next steps in Hungary will be to finalize the Front End Engineering and Design for Nabucco West and to continue the process of obtaining the necessary permits for construction. Nabucco is a joint venture comprising Hungary’s MOL, Germany’s RWE, Vienna- based OMV, Bulgargaz EAD, Romania’s Transgaz SA and Turkey’s Botas. Each shareholder holds an equal share of 16.67 percent of Nabucco Gas Pipeline International GmbH. It is the shareholders who are responsible for the negotiation of gas contracts. 

The pipeline will link Turkey’s eastern border to Baumgarten in Austria – one of the most important gas turntables in Central Europe – via Bulgaria, Romania and Hungary. Gerhard Roiss, chief executive officer at stakeholder OMV, said Azerbaijan could take on a stake in the project consortium. “We have said it will have a different structure from today and we have always said that upstream countries should be part of Nabucco,” he was quoted by the Platts news service.

Sorin Keszeg, director of international relations for Transgaz, told Bloomberg News last month that MOL was stalling Nabucco’s funding while it waited for the BP group to vet various pipeline projects. “MOL may reconsider its position on the planned capital increase, since Shah Deniz partners said they favor Nabucco. If MOL doesn’t, its stake will be diluted," he said.

Next year, the BP-led group should decide between Nabucco West and the rival TAP as the conduit for Azerbaijani natural gas. The gas will first move through Turkey before taking either the TAP’s southern route or the Nabucco West path into Austria. In late June, Azerbaijan and Turkey agreed to implement the Trans-Anatolia Gas Pipeline (TANAP) that will transport gas across Turkey from east to west, providing for stable transit across the country. The project will link with the expanded South Caucasus Pipeline starting in Azerbaijan and continuing through Georgia, and with a variety of proposed pipelines in the EU. Recently, a BP representative said that SOCAR is seeking participation from BP in the TANAP project. BP PLC has proposed to buy a stake in the planned US$ 7 billion pipeline.