AZERBAIJAN'S GAS FOR GERMANY

FT - Chancellor Angela Merkel will visit Azerbaijan this week for talks on boosting supplies of Caspian gas to Europe, as the US steps up pressure on Berlin over the Nord Stream 2 pipeline that will bring gas directly from Russia to Germany.

A senior German official said Germany had a "big interest" in developing the so-called "southern gas corridor" linking Azerbaijan to Europe via Turkey, pointing out that it was an important part of EU efforts to diversify the continent's supply of gas and secure alternatives to energy imports from Russia.

He said Germany would like to see the corridor expanded to take in gas from other states, such as Turkmenistan, Iran and Iraq.

Ms Merkel is keen to show her support for EU efforts to diversify away from Russian gas amid growing criticism of Germany's support for Nord Stream 2, a project that critics say will increase the continent's reliance on Russian hydrocarbons.

Nord Stream 2 will also allow Russia to bypass Ukraine's gas pipeline system, depriving it of lucrative transit fees and leaving it more exposed to pressure from Moscow as it continues to fight Russia-backed separatists in the east of the country.

Ms Merkel is visiting Baku as plans proceed to build a pipeline bringing gas from Azerbaijan's vast Shah Deniz 2 field to the EU. The $40bn, 3,500km conduit is one of the biggest infrastructure projects in the global oil and gas industry.

The German official welcomed an agreement reached earlier this month between the Caspian littoral states — Russia, Iran, Kazakhstan, Azerbaijan and Turkmenistan — on a legal framework for sharing the Caspian, the world's largest inland body of water.

He said the deal, which raised the prospect of an end to 27 years of diplomatic wrangling over the Caspian's status, could turn out to be a "first step" towards the construction of a Trans-Caspian Pipeline that would bring gas from Turkmenistan to Azerbaijan — and thus "help to diversify" Europe's energy imports.

He stressed, however, that such a project would be "difficult", and there were "other important legal issues that remain to be resolved".

Germany has come under mounting criticism over its role in the Nord Stream 2, a €9.5bn pipeline that will directly connect the world's biggest exporter of natural gas with Europe's largest economy.

The new line and the existing trans-Baltic link Nord Stream 1 will together be able to carry 110bn cubic metres a year of natural gas, enough to meet almost a quarter of total demand across the EU.

At the Nato summit in Brussels last month, US president Donald Trump fiercely criticised Nord Stream 2, saying Germany was buying so much Russian gas that it had become a "captive" of Moscow.

Ms Merkel has addressed the criticism by seeking to win assurances from Russia that it would continue to send gas through the Ukrainian transit system even after Nord Stream 2 comes on line. The issue was one of the topics discussed by Ms Merkel and Russian president Vladimir Putin at their talks in Meseberg, the German government guest house, at the weekend.

The EU and US have long championed the southern corridor as a way for Europe to reduce its dependence on Russian gas. The project, which will bring Caspian gas through three linked pipelines from Azerbaijan to southern Italy, has been designated one of the EU's "priority projects".

The central part is the Trans-Anatolian Pipeline, which is being built by a mostly Azeri-owned consortium. It will connect with the Trans-Adriatic Pipeline, which runs from Turkey through Greece and Albania to Italy.

Ms Merkel is visiting Azerbaijan as part of a tour of the South Caucasus, which will also take her to Georgia and Armenia. In Armenia she will have talks with the new prime minister, Nikol Pashinyan, a former journalist who came to power in May after weeks of opposition street protests brought down the previous leader, Serzh Sargsyan.

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Earlier:

2018, August, 10, 10:30:00 SOUTHERN GAS CORRIDOR SANCTIONS PLATTS - The Southern Gas Corridor has received a waiver from US sanctions against Iran's energy customers, an expected win for the project, designed to transport 16 Bcm/year of Caspian natural gas to Turkey and southern Europe while bypassing Russia.

2018, August, 6, 12:50:00 UNESSENTIAL SOUTHERN GAS CORRIDOR NGW - Commercial conditions for the Southern Corridor’s success have deteriorated as political support for it has grown. Up to 2030, the corridor will most likely remain an insubstantial contributor to Europe’s gas balance.

2018, July, 6, 11:35:00 €500 MLN FOR TRANS ADRIATIC PIPELINE EBRD - The EBRD Board of Directors has approved an up to €500 million loan for the construction of the Trans Adriatic Pipeline (TAP), a priority project of the European Union (EU) and the Energy Community. The 878 kilometre pipeline will start at the Greek/Turkish border, cross Albania and, after passing under the Adriatic Sea, will end in southern Italy. It constitutes the final leg of the Southern Gas Corridor and will transport gas from the Caspian region to Europe.

2016, September, 26, 18:40:00 SOUTHERN GAS CORRIDOR DIFFICULTIES The $45bn complex pipeline project running from Azerbaijan to Italy and consisting of four mega projects – Shah Deniz 2, South Caucasus Pipeline expansion (SCPX), Trans-Anatolian Pipeline (Tanap), and the Trans-Adriatic Pipeline (TAP) – would be delivered and will come in under budget, eventually delivering 16-32bn m³/yr.

2016, June, 22, 18:10:00 AZERBAIJAN NEED $30 BLN Azerbaijan is hoping in the best case for profits in excess of $50bn from the Southern Gas Corridor (SGC). State oil company Socar told that even the gloomiest outlook showed that Azerbaijan’s share in the profit of SGC would be at least $30bn over the 25 years' duration of the sales and purchase agreements.

2016, April, 8, 20:55:00 SOUTHERN CORRIDOR FUNDING Last month, the state-owned Southern Gas Corridor Company (SGCC) raised $1bn in a 10-year eurobond at 6.875% yield. However, it met only half of its original plan.

2014, October, 2, 20:20:00 TAP IN EUROPE The EU’s long term goal regarding energy security is to become independent from one single gas supplier, increasing competition by having diverse energy suppliers. For these reasons, the EU promotes the Southern Gas Corridor, a strategically important gas value-chain passing through Azerbaijan, Georgia, Turkey, Greece, and Albania, linking Caspian gas to Europe.