ECONOMY

Caspian Sea gas will not reach Italy before 2011

BAKU – Italian gas consumers, such as power group Edison, can expect Caspian Sea gas no earlier than 2011 when Statoil and BP will be able to expand an Azeri project, Statoil said yesterday. «The second phase of our project is very market dependent. We will need to do more exploration work and sign final contracts with end users,» the head of Statoil in Azerbaijan, Georg Gundersen, told Reuters. Statoil and BP are co-leading the giant $4 billion Shakh-Deniz offshore gas project in Azerbaijan and a $1 billion pipeline from it to Turkey, which could potentially send gas onward to Europe to cover growing demand. The group, which also includes Russia’s LUKOIL, France’s Total, as well as Iranian, Azeri and Turkish state firms, wants to launch production next year and has already sold all gas from the first phase to Turkey and local markets in Azerbaijan and Georgia. Additional exploration has showed Shakh-Deniz contains 1 trillion cubic meters of gas – 20 percent more than expected, which Gundersen said justified the re-export of gas via Turkey. Shakh-Deniz’s phase-one peak production will be around 8.5 billion cubic meters a year. «We believe this is just one-third of what the field can actually produce,» said Gundersen. In July, Turkish gas firm Botas and Greece’s DEPA will finish building a pipeline between the two countries, which will enable Greece to start gas imports from 2006. DEPA has also signed a memorandum with Edison on constructing a 950-million-euro, 600km (375-mile) pipeline across Greece and 220km (138 miles) under the Adriatic Sea. Energy hub Greece, which is hoping to become an energy hub for southern Europe, hopes to transit up to 8bcm a year to Italy. «A final investment decision is expected by the end of 2006 and then the construction would take up to four years,» DEPA’s head for strategic planning, Vassilios Tsombanopoulos, told an industry conference in Baku. Gundersen said Statoil would not object to a deal between Botas and DEPA under which Turkey would resell modest volumes of some 0.75bcm a year to Greece from 2006. But he said bigger volumes, including those for Italy, would become possible only when Statoil and BP sanction a multibillion-dollar second phase of Shakh-Deniz.