DEPA and the Southern Corridor Blues
The gathering of business officials, governmental representatives and energy specialists at the 3rd Mediterranean Oil & Gas Conference re-inforced two major themes in the European energy market: the Southern Corridor project and the diversification process of decreasing the role of Gazprom as its primary supplier.
Having seen the DEPA supported ITGI project fall to the Trans-Adriatic Pipeline project in the initial stages of the Southern Corridor contest become the transit route for gas transported from the second phase of the Shah Deniz field in Azerbaijan, DEPA President Harry Sachinis took the tactic of downplaying the importance of the Southern Corridor as far as the EU market is concerned.
Mr. Sachinis noted that according to the date compiled by DEPA, the consumption of natural gas in Italy has decreased recently by as much as 6 bcm due to the mass introduction of solar energy into the electricity production of that country. He added that this changes the overall picture of Southern Corridor as a project that will satisfy the growing needs of Italy, because that simply is not true.
Sachinis focused on the importance of providing supply to Balkan markets, a theme echoed by US Ambassador Richard Morningstar as being integral to the reduction of Gazprom's influence, who at present is the major supplier of Bulgaria, Serbia, Romania and others. Morningstar has been previously quoted as stating: “The first priority has to be getting at least a reasonable amount of gas to the Balkans. The Shah Deniz consortium and BP understand that if they were to build TAP, significant gas would have to be left in the Balkans.”
Sachinis also dropped proposals regarding the capability that the Cyprus offshore reserves can offer regarding DEPA's regional ambitions and contribute to the EU's diversification policy.
Several options were provided by which gas can be transferred into Europe from the Eastern Mediterranean through Cyprus and Greece. Moreover, LNG plans were announced and the role of Israel and Cyprus in Europe's diversification process was revealed as one of DEPA's new strategies.
Gulmira Rzayeva of the Center for Strategic Studies under the President of the Republic of Azerbaijan downplays that notion. "The reserves offshore Cyprus cannot compensate for Southern Corridor at any case. Still little is known of them, there are no concrete plans and it will take several years before they are made. For the moment it's the Shah Deniz consortium and Azerbaijan that have the gas sources and have made all the plans to satisfy the needs of Southeastern Europe and the EU. In Baku there is no real concern for East Med. reserves".
Ms. Rzayeva also added that "Azerbaijan has a strategic policy to penetrate European markets and despite issues that we may have, especially regarding Russian plans for South Stream, we can achieve that aim, as we achieved the Baku-Tbilisi pipeline regardless of the objections by Russia".
Commenting on the Balkan issue a Russian diplomat said “US diplomacy is interested in decreasing Russian bonds to the Balkans and DEPA is siding along, despite the fact that it cannot play such role apart from rhetoric. Gazprom will continue to be the main player in the Balkan gas market; the fundamentals cannot change by rhetoric alone".
When asked how he views Azerbaijan's future role he replied that "Baku will skillfully try to attract as much investments and political support as possible, but they cannot influence the course of events regarding the Southern Corridor, because it does not depends in their ambitions, but rather on the state of play between Moscow and Brussels with Washington on the sidelines."
The big "elephant in the room" was the question of co-operation between DEPA and TAP. The TAP consortium has said that it is open to partnership from Italy and Greece.
Rikard Scoufias, TAP's country manager for Greece, was previously quoted as saying said that the consortium would welcome participation from those two countries given TAP's presence in both.
"We’re open to discussing new partnerships at a shareholder level and looking at our host countries. We’d welcome a Greek and/or Italian partner," he said
Following February's announcement that ITGI had officially lost out to TAP, reports attributed to unidentified individuals in the Greek Energy Ministry stated that Depa SA, the Greek state-controlled natural gas supplier and ITGI consortium partner, was reported to be interested in buying a stake of as much as 15 percent in TAP.
A DEPA manager citing his personal views assumes that "DEPA will get into a sort of a partnership with TAP sooner rather than later. We have Greek elections coming on the 17th of June and afterwards I think we'll approach the TAP consortium, although we do need to have leverage in negotiations by citing our other plans we have been working with such as plans for the East Mediterranean gas reserves and our relation with Noble Energy".