EU, US to fund study for gas corridor from Caspian to Europe

EU, US to fund study for gas corridor from Caspian to Europe

Tbilisi (Platts)--20Jun2006

The European Union and the US are preparing to launch a study into the
feasibility of a new energy corridor to carry gas from the Caspian region to
European markets, EU energy adviser Faouzi Bensarsa said Tuesday.

The study is being made at the request of the governments of Kazakhstan
and Azerbaijan, and is provisionally costed at Eur3.2 million, to be jointly
funded by the EU and the US, Bensarsa said.

The study is to incorporate a planned feasibility study for a direct
Kazakhstan-Azerbaijan trans-Caspian gas pipeline for which financing is to be
made available by the US Trade Development Agency.

The goal of the project would be to diversify European supply sources in
general and in particular to offer Ukraine an alternative to its current 100%
dependence on Russia for gas imports.

Bensarsa was speaking on the sidelines of a conference on Eurasian energy
security in Tbilisi organized by the International Energy Agency and the
government of Georgia.

No specific details of the energy corridor have been announced but
options would include both the planned Nabucco project to pipe gas from Turkey
through southeast Europe to Austria and the Turkey-Greece gas interconnector
currently under construction and its planned extension to Italy.

Italian sources at the same conference said the goal was to deliver
Azerbaijani gas to the Italian market in January 2011.

Bensarsa is heading for Baku Wednesday to discuss core issues of EU
competition and regulatory practice, including the exemption from EU
requirements concerning initial access to pipelines.

One key issue for the EU to tackle is whether the fact that Azerbaijan's
principal gas resources at the Shakh Deniz field are operated by a consortium
would cause problems for European competition law.

EU sources told Platts that they believed this issue could be overcome
and that the 11 members of the Shakh Deniz consortium would not need to sell
their gas individually in Europe, so long as Azerbaijani gas did not occupy a
dominant position on the European market,

The BP-led consortium developing Shakh Deniz is on track to deliver its
first gas to Turkey on September 30 this year, a BP official said earlier this
month. The field's potentially recoverable reserves are estimated to be in
excess of 400 billion cubic meters.

--John Roberts, john_roberts@platts.com

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