Azerbaijan's giant gas field sees lower European demand

LONDON, March 22 Fri Mar 22, 2013 2:51pm EDT

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LONDON, March 22 (Reuters) - The consortium developing Azerbaijan's giant Shah Deniz II gas field, Europe's best hope of diversifying supplies away from Russia, is finding less interest for its gas from buyers across the continent, BP said on Friday.

BP's Vice President of Shah Deniz Development, Al Cook, said the project has seen a 25 percent reduction in demand expressed by European buyers since 2010 for future deliveries of Azeri gas once it starts flowing through pipelines across Turkey to Europe in 2019.

But despite the drop in interest, demand still far outstrips the 10 billion cubic metres per annum (Bcma) that Azerbaijan has earmarked for customers in Europe, Cook said.

"Two years ago demand for Azeri gas was 40 Bcma (billion cubic metres per annum), today it's 30 Bcma," BP's Vice President of Shah Deniz Development Al Cook said.

Two groups are currently competing to pipe Azerbaijan's Caspian Sea gas into western European markets.

The Shah Deniz consortium, which comprises BP, Statoil , state-run Azeri firm SOCAR and Total among others, will decide by end-June whether to pipe gas into Austria through the proposed Nabucco West pipeline or into Italy through the rival Trans-Adriatic Pipeline (TAP) project, Cook said.

Decreasing demand for Azeri gas in Europe is due to companies making more realistic estimates of their future gas demand compared with a few years ago, Cook said, denying that it was the result of economic slowdown weighing on energy demand.

"At the end of last year we nervously awaited the results of buying interest, but the desire for Azeri gas in Greece and southern Europe has not been dimmed (by the economic crisis)," Cook said.

BP expects first gas from Shah Deniz II to be delivered to Turkey in 2018 with early 2019 set for the first Azeri gas to reach western Europe in a major development that will reduce European dependence on Russia for its energy supplies.

The European Union, which depends on Russia for about a quarter of its gas needs, wants to diminish that share by bankrolling new import corridors from the Caspian Sea via Azerbaijan and Turkey.

Output from Shah Deniz II is expected to reach 16 Bcma of natural gas.

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