* Nabucco could get future Azeri gas supply - SOCAR
* Shah Deniz formally selects TAP pipeline to Italy
* Spot pricing could be advantage over Russian gas
By Lada Evgrashina
BAKU, June 28 Central Europe could get future
supplies of Azeri natural gas, energy company SOCAR said on
Friday, after passing over the region in favour of a project
that will pipe Azerbaijan's first European deliveries to Italy.
Capping more than a decade of planning, SOCAR and partners
including BP and Statoil formally selected the
Trans Adriatic Pipeline (TAP) on Friday.
TAP plans to deliver 10 billion cubic metres of Azeri gas to
Europe each year beginning in 2019, linking a Turkish pipeline
to southern Italy via Greece and Albania.
It will tap Azerbaijan's vast Shah Deniz II project in the
Caspian Sea, one of the world's largest gas fields with an
expected investment of more than $40 billion including
pipelines, and help Europe reduce its reliance on Russian gas.
The decision meant defeat for the rival Nabucco West project
which had hoped to build a central European pipeline to Austria
via Bulgaria, Romania and Hungary.
Yet SOCAR noted Azerbaijan's gas exports will increase
dramatically after the development of additional fields such as
ACG Deep, Absheron, Umid and Shafag-Asiman.
"We clearly see the Nabucco pipeline corridor as the natural
market for our future volumes of gas," Rovnag Abdullayev,
president of SOCAR, told a news conference.
"We expect that the ability of the southern corridor to
bring new sources of supply to European markets will extend
beyond the immediate areas transitted by TAP," he said.
The European Commission also saw scope for central European
deliveries in the future.
"In principle, gas from the Caspian Sea could be delivered
to the EU both to Baumgarten/Vienna (Nabucco West) or to Italy
(TAP)," the Commission said in a statement.
Regarding the selection of TAP, Shah Deniz consortium member
BP said there was a "substantial" commercial difference between
the two competing pipeline projects, including the cost of
shipping the Azeri gas and gas prices in the respective markets.
Analysts at consultancy Wood Mackenzie said Azeri gas
contracts could include a high proportion of spot-indexation
rather than deals linked to oil prices.
Offering contracts largely based on spot gas prices would
give Azerbaijan an advantage over supply from Russia's Gazprom
, whose contracts linked to oil prices have caused
friction with some European gas buyers.
TAP shareholders are Statoil, Swiss company AXPO
and Germany's E.ON Ruhrgas. Nabucco West is led by
Austrian energy company OMV.
OMV reiterated comments made earlier this week that it
considered the Nabucco project over.
The Nabucco consortium said its shareholders would decide on
its next steps in the coming weeks, and OMV said it might turn
its attention to gas for Europe from the Black Sea.
The TAP decision prompted a flurry of potential partners to
Belgium's Fluxys is expected to join the group by August,
TAP managing director Kjetil Tungland said, while Shah Deniz
members SOCAR, BP and France's Total said they would
take stakes in the pipeline project by the end of the year.
Transit countries Turkey and Greece also said they were
assessing options to join the project.
Greece's DEPA has made an offer to buy 1 billion cubic
metres of the Azeri supply, the Greek deputy energy minister
In response to Europe's quest for Caspian supply, Russia's
Gazprom has put forth its $39 billion South Stream project which
would pipe gas to northeast Italy via the Black Sea.