Between TAP and Nabucco: Who is the “WINNER”? Azerbaijan or Russia?

28 August 2013
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Today, every new pipeline changes the market and geopolitics of region. Two months ago, the final decision made by Shah Deniz Consortium, surprised many people. The competition for which pipeline will deliver Azeri gas to Europe is “Almost” over. Although Nabucco-West was strongly and diplomatically supported by European Union and United States, Shah Deniz Consortium opted Trans-Adriatic Pipeline (TAP) which will be connected with Trans-Anatolian Pipeline (TANAP) at Turkish-Greek border. This decision totally paralyzed Nabucco-West pipeline project. Two shareholders of Shah Deniz consortium – BP and Statoil - fully supported TAP. Because, “under agreements signed with TAP during 2012, the Shah Deniz Consortium shareholders BP, SOCAR and Total hold options to acquire a combined 50% of TAP’s shares, thereby contributing to TAP’s construction costs.” (1)

The initial shareholders of TAP were Switzerland’s Axpo (42.%), Norway’s Statoil (42.5 %), and Germany’s E.ON Ruhrgas (15 %). In June 2013, Fluxys stated its willingness to join the TAP consortium. “Fluxys is a Belgium-based major operator of gas transmission pipelines and storages in Europe’s northwest countries, as it holds ownership stakes in the Transit gas pipeline that links Switzerland with Germany, as well as in the Belgium-Britain and Netherlands-Britain interconnector pipelines. TAP’s vision is to enable south-north flows from Italy to Switzerland, Germany, France and Great Britain. Azerbaijani gas from the TAP pipeline could be moved straight into north-western European markets.” (2)

Following those developments, on July 30, TAP Consortium declared that, “Azerbaijan’s State Oil Company (SOCAR), BP (British Petroleum), and France’s Total - gas producers at Shah Deniz in Azerbaijan - entered the TAP pipeline consortium. SOCAR and BP owned 20% each and TOTAL 10% of TAP’s shares. Another new entrant was Fluxys (as mentioned about above) has taken a 16% of stake.” (3) “Norwegian Statoil (which also owns a stake in Shah Deniz Consortium), German E.ON Ruhrgas and Swiss Axpo, reduced their stakes in the TAP project due to the new stakeholders. TAP’s current shareholders are now comprised of SOCAR, BP and Statoil with 20% for each, Fluxys 16%, Total 10%, E.ON 9%, and Axpo 5%.” (4) “TAP plans to invest in pipeline upgrades along the entire route from southern Italy to the North Sea for its Caspian gas” (5)

Through TAP, Azeri gas (10 bcm) will be pumped through Greece (Kipoi) and Albania (port of Fier), across the Adriatic seabed (at the Strait of Otranto) to Italy (San Foca) in 2019. However, within this time much things might be changed, especially EU’s energy tale, and not only Russia, as well as Azerbaijan will be faced with new rivals in European energy market, such as shale gas from U.S or other EU states, including liquid natural gas from Mediterranean.

“Selection of TAP will enable SOCAR to focus on Balkan gas markets in Greece (with direct access to consumers through DESFA pipelines), in Bulgaria (through the planned Interconnector Greece-Bulgaria, on which SOCAR is now a stakeholder via DESFA), and in Albania (where no gas is used and no pipeline grid exists, but SOCAR appears prepared to change that situation).” (6)

Many observers and experts claim that, Russia is the first actor that will be happier about this decision, because Central and Eastern Europe, Northern Italy and Southern Germany are in the target of Russian-led South Stream project. In order to challenge with Nabucco, Russia decided to construct the South Stream pipeline which will deliver natural gas to Southern and Central Europe via a pipeline under the Black Sea. In this regard, Azerbaijan made very strategic decision in order to keep its relations with Russia balanced, and not to ignore EU. Opting for Trans Atlantic Pipeline was an advantageous diplomatic gesture from Azerbaijan toward Russia. “By opting for the TAP, the Shah Deniz consortium apparently avoided direct confrontation with Gazprom’s markets in Eastern Europe, which it serves through the existing networks and possibly through South Stream in the future.” (7) However, selection of TAP has disappointed all Nabucco consortium members, because “the advantages of Nabucco West were more than TAP’s advantages.” (8)

Actually, Nabucco died two times, first when Trans-Anatolia Pipeline Project (TANAP) agreement signed, second when Shah Deniz consortium made its final decision. According to Amanda Paul (Policy Analyst for European Policy Centre), “Indeed, Nabucco was talked about so much it became labelled an anti-Russian project, which made some countries in Central Asia wary of getting involved in it. The fact that Azerbaijan’s SOCAR purchased the Greek DESFA gas transit system a few days before the announcement, while also receiving some $1 billion worth of arms sales from Russia, was pretty good signal that TAP would be chosen. Moreover, by not choosing Nabucco-West, Azerbaijan avoided hurting Russia’s gas exports routes.” (9) “From the other hand, Russian state-owned oil company Rosneft fully owned the TNK-BP consortium on 22 October 2012. By this way, Rosneft gained an additional chair in the BP’s Board of Directors. In this way, Russia will have a voice in any international agreements of BP and may have a direct/indirect impact in the “Southern Gas Corridor” project of EU.” (10) According to Zaur Shiriyev (Editor-in-Chief for Caucasus International), “While Russian Gazprom plans to construct the South Stream pipeline in order to damage the commercial and geopolitical strength of the alternative transit routes to Europe, TAP is not actually competing for the same markets -- which contributes to TAP's stability.” (11)

In the mid of 2012, Azerbaijani government made a strategic step in his energy history and saved Nabucco pipeline project of being failed. Azerbaijan and Turkey signed Memorandum of Understanding for construction of the TANAP through Turkish territories to Europe in which Azerbaijani SOCAR is main stakeholder (with 80%) and project operator. TANAP replaced Nabucco’s eastern wing on Turkey’s territory and made Nabucco shorter, as a “Nabucco-West”, from the Turkish-Bulgarian border to Baumgarten in Austria. According to Vladimir Socor (Senior Fellow for The Jamestown Foundation), “Western gas producing companies at Shah Deniz were unable to take responsibility for a new pipeline across Turkey, such as TANAP. The EU was unable to mobilize political or financial support for a pipeline across Turkey.” (12)

There were several reason that, made Nabucco dream failed:

•Lack of political support in the wake of the finalization of decision-making in favour of Nabucco-West;

•Lack of huge investment by Consortium members;

•Uncertainty of natural gas sources to be provided for Nabucco;

•Lack of coordination among Nabucco stakeholders;

•Lack of financial capacity and experience of Consortium members;

•Withdrawal of companies (Hungarian MOL, German RWE) from Nabucco Consortium;

•Pressure by Russian government over Nabucco transit countries and European consumer countries;

•Cautiousness of Azerbaijan not to spoil relations with Russia;

•The issue of costs. “Nabucco’s construction would be charged over €10 billion, while the Trans Adriatic Pipeline’s €1.5 billion.” (13)

•“Purchase prices for Azeri gas by TAP’s potential customers - Greece, Albania, Italy, Croatia, Bosnia and Montenegro - are higher than Nabucco-West’s clients.” (14) However, according to Italian Industry Minister, Claudio De Vincenti: “It was not for high gas prices in Italy and Greece. TAP beat Nabucco on seven out of eight evaluation criteria - market opportunities, timing, scalability, management operability, funding available, project quality and transparency.” (15)

•On June 20, SOCAR received approval for its 400 million EUR bid for a 66% stake in DESFA (the gas distributor of the Hellenic Republic). The deal will enable SOCAR directly to control a domestic gas-distribution within EU. Although, to the official statement made by SOCAR that, there is not any connection between TAP and DESFA, the selection of TAP pushed ahead for SOCAR’s achievement on purchasing DESFA which made TAP a “negotiation card” between the Azerbaijan and Greece. According to Alex Jackson, “If Gazprom had won, TAP’s position would have been significantly weaker.” (16)

•Independent decision-making by Austria without consulting to other consortium members. “The Austrian side proposed allowing Gazprom to use part of Nabucco’s capacity in the future for Russian gas, which would have defeated this project’s supply diversification goals. While the Baumgarten terminal was a major selling point for Nabucco, OMV at one time agreed to share control of the terminal with Gazprom, until the European Commission invalidated that agreement.” (17)

Russian stated-owned Gazprom and Sintez also wanted to gain the control of Greece’s natural gas trading system by acquiring major share in DEPA and DESFA respectively. However, few days before the Shah Deniz consortium’s decision (in favour of TAP), the European Commission made its position more clear on Third Energy Package (the market liberalization) in Greece and to keep Gazprom’s dominance away from Greece’s national gas grid. Later, Gazprom withdrew from DEPA’s tender. However, Gazprom probably is pushed back by EU because of anti-trust investigations. According to Vladimor Socor, “Sintez is seen as a possible Trojan horse for Gazprom.” (18)

In the future, it’s supposed that, more Balkan States - Albania, Montenegro, Bosnia and Herzegovina and Croatia - can benefit of TAP. “The necessary MoU have been signed between TAP and Croatian Plinacro, BH-Gas of Bosnia and Herzegovina, as well as with the governments of Montenegro and Albania.” (19) “This can be realized by implementing the Ionian-Adriatic Pipeline (IAP), from Albania to Croatia, with proposed branch into Kosovo and Bosnia. Montenegro and Kosovo are not connected to a grid for natural gas. Of these countries, only Croatia is being eyed by Gazprom’s South Stream. Conversely, TAP is not proposing IAP to the Serbian Republic and Macedonia, both of which are enlisted in Gazprom’s South Stream.” (20)

Although, Nabucco project failed, but natural gas can be delivered to Central Europe by constructing the Greece-Bulgaria and Bulgaria-Romania interconnectors, and then gas might be delivered to Hungary through existing Hungarian-Romanian interconnector. According to Elshad Nasirov (Vice-president of SOCAR), “Bulgaria can become the first buyer of natural gas supplied through the Trans Adriatic Pipeline. There is a two-way interconnector between Bulgaria and Greece, which the pipeline runs through. If it is technologically possible, Bulgaria will be able to buy Azerbaijani gas from the very first stage of its transportation to Europe.” (21) “DESFA is a shareholder of the Interconnector Greece-Bulgaria (IGB) project, which is now expected to be completed by 2015. Through that pipeline Bulgaria would be able to receive Azerbaijani gas. DESFA operates Greece’s gas transmission pipelines, distribution networks, and the Revithoussa liquefied natural gas terminal. With the Revithoussa LNG terminal, SOCAR gains a new asset in case of this terminal will became transit point for gas sourced from the Mediterranean basin to European countries via DESFA transmission pipelines.” (22)

According to the statement of Günther H. Oettinger (European Commissioner for Energy), “For Europe, the decision of the Shah Deniz Consortium marks a real breakthrough in terms of securing Europe’s energy supplies for the future. This is certain: we will need more gas in 2020, and Caspian gas is a good response to this need. More importantly than the choice between Tap and Nabucco is the opening of the Southern Corridor. With an effective and functioning internal energy market, with the necessary infrastructure and reverse flows in place, once the gas enters the EU, it can be transported anywhere in Europe.” (23)

Selection of TAP also proved that, Azerbaijan is willing to hold a dominant position in the Southern Gas Corridor by:

•Opting TAP;

•Holding major stake in the Trans-Anatolian Pipeline;

•Owning predominant market share in Georgia;

•Joining to the TAP consortium;

•Purchasing DESFA;

•Investing and participating in the construction of gas infrastructure in Albania.

TAP also offers many advantages for the countries that involved in it:

•TAP will push forward for employment and represent investment in Greece and Albania;

•TAP will motivate SOCAR to construct and develop Albania’s gas infrastructure;

•TAP offered higher natural gas sales price and less transit tariffs than Nabucco West would;

•TAP is shorter and less expensive;

•TAP will stimulate the stagnant economies of Southeast Europe;

•TAP will enable Italy to became an energy hub, and further transit country in order to deliver Caspian natural gas to western European markets;

•TAP will strengthen position of SOCAR in South-eastern Europe etc.  

“The Southern Corridor could expand further, to include natural gas from Israel and Cyprus in the Eastern Mediterranean, as well as Iraq and perhaps someday, Iran. The Southern Corridor will be essential to stabilizing the volatile region South Caucasus by anchoring Azerbaijan to the Euro-Atlantic community.  Just as the Baku-Tbilisi-Ceyhan pipeline solidified Azerbaijan’s and Georgia’s Western links, the Southern Gas Corridor will expectantly contribute to cementing their Euro-Atlantic orientation.” (24)

The long negotiated Trans-Caspian pipeline project was also considered first leg of the Southern Gas Corridor. However, because of known/unknown reasons project remains frozen. Actually, according many observers project cannot be realized because of Russian and Iranian resistance, or territorial disputes in Caspian Sea between Azerbaijan and Turkmenistan. However, official Baku currently is also not interested in realization of Trans-Caspian pipeline, and wants to be main supplier for Southern Gas Corridor which means SOCAR is eager to pump natural gas from Azerbaijani fields only rather than other countries’ sources. The Absheron, Umid-Babek, Shafag-Asiman and ACG-Deep projects are also envisaged to launch production by 2020. From the other side, TAP doesn’t have sufficient capacity, and Shah Deniz consortium members currently prefer to feed TAP on their own gas only.

OMV’s CEO Gerhard Roiss stated that, “Our goal now is European gas for European customers.” (25) It means Europe will probably rely not only on decision making of other countries. They tend to develop their own (alternative) resources also, such as shale gas and shale oil in Poland, Baltic States and Romania’s Black Sea continental shelf.

Since Nabucco failed, Gazprom will still continue to dominate the price-setting process and keep its monopole position in Central Europe. However, “TAP is the first step in Europe’s new energy reality, one that will not only shift the balance of power away from Gazprom, but also brings with it new partners such as Azerbaijan.” (26)


1)Vladimir Socor, "Shah Deniz Gas Producers Select Trans-Adriatic Pipeline Route into Europe over Nabucco", (June 27, 2013)

2)Vladimir Socor, "Shah Deniz Gas Producers Select Trans-Adriatic Pipeline Route into Europe over Nabucco", (June 27, 2013)

3)“BP, SOCAR, Total and Fluxys join the TAP project”, (July 30, 2013)

4)Vladimir Socor, "TAP Project Consortium Restructured in Line with Market Priorities", (July 31, 2013)

5)Vladimir Socor, "Gas Supply Diversification Prospects Uncertain in Central and Southeastern Europe", (August 1, 2013)

6)Vladimir Socor, "TAP Gas Consortium Looks at Markets from Bulgaria to Britain", (July 18, 2013 )

7)Sabah Kardas, “Turkey and the Southern Corridor after TAP’s Selection as the Main Export Route for Caspian Gas”, Publication of The German Marshal Fund of the United States, July 18, 2013,

8)Ilgar Gurbanov, “Post-Shah Deniz II Period: Challenges that Azerbaijan may face”, (June 12, 2013)

9)Amanda Paul, "Nabucco: dead and buried", (06 July 2013),

10)Ilgar Gurbanov, “The New Trends in Russian Energy Policy following Third Presidency of Putin”, Strategic Outlook, (27 October 2012),

11)Zaur Shiriyev, “Why TAP? Pipeline politics in an economically fragile Europe”, (July 25, 2013)

12)Vladimir Socor, “TAP Project Consortium Restructured in Line with Market Priorities”, (July 31, 2013)

13)"Victory for Russia As the EU’s Nabucco Gas Project Collapses", (July 1, 2013),

14)Shahin Abbasov, "Azerbaijan: When it Comes to Pipelines, It’s Not Personal, It’s Strictly Business", (Julu 20, 2013)

15)"TAP Beat Nabucco on Seven out of Eight Criteria", (July 1, 2013),

16)Alex Jackson, "Where Next for SOCAR?", (July 8, 2013)

17)Vladimir Socor, "The Curtain Falls on Nabucco’s Last Act", (June 28, 2013)

18)Vladimir Socor, "Azerbaijan Wins Tender for Gas Pipelines in Greece", (June 25, 2013 )

19)Farid Osmanov and Elmar Baghirov, "Repercussions of TAP’s Selection", (July 17, 2013)

20)Vladimir Socor, "TAP Gas Consortium Looks at Markets from Bulgaria to Britain", (July 18, 2013 )

21)"Preference for Trans Adriatic Pipeline does not mean Azerbaijan gives up plans to supply gas to Bulgaria", (June 30, 2013)

22)Vladimir Socor, "Azerbaijan Wins Tender for Gas Pipelines in Greece", (June 25, 2013 )

23)Günther H. Oettinger, European Commissioner for Energy, "Shah Deniz Decision: More Gas for Europe", (July 1, 2013)

24)Matthew Bryza and David Koranyi, "A Tale of Two Pipelines: Why TAP has Won the Day", (July 2, 2013)

25)Vladimir Socor, "Old and New Options Considered in the Post-Nabucco Era", (June 28, 2013)

26)Alexandros Petersen, "With TAP Selection, Caspian Gas to Europe Will Soon Be a Reality", (July 30, 2013)

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