‘Southern Gas Corridor is a project of common interest’

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Energy security and the economic benefits of ZEVs in Europe

BY ELENA KOSOLAPOVA

AZERI OBSERVER STAFF WRITER

THE EUROPEAN COMMISSION’S VICE-PRESIDENT FOR THE ENERGY UNION, MAROŠ ŠEFČOVIČ, TOLD AZERI OBSERVER IN AN EXCLUSIVE INTERVIEW ABOUT COOPERATION BETWEEN AZERBAIJAN AND THE EUROPEAN UNION IN THE ENERGY SPHERE, AZERBAIJAN’S ROLE IN ENSURING EUROPEAN ENERGY SECURITY AND PROSPECTS OF GAS SUPPLIES FROM OTHER COUNTRIES TO THE EU.

Question: European officials speak a lot about the importance of diversification of energy supplies. Why is this issue so important for the European Union?

Answer: Previous energy crises have taught us that to strengthen the EU’s energy security, we need to diversify sources, suppliers, and routes. Ensuring steady and reliable flows of energy – that are secure, competitive, affordable, and sustainable – is a fundamental requirement for our economies and societies to prosper. After all, competition based on fair and transparent conditions is healthy and can provide better prices for consumers. Therefore, I see infrastructural projects from recent past – such as better interconnections and reverse flow capabilities completing our internal energy market or liquefied natural gas (LNG) projects – as a positive development in order to make our Energy Union more resilient. The number of the Member States exclusively dependent on one single supplier has dropped. I believe that by 2019, the Energy Union, as one of the top priorities of this Commission, will no longer be a policy, but a reality.

Q.: What is the role of the Azerbaijani gas in ensuring the EU energy security?

A.: In one word – strategic. The Southern Gas Corridor has strategic importance for the European energy security. It helps diversify our energy supply sources, as well as routes, especially in the most vulnerable regions such as South Eastern Europe and Southern Italy. The importance of the project has been repeatedly confirmed by the Commission and the Member States, most recently during the Eastern Partnership Summit in Brussels last November and during the Advisory Council ministerial meeting in Baku in February. Let me give you some practical examples that clearly demonstrate our support. First, key components of the Corridor have been identified as projects of common interest, and as such, they can, for instance, apply for the Connecting Europe Facility funding. Secondly, the European Bank for Reconstruction and Development (EBRD) approved a loan for the Trans-Anatolian Pipeline last October, while earlier this year, the European Investment Bank (EIB) approved its financing for both the Trans-Adriatic Pipeline and the Trans-Anatolian Pipeline. Already in the middle of this year, Caspian gas is expected to flow on a commercial basis to Turkey, and by 2020, further to the EU. We are indeed set to open the South Eastern European markets to the Corridor while the Central and South Eastern Europe Connectivity effectively prepares the ground for Azerbaijani gas. This shows that the Energy Union does not stop at the EU’s borders and it has a strong external dimension. Only like this can it be truly resilient.

Q.: At what stage is the implementation of the Southern Gas Corridor which will deliver Azerbaijani gas to the European market?

A.: To elaborate on my previous comments, I can say that despite challenges, solid progress has been achieved on all the Corridor’s projects along the entire value chain – Shah Deniz II field development, expansion of the South Caucasus Pipeline, the Trans-Anatolian Pipeline and the Trans-Adriatic Pipeline. This would not have been possible without good regional cooperation between the countries concerned. I often emphasize in the Energy Union’s context, that regional cooperation really pays off. Let me also highlight once again, as it is important, that the Corridor’s key components – namely, the expansion of the South-Caucasus Pipeline, the Trans-Anatolian Pipeline in Turkey, and the Trans-Adriatic Pipeline connecting Greece to Italy – have been identified as projects of common interest. These can benefit from improved regulatory conditions, increased visibility, and the Connecting Europe Facility funding.

Q.: What could you say about the environmental impact of the Southern Gas Corridor? Are there any reasons to worry about it?

A.: We take environmental standards, as well as concerns, with utmost seriousness and care. Every project under the Southern Gas Corridor must therefore fully comply with all environmental legislation. I would particularly underline the stringent benchmark requirements of the international financial institutions, namely the EIB and the EBRD, which are providing loans to some components of the Corridor. This goes for the Trans-Adriatic Pipeline, the Corridor’s EU leg, too – the best, most feasible option from an environmental point of view was chosen.

Q.: Do you expect that any other gas from new alternative sources to reach Europe within several years?

A.: I can only reiterate that diversification of sources, suppliers, and routes is the alpha and omega of our energy security. Our goal was very clear from the very beginning – an Energy Union based on true solidarity and trust, and an Energy Union that speaks with one voice on global affairs. All new European pipeline projects should, therefore, make our Energy Union more resilient. In practice, it means that diversification on the basis of fair, transparent conditions and negotiations with all our partners which will increase competition and provide fair prices for EU consumers. In this context, to access Caspian gas is of strategic importance for the EU and when it comes to pipelines, the Southern Gas Corridor is the only advanced project currently being built. But, let me also briefly mention our LNG strategy which has opened doors for the EU to gain access to the global gas market. And, as we have seen in the Baltics, it can lead to a decrease in consumer prices.

Q.: Do you believe that gas from Central Asia, and in particular from Turkmenistan, which has the 4th largest proven gas reserves, can join the Southern Gas Corridor in the near future?

A.: Our vision of the Southern Gas Corridor is not limited to the Shah Deniz II field, but envisages Caspian, Central Asian, and Middle Eastern gas resources as a possibility. We are indeed engaging with both, Azerbaijan and Turkmenistan with respect to the Trans-Caspian pipeline. Turkmenistan is interested in feeding the Southern Gas Corridor and exporting its gas to Europe. Here, let me point out the work of the multilateral Working Group set up by the Ashgabat Declaration that allows us to enhance our cooperation with the view of bringing Central Asian gas to the European market. The EU stands ready to continue talks on the modalities for potential deliveries as shown by bilateral consultations with Turkmenistan which took place in Ashgabat in March.

Q.: Iran has huge gas reserves and is interested in gas supplies to Europe. Many international companies are afraid to invest in Iranian gas sectors because of the United States sanctions, which are still in place. Do you think that Iranian gas can reach Europe in this situation? What is the best route to deliver Iranian gas supplies to the EU?

A.: At this moment, no discussions on Iranian gas supplies to Europe are underway. There are huge possibilities in the Iranian gas sector, indeed. A majority of the upcoming investments in the gas sector are, however, aimed at domestic use, starting with considerably upgrading the existent or constructing new pipeline systems. Developments in the global market will ultimately decide where Iranian gas will be destined.

Q.: There were some proposals to link up the Turk Stream Pipeline initiated by Russia with the Trans-Adriatic Pipeline, which is a part of the Southern Gas Corridor. Meanwhile, some experts say that it is against the EU’s energy diversification strategy. What is your opinion on this issue?

A.: This is a hypothetical question and currently we are focused on bringing Caspian gas resources to the EU market through the Southern Gas Corridor. At this stage, it still remains to be seen whether the Turk Stream pipeline will indeed be constructed and to which extent. In all events, any infrastructure transporting gas to Europe has to comply with the EU internal market legislation.

Q.: The United States has led the world in natural gas production for the past several years and has supplied several LNG tankers to Europe since 2016. Do you think that American LNG supplies could force other gas suppliers out of the European market and help the EU to reach the desired energy security?

A.: In 2015, the EU adopted its LNG strategy and as said, thanks to it, the EU has gained access to the global gas market. LNG plays an important role in our diversification efforts. We have seen the positive effects for consumers in the Baltics; similarly, the Commission gives a strategic importance to an LNG project in Croatia. But, we could do more to improve the functioning of the LNG market and to enhance its contribution to the security of supply by further improving infrastructure.

Q.: Azerbaijan has a huge potential for renewable energy. What are the prospects of cooperation between Azerbaijan and the EU in this sphere?

A.: Our mutual cooperation in the energy field does go beyond the Southern Gas Corridor. Its basis was laid down in 2016 when we signed the memorandum ofunderstanding (MoU) on a strategic partnership which identified four priority areas – one of them is the development of renewables and increased energy efficiency. It is my conviction, that investing in clean energy transition is a prerequisite to modernize the economy of a country. In Europe, we have therefore proposed the so-called Clean Energy for All Europeans package as a new legal framework for the most comprehensive and deepest transformation of Europe’s energy systems since the industrial revolution 150 years ago. Azerbaijan has a big potential when it comes notably to renewables. The EU has already provided some assistance in this area and is ready to continue doing so. I firmly believe there is indeed a huge potential that needs to be fully tapped.