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EU expects significant progress in Southern Gas Corridor project

EU expects significant progress in Southern Gas Corridor project Energy

By Aynur Karimova

The Southern Gas Corridor project, aiming to bring the Caspian gas to Europe, is one of the biggest construction projects of our time.

This was announced by Vice-President of the European Commission for Energy Union, Maros Sefcovic at the High-level Conference titled "EU energy cooperation with the Eastern Neighborhood and Central Asia" in Brussels on March 18.

“Very important area where I expect we make significant progress this year is the Southern Gas Corridor. This pipeline chain of 3,500 km whose value $45 billion is one of the biggest construction projects of our times,” he said.

Sefcovic emphasized that with this, Europe will start receiving the Caspian gas in 2020.

Today the Southern Gas Corridor is among the European Commission’s priority energy projects, which aims at diversifying the EU gas supply sources and routes.

This project envisages the transportation of the gas extracted at the giant Shah Deniz field in the Azerbaijani section of the Caspian Sea. Shah Deniz Stage 2 gas will make a 3,500 kilometer journey from the Caspian Sea into Europe. This requires upgrading the existing infrastructure and the development of a chain of new pipelines.

The existing South Caucasus Pipeline will be expanded with a new parallel pipeline across Azerbaijan and Georgia, while the Trans-Anatolian pipeline will transport Shah Deniz gas across Turkey to join the Trans-Adriatic Pipeline, which will take gas through Greece and Albania into Italy.

The first gas supplies through the corridor to Georgia and Turkey are given a target date of late 2018. Gas deliveries to Europe are expected just over a year after the first gas is produced offshore in Azerbaijan.

Meanwhile, Fitch Ratings predicted that the Southern Gas Corridor project’s net financial needs for operations and capex will be close to $8.4 billion in 2016-2019.

Fitch expects the Southern Gas Corridor to tap debt capital markets for funding in the medium term, while bonds and loans could be supplemented by state capital injections should offered market terms be unacceptable,” the agency reported on March 17.

The Fitch experts believe that the projects under the Southern Gas Corridor's development carry strategic importance for Azerbaijan's long-term macroeconomic stability, "while the most of the gas is already contracted until 2045 by buyers from the EU and Turkey."

Fitch considers Azerbaijan's control over the Southern Gas Corridor's operations as strong and views the government support previously provided to the project as a supportive rating factor.

The Azerbaijani government has recently held road shows of bonds for the Southern Gas Corridor in the world's major financial centers - London, New York, Los Angeles, San Francisco and Boston.

The Southern Gas Corridor's bond offering under the state guarantee is forecasted at the level of $1 billion depending on market conditions.

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