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BP Plans Major Pipeline Investment for Caspian Gas

BP PLC is set to invest in two pipeline projects vying to carry Caspian natural gas to Europe, the clearest indication yet of how an ambitious plan to lessen Europe's dependence on Russian gas may play out.

The company aims to take a "substantial" stake in the Trans-Adriatic Pipeline and is negotiating for a stake in the Trans-Anatolian Pipeline, Al Cook, BP's Shah Deniz development vice president, said in an interview.

BP's plan to invest in the two pipelines could represent a further blow to the European Union-championed Nabucco pipeline project—originally designed as a 3,300 kilometer-long pipeline to bring Caspian gas to Austria across Turkey and most of central Europe—which has had to scale down its proposals in recent months in the face of competition from rival routes.

BP leads Shah Deniz 2, a consortium of companies developing a giant gas field in Azerbaijan's portion of the Caspian basin. Mr. Cook stressed that BP remains committed to a selection process that may result in Nabucco being chosen as the consortium's preferred route to ship the Caspian gas to Europe, —a project that the EU sees as key to its energy security—but its investment plans suggest a clearer picture is emerging of what form the so-called Southern Corridor pipeline route could take.

The Trans-Adriatic Pipeline, or TAP, is the only project left in the mix that would take the gas to Italy, rather than through central Europe.

"BP has completed the negotiation in principle to join the TAP pipeline and to help provide funding in the short term," Mr. Cook said. He declined to specify the size of the stake BP would acquire, but said it will be "substantial."

"We will put our money where our mouth is, we will demonstrate that we are very serious about the success of TAP," Mr. Cook said. A deal should be signed in the next few weeks, he said.

The investment in TAP is part of an effort to gather support around the pipeline, especially in Italy, after the Shah Deniz consortium excluded from the contest another plan that had been backed by the previous Italian government. Mr. Cook stressed that the decision to invest in TAP was partially motivated by the "changing regulatory and economic outlook" in Italy that is making it easier to invest in the country.

Mr. Cook also said that BP is negotiating the acquisition of a stake in the Trans-Anatolian Pipeline, or TANAP, which would transport the gas across Turkey, and it plans to sign an agreement in the next few months.

Mr. Cook's comments suggest that a bigger pipeline from Azerbaijan to Turkey across Georgia could form the first chunk of the Southern Corridor. TANAP would then than carry the gas across Turkey, and TAP would bring it to Italy through Greece and Albania. From Italy, the gas could be sold across Europe.

Mr. Cook cautioned that BP's decision to invest in TAP isn't a case of prejudging the final pipeline selection. TAP is one of three remaining contenders in the fight for the European stretch of the Southern Corridor, together with a down-scaled version of Nabucco, called Nabucco West, and the South East Europe Pipeline, or SEEP—a project created by BP—both of which would carry the gas through Central Europe rather than to Italy.

Shah Deniz will decide this week whether it favors Nabucco West or SEEP and is expected within a year to decide which route to use for sending Caspian gas to Europe.

The decision to invest in TAP "is more a reflection of the acceleration of TAP" rather than a signal about which pipeline will ultimately be selected, Mr. Cook said. With the total investment in Shah Deniz set to reach $40 billion, it is worth investing in different projects to keep options open, he said.

Source: The Wall Street Journal

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