Results of AGRI summit

A summit of the Azerbaijani, Georgian and Romanian leaders that took place in Baku resulted in the signing of a memorandum of understanding on establishing a joint venture to implement the Azerbaijan-Georgia-Romania Interconnection (AGRI) project. The new company is to prepare a feasibility study of the project on transporting Azeri gas to Europe. Natural gas from Azerbaijan's Shakh-Deniz field in the Caspian Sea region is planned to be pumped through the Baku-Tbilisi gas pipeline and further to the eastern shore of the Black Sea where it is to be liquefied at the Kulevi terminal (Georgia) and delivered by tankers to Romania's Constance.

Prospects of the project to be implemented seem rather doubtful currently, because it has serious economic, political and technological limitations. Firstly, the technology of liquefied natural gas transportation is justified only in case of quite long distances but not across the Black Sea. By the way, implementing a periodically proposed plan of using takers to carry compressed natural gas (CNG) is also unlikely. The technology is not well developed yet, which makes it potentially risky from the point of view of possible accidents.

Secondly, Azerbaijan simply may not have enough gas for all the projects it is joining. The Azerbaijan-instead-of-Russia idea has become so popular in the EU that several gas pipelines running to the west are planned to be launched in this Southern Caucasus state. In addition to the already operating Baku-Tbilisi-Erzurum pipeline, there are plans to lay the Turkey-Greece-Italy (TGI) gas pipeline, Nabucco and AGRI. Moreover, Dmitry Medvedev and Ilkham Aliyev at their recent meeting agreed to increase Azeri gas supplies to Russia.

Thirdly, there are problems with financing of the new project; despite all statements and memorandums, no concrete financial resources have been allocated on AGRI (financial issues of Nabucco have not been settled either). And this is not surprising since investors are in no hurry to loosen their purse strings when it concerns projects with the unconfirmed resource base and not guaranteed economically expedient transit.

By Stanistav Mitrakhovich, NESF leading expert