Total, E.ON to exit pipeline to bring Azeri gas to EU

June 4, 2014

France's Total and Germany's E.ON plan to withdraw from a pipeline scheme to bring Azerbaijan's gas to Italy, an Azeri official said, as falling Italian demand puts energy projects there into doubt, Vagif Aliyev, SOCAR's investment department head at Azeri SOCAR said in a news conference late on June 3, Reuters reported.

The move comes less than a month after Russia's Gazprom said that it would re-route its massive South Stream pipeline, which plans to bring Russian gas to Europe later this decade, to Austria instead of Italy. Total and E.ON plan to withdraw from the Trans Adriatic Gas Pipeline (TAP).

Total is already selling its stake in Azerbaijan's major gas field, while sources say E.ON is pulling out of the ailing Italian market. Both are lesser partners in TAP, in which BP, SOCAR and Norwegian Statoil all hold 20% stakes.

Europe sees Azeri gas as an alternative to its reliance on Russia, but analysts say commercial issues cloud the picture. "At the end of the day it is all about the commercial viability," said Peter Kiernan, lead energy analyst at the Economist Intelligence Unit (EIU). "Gas in Europe seems pretty sluggish at the moment in terms of demand, so these factors combined would have an impact on the economics of it." Azerbaijan aims to transport 16 billion cubic meters of gas a year from its Shah Deniz II field in the Caspian Sea by the end of the decade to Turkey and on to Italy.

Copyright: Prime, 2014