The inter-ministerial meeting of the participating states of the AGRI project (Azerbaijan-Georgia-Romania Interconnector) was held in Bucharest on June 24, 2015. During the meeting, the Ministers of the energy sector in charge of the liquefied natural gas project discussed the outcomes of the feasibility study and opportunities for financing. In conclusion of the meeting, the Minister of Industry and Energy of Azerbaijan, Natig Aliyev, the Minister of Energy, Small and Medium-Sized Enterprises, and the Business Environment of Romania, Andrei Dominic Gerea, the Deputy Minister of Energy of Georgia, Mariam Valishvili, signed a Joint Declaration on the AGRI project. Within the framework of the Joint Declaration, the countries-participants expressed their intention to consider the AGRI project as a part of the Southern Gas Corridor lobbied by the European Union. The member-states agreed to promote the AGRI project within the European Commission in order to submit it to the definitive list of projects that will be guaranteed to be financed by the European Fund for Strategic Investments.
From the very beginning, the AGRI project was launched to diversify both supply sources and transit routes of natural gas from the Caspian region to Europe. Briefly, the project envisaged transportation of the Azerbaijani gas via pipelines to the Georgian Kulevi port on the Black Sea coast, where the gas would be liquefied at a special terminal, after that, the tankers would be delivered to the terminal at the Romanian port, Constantsa. Further, the regasified gas would be transferred to other European countries.
In order to implement the AGRI initiative, Azerbaijan, Georgia, and Romania signed a Memorandum of Understanding (MoU) on the cooperation in the field of LNG and its transportation in Bucharest on April 13, 2010. On May 12, 2010, in Tbilisi, the project participants signed a Protocol regarding the establishment of the AGRI Project Development Company. During the first AGRI Summit, which was held in Baku, on September 14, 2010, the Republic of Hungary was officially invited to the AGRI project as a partner. At the end of the Summit two more documents were signed, namely, the Baku Declaration inked by Presidents of Azerbaijan, Georgia and Romania, and the MoU on association of the AGRI LNG Project Company, adopted by the Heads of the national energy companies – the State Oil Company of Azerbaijan, the State Oil Corporation of Georgia and the Romanian national company ROMGAZ. Therefore, since January 2011, the participants of the AGRI have launched the SC AGRI LNG Project Company SRL, which was registered in Bucharest and operated in accordance with the legislation of Romania.
On February 14, 2011, in Bucharest, at the meeting of the Ministers of Azerbaijan, Georgia, Romania and Hungary it was announced that Hungary’s accession to the AGRI project was accepted and Hungarian company MVM officially became the member of the project. According to the reached agreement, the member-countries of the AGRI project would have equal shares. In other words, the shareholders of the AGRI project (SOCAR, GOGC, ROMGAS, and MVM) own 25% each.
After establishing the necessary administrative infrastructure, the parties started the process of analyzing the technical and economic basis of the project, as well as other issues considered in this respect. The AGRI LNG Project Company launched an international tender for consultancy services related to the feasibility study for the AGRI project, which was won by the oil and gas engineering group, Penspen Limited. The contract for consulting services was signed on June 28, 2012. The Penspen provided the results of the report on the feasibility study of the AGRI to the Board of Directors of AGRI LNG Project Company after the 2-year period.
Despite the fact that the AGRI participants have already discussed the primary results of the feasibility study, there is still unclearness on the estimation of project costs and technically detailed projections. According to the estimative data, there are at least 3 options of the project costs and capacity, namely, €1.2 billion for a projected capacity of 2 billion cubic meters (bcm), €2.8 billion for a projected capacity of 5 bcm and €4.5 billion for a projected capacity of 8 bcm. In other words, the AGRI project is still facing a wide range of barriers and implementation difficulties.
For instance, there is still a lot of uncertainty regarding the AGRI project resource base. Azerbaijan has already signed a long-term agreement for supplying all forthcoming natural gas volumes produced within the second phase of the giant gas field Shah Deniz to the European countries via the Trans Anatolian Natural Gas Pipeline (TANAP), which would be connected with the Trans-Adriatic Gas Pipeline (TAP). Therefore, Azerbaijani officials should consider other sources of natural gas, which would be supplied over the Black Sea gas transportation corridor. Actually, the problem of natural gas shortage could be solved by joining of Turkmenistan to the AGRI project. The Turkmen gas could be transported via LNG tanker across the Caspian Sea to the Sangachal terminal in Eastern Azerbaijan, where it should be gasified and transmitted across Azerbaijan and Georgia to the Black Sea terminals. However, it definitely would cause necessity to construct additional LNG terminals on the Caspian Sea shore, which could lead to the dramatic increase in the total cost of the project.
On the other hand, in many respects, the AGRI proposal is similar to the proposed project to deliver compressed natural gas (CNG) from Azerbaijan to Bulgaria via Georgia and the Black Sea. The MOU of Azerbaijan, signed with Georgia and Bulgaria in the latter part of 2009, envisage the possible shipping of the Azeri compressed gas via Georgia and the Black Sea to Europe. In other words, in case if Azerbaijan manages to provide the necessary natural gas volumes for transportation over the Black Sea shipping route, Baku will possibly have to separate the high priority project from the lower priority one.
It also should be admitted, that according to the statements made by the high-ranked officials of the AGRI project, the realization of the idea of the project also depends on the implementation of the investments attraction strategy. Up to date, there are no new shareholders of the AGRI LNG Project Company, which could be interested in the construction of the LNG facilities on the Black Sea coast. Consequently, the project participants are looking forward to further extend the amount of the shareholders and to increase the share capital of the company. In this respect, it seems natural that after the meeting between the Minister of Mining and Energy of Serbia, Aleksandar Antic, and the Minister of Energy, Small and Medium-Sized Enterprises, and the Business Environment of Romania, Andrei Dominic Gerea, held in Belgrade on June 29, 2015, Serbia has received an offer to take part in the AGRI energy project. The Romanian Minister of Energy invited his Serbian counterpart to take part in a meeting with the AGRI participating countries, including Georgia, Azerbaijan, Romania, and Hungary, that will be held in September or October 2015.
Approving Serbia’s acceptance as a partner could give a new impetus to promoting the AGRI project. After Russia announced it would stop to deliver natural gas through Ukraine by 2019, Serbian Government started an active phase of the search for new sources of gas supply. Early in June 2015, Serbia and Bulgaria signed an agreement on the construction of a gas interconnection, which should give Serbia a possibility to receive certain quantities of gas flowing through the TAP and the TANAP. To ensure its energy security, Belgrade would consider the construction of a two-way gas interconnection with Romania with the annual capacity of at least 1 bcm. Therefore, in case if the established Joint Serbian-Romanian Working Group for the promotion of cooperation in the field of energy succeeds in defining technical parameters of the new gas pipeline, Serbia could almost certainly join the list of states involved in the implementation of the AGRI project.
In conclusion, it is obvious that in comparison with the TAP and the TANAP projects the AGRI project does not have enough capacity to significantly shift the energy geopolitics in the region. However, as a part of the EU’s energy diversification strategy, the AGRI project could play an important role in weakening Russia’s leverage over the natural gas imports in Central and Eastern Europe. Therefore, the AGRI project still has an opportunity to become the first LNG project to be developed in the Black Sea, aiming transportation of natural gas from the Caspian region to Europe.