Europe has access to Caspian gas

By Arthur Dunn

 

The EU energy strategy in the Caspian was gradually formed and at first did not differ dynamism. Only in the late 1990s, when it was announced that there are significant gas reserves in the Caspian, the EU's policy has become more clear. In the implementation of geopolitical interests, the EU largely borrowed the US strategy, for which pipelines acted as the key element of the policy in the Caspian region. The opening of significant gas reserves in Azerbaijan increased the interest of the EU towards the region, which led to the appearance of the Nabucco gas pipeline project. It was supposed to be laid from Azerbaijan to Austria and Germany. In addition, Turkmen gas was considered as a potential source of resources for the pipeline. Since 2002, this project has been the flagship of the European energy policy in the Caspian region. However, at that time Azerbaijan did not have free volumes of gas, which was considered as the main source of filling the European pipeline.

At that time, Turkmenistan was not ready to get involved in an economically dubious project that did not approve of China. These factors made the implementation of Nabucco unpromising. As a result, at the turn of 2012-2013, the EU was forced to reconsider its policy, placing emphasis on smaller-scale pipeline projects. In 2012, the EU proposed a shortened gas pipeline project - Nabucco West, which should start from the Turkish-Bulgarian border and extend to Austria, passing through Bulgaria, Romania and Hungary. However, this project also faced the same difficulties as Nabucco, - the lack of free gas volumes. The failures of the European pipeline policy were due to objective reasons. Developed in the Caspian region, the fields could not yet provide the necessary volumes of hydrocarbon resources for new pipelines. In addition, the EU itself lacked a unified position.
Unlike the EU, which in recent decades initiated large-scale pipeline projects, Turkey operated with its own projects. Starting with the realization in the 1990s of the Blue Stream gas pipeline, which brought Russian gas to the Turkish market, Turkey consistently promoted new pipeline projects. While the EU was trying to implement an ambitious gas export project from the Caspian region, Azerbaijan and Turkey were developing new pipeline projects. They had to ensure the export of Azerbaijani gas to Turkey and then to the European market. The first step in this direction was made after the construction of the Baku-Tbilisi-Erzurum gas pipeline began. In 2007, its construction was completed, which allowed Azerbaijan to supply gas to Turkey.

Lack of success in the energy policy of Brussels, primarily in the implementation of the Nabucco project, benefited from the Caspian countries. Azerbaijan has adjusted its energy policy, moving away from a unambiguous orientation towards the European pipeline project Nabucco. In turn, Turkey, having implemented the Baku-Tbilisi-Erzurum gas pipeline project by 2007, supported the creation of additional gas pipelines that allowed Azerbaijani and Russian gas to be exported to its territory. As a result, Azerbaijan and Turkey in 2012-2013 proposed pipeline projects that could create additional opportunities for the delivery of hydrocarbons to the European market. In particular, these countries proposed the Trans-Anatolian Gas Pipeline (TANAP) project, which was supposed to ensure the supply of Azerbaijani gas to the western borders of Turkey. This project was supported by the EU, as it was aimed at increasing the supply of Azerbaijani gas in the Shah Deniz field with subsequent exports to Europe.

Azerbaijan-Turkey energy cooperation was the reaction of Baku and Ankara to the EU energy policy, which failed to achieve coordinated decisions and ensure the subsequent implementation of the Nabucco pipeline project. In this regard, TANAP can be considered as a pipeline project, which is of interest primarily to Azerbaijan and Turkey. Baku received a new export route for its gas, while Ankara strengthened its role in gas supply to Europe.
In June 2013, the consortium for the development of the Azerbaijani gas condensate field Shah Deniz decided to select the Tracadriatic Gas Pipeline (TAP) as the main route for gas supply to Europe. The 878 km pipeline should pass through the territory of Greece, Albania, along the bottom of the Adriatic Sea, and then go to the south of Italy.
The project has become a priority for European countries. In early 2016, the European Commission approved its construction, which began in May of the same year. After the implementation of the TAP, Azerbaijani gas will be able to flow to European countries in the amount of up to 10 billion cubic meters. m. Such a volume of hydrocarbon feedstock will have virtually no effect on the balance of forces in the European gas market, at which significant volumes of liquefied natural gas may appear by that time.
Simultaneously with the implementation of the Southern Gas Corridor, the Turkish Stream project, implemented by Russia and Turkey, is no less successful. So, in recent months, Gazprom has signed documents on the construction of the second line of the pipeline, which is to supply 31 billion cubic meters. of Russian gas.

As a result, after the completion of the construction and the full capacity of the TANAP and TAP pipelines that will form the Southern Gas Corridor, and after the completion of the Turkish Stream project, Ankara will significantly strengthen its positions by becoming a key player in the supply of hydrocarbons from the Caspian region to the European countries. In turn, the new pipelines will give Baku additional opportunities to increase the volume of its gas supplies to the foreign market.
During the period 1991-2017, Azerbaijan's energy policy went through several stages. In the early 1990s, Azerbaijan relied on oil production, attracting Western oil and gas companies to develop deposits, the interest of which was strengthened by data on significant hydrocarbon reserves. For their development, Azerbaijan had a developed infrastructure, experienced personnel, had a long tradition of oil production, which developed from the XIX century, when Baku was the center of world oil production. The key goal of Azerbaijan's energy policy was not only to increase production at the Caspian fields, but also to build new pipelines that would ensure the delivery of Azerbaijani oil to foreign markets. In this issue, Azerbaijan managed to achieve significant success by building new pipelines for oil exports with the help of the oil and gas business and Western countries. In addition, the increase in oil production allowed Azerbaijan to solve the social and economic problems that arose after the collapse of the Soviet Union due to the severance of trade and economic ties with the former Soviet republics and stabilize the political situation.
At the beginning of the XXI century, Azerbaijan's energy policy has undergone drastic changes. Beginning its development as an oil state, Azerbaijan then relied on the development of gas fields that were discovered during the development of oil fields. Confirmed gas reserves and volumes of its production allowed Baku to make plans to increase exports to foreign markets.
In recent years, Azerbaijan has pursued an energy policy aimed at securing its role as an exporter of hydrocarbon resources in the European direction. The solution of this task is facilitated by the expansion of cooperation with Turkey. The Azerbaijani-Turkish cooperation allowed the launch of new gas pipeline projects, the construction of which will increase the volume of Azerbaijani gas supplies to the foreign market.

At present, one of the main tasks facing Azerbaijan is the development of the resource base for the Southern Gas Corridor. In 2018, the Azerbaijani side took steps to further develop the Absheron gas field, and the oil and gas "Karabakh". These deposits are considered important elements of the resource base of the Southern Gas Corridor. In this issue, Baku relies on political support from the EU and the US, which pay great attention to the new pipeline routes and regard them as strengthening the energy independence of Azerbaijan. Thus, the energy policy of Azerbaijan meets the interests of the EU, which considers the Caspian energy resources as an alternative to Russian supplies. At the same time, the European Investment Bank approved a loan for the construction of the TAP of 1.5 billion euros, which also underscores the interest of European countries in the creation of new pipeline routes.
In the next decade, Azerbaijan is unlikely to be able to export natural gas volumes that will compete with Russian hydrocarbons. For certain European countries located in the south of Europe, the supply of Azerbaijani gas will play a positive role. However, in general, Azerbaijani gas will not have a serious impact on the European gas market.

 

 

13.07.2018

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