ISSN 2330-717X

Azerbaijan: Jockeying Intensifies In Caspian Gas Pipeline Race

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By Molly Corso

The Nabucco pipeline may not be dead yet. A scaled-down version of the long-planned project could end up being folded into a joint Azerbaijani-Turkish effort to transport natural gas from the Caspian Basin to Europe.

Caspian gas exports was the main topic of discussion at the 11th Georgian International Oil & Gas, Energy & Infrastructure Conference and Showcase, held March 28 in Tbilisi. It was clear from the chatter of conference participants that lots of maneuvering is still going on.

Back in December, Turkey and Azerbaijan signed a memorandum of understanding to build a trans-Anatolian pipeline, dubbed TANAP, which would deliver Azerbaijani gas to Europe. The project, with a cost estimate of upwards of $5 billion, appeared to deliver a death blow to the Nabucco initiative, which has faced repeated delays due to a lack of reliable gas supplies.

A TANAP agreement was originally expected to be finalized earlier in March, according to reported comments by Azerbaijani Energy Minister Natik Aliyev. But so far the two sides have yet to sign on the dotted line.

Gulmira Rzayeva, a research fellow at the Center for Strategic Studies under the President of the Republic of Azerbaijan, suggested that a technical dispute over jurisdiction is holding up the agreement’s finalization. “Turkey wants to regulate [the agreement] according to Turkish law, but, of course, SOCAR [the State Oil Company of the Azerbaijani Republic] cannot agree to that,” said Rzayeva, who was a panelist at the Tbilisi energy conference.

Rzayeva added that the European Union was likely opposed to grounding TANAP in Turkish law. “The EU doesn’t want to depend on Turkish law when transporting [gas],” she said. Experts at the conference, including Rzayeva, believed the current differences would be resolved relatively easily. “It is a matter of time,” she told EurasiaNet.org. “Of course, this deal will be signed because it is in the interest for both countries.”

“You wouldn’t start proposing and considering a project like TANAP if you weren’t really minded to do it,” chimed in John Roberts, a UK-based energy security specialist.

Under the existing TANAP terms, Azerbaijan would deliver 16 billion cubic meters of gas to Turkey per year; Turkey would slice off 6 billion cubic meters for its own needs, and the rest would head to European markets. The project is envisioned for completion in 2017.

An unanswered question hanging over TANAP and other proposed export routes is where will energy extracted as part of the second phase of the Shah Deniz gas field’s development go? The lead partner in the Shah Deniz consortium, BP, has indicated that a final decision won’t be made until 2013. Neil Dunn, the general manager for BP Exploration (Caspian Sea) Georgia, indicated the main strategic choice facing the Shah Deniz consortium is whether to direct gas to the Balkans and Italy, or send it to Central Europe.

TANAP can move forward regardless of what the Shah Deniz consortium finally decides. It’s what would happen after the gas leaves Turkish territory that is the main subject of competition. The decision process appears to be creating the wiggle room needed for the Nabucco consortium to climb back into pipeline game.

Rzayeva suggested that a revamped, smaller version of Nabucco, known as Nabucco West, could merge with TANAP to become the chief contender for the Central European export option. Nabucco West “has a chance to win because it already has all the documents,” she said, referring to country transit agreements.

Ultimately, a former senior American diplomat cautioned, the tangle of competing pipelines is not about a race to the finish line, but about providing the best range of options for regional energy security. “It is important to get beyond the thinking of one pipeline blocks another, and how one pipeline means security,” commented former US envoy to Azerbaijan Matthew Bryza.

Molly Corso is a freelance journalist who also works as editor of Investor.ge, a monthly publication by the American Chamber of Commerce in Georgia.

Eurasianet

Originally published at Eurasianet. Eurasianet is an independent news organization that covers news from and about the South Caucasus and Central Asia, providing on-the-ground reporting and critical perspectives on the most important developments in the region. A tax-exempt [501(c)3] organization, Eurasianet is based at Columbia University’s Harriman Institute, one of the leading centers in North America of scholarship on Eurasia. Read more at eurasianet.org.

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