Azerbaijan resolute about Trans-Caspian gas project - Turkmenistan should seize exceptional opportunity

Economy Materials 15 August 2023 09:05 (UTC +04:00)
Maryana Ahmadova
Maryana Ahmadova
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BAKU, Azerbaijan, August 15. Azerbaijan has consistently shown its willingness to boost gas supplies and provide assistance to Europe during times of crisis. Through President Ilham Aliyev's well-defined energy strategy, the country has established itself as a dependable and trustworthy energy partner for Europe. The EU countries are progressively reinforcing their energy alliances with Azerbaijan and actively endorsing all related initiatives.

Given the worldwide energy crisis and the imperative for genuine diversification of gas sources and transportation paths, the EU countries have consistently shown keenness in increasing gas imports from Azerbaijan. The present focus revolves around expanding the capacity of the Southern Gas Corridor.

In 2021, Azerbaijan's gas supplies to Europe amounted to 8 bcm. By 2022, this figure had risen to 11 bcm. The country's aim for this year is to elevate its gas exports to the region to 12 bcm. In the initial 7 months of the current year, Azerbaijan has already supplied 6.6 bcm of gas to the European partners. Altogether, the global market is projected to receive 24.5 bcm of Azerbaijani gas in 2023.

The realization of the Southern Gas Corridor project was made possible through the political determination and foreign policy of President Ilham Aliyev. Right from its inception, the project, initiated by Azerbaijan, was designed with a focus on long-term prospects, evident from the outset as discussions about its expansion began.

In this regard, the Trans-Caspian Gas Pipeline, which aims to connect Turkmenistan’s Turkmenbashi and Baku through a subsea pipeline, is an ambitious project that seeks to transport natural gas from Turkmenistan and Kazakhstan to the EU countries, bypassing Russia and Iran. By integrating with the Southern Gas Corridor, the pipeline could tap into substantial Turkmen gas reserves and supply Türkiye and Europe, making it a highly intriguing initiative.

As of today, Turkmenistan does not remove the construction of this pipeline from its agenda. For instance, a few days back, Minister of Foreign Affairs of Turkmenistan Rashid Meredov stated that Turkmenistan is ready to continue cooperation with European partners on the Trans-Caspian gas pipeline project.

“Turkmenistan, being committed to the strategy of diversifying energy flows, expresses its readiness to continue cooperation with European partners on the implementation of the Trans-Caspian gas pipeline project. The idea of its construction, initiated by Turkmenistan, was initially considered by Turkmenistan not only as an economically and commercially viable project, but also as a key condition for ensuring global energy security and sustainability based on equal consideration of the interests and benefits of energy producers, transit countries and energy consumers,” he said.

Needless to say that the project directly involves active cooperation with Azerbaijan, however, as President Ilham Aliyev previously stated repeatedly, this project as an idea is based on the gas resources of Turkmenistan, therefore, it's not up to Azerbaijan to initiate it or to invest in it.

“For additional gas from eastern shores of the Caspian – first, the Trans-Caspian Gas Pipeline must be built under the sea, and second from Baku to the European destination, another something like the Southern Gas Corridor must be built. And the main question is who will finance these important projects? And we don't have an answer,” said President Ilham Aliyev, as he addressed the Shusha Global Media Forum.

As John Roberts, Energy Security Specialist and nonresident senior fellow at Atlantic Council’s Global Energy Center, told Trend, laying the Trans-Caspian pipeline is, indeed, somewhat like building a new SGC.

“Under current circumstances, it is impossible to imagine that International Financial Institutions would be prepared to finance such a project. The original SGC's infrastructure — the SCP-X, TANAP and TAP pipelines and their compressor stations — cost around $18 billion for the initial system designed to deliver 16 bcm per annum to Türkiye, and 10 bcm per annum - to Italy. The cost of replicating such a system today, when you consider that it would be double the size of the original SGC and that it would have to include a 30 bcm per annum Trans-Caspian pipeline, would amount to much, much more than that. I would suggest $30 billion at the very least and possibly a lot more,” he said.

As the expert suggests, to bring this project to life, there is in fact a much more limited option designed to make use of existing energy infrastructure on the Caspian.

“That would require construction of a 78-km Connector pipeline between the Petronas-operated Magtymguly field in Turkmen waters and the bp-operated oil and gas gathering facilities at the Azeri-Chirag-Gunashli (ACG) field in Azerbaijani waters. Such a system could convey around 5 bcm per annum to Azerbaijan’s existing gas processing facilities at Sangachal at a cost of around $400-600 million. Moreover, at present there appears to be perhaps as much as 4 bcm per annum in spare capacity in the pipelines connecting Azerbaijan to Türkiye,” Roberts added.

Turkmenistan firmly believes that no political, economic, or financial obstacles stand in the way of building this gas pipeline. Conversely, the Trans-Caspian Gas Pipeline is a genuinely viable undertaking, economically sound, and poised to significantly enhance energy security in the Eurasian region. Why is it that no substantial strides have been taken, even though discussions about the project were initiated back in 2007?

Ashgabat stated that the construction of the Trans-Caspian Gas Pipeline is directly related to the delimitation of the seabed between Turkmenistan and Azerbaijan.

Nevertheless, all opinions boil down to the fact that Turkmenistan does not have much time to make the Trans-Caspian project viable, and needs to act extremely fast in order to put this pipeline in operation. Turkmenistan ought to grasp this chance promptly, as the window of potential for drawing foreign investment in fossil-fuel endeavors, regardless of their scale, is gradually narrowing. At the same time, since the EU still has to substitute those volumes of Russian gas that are no longer there, the alliance would probably consider supporting this investment. However, the transition from hydrocarbons to renewable sources significantly influences the backing from international financial institutions. Currently, any funding for the connector will need to be sourced from either the private sector or the participating governments.

Azerbaijan, in turn, has firmly expressed its stance on the project, emphasizing that while it isn't a primary sponsor of the gas pipeline's construction, it remains consistently prepared to offer its territory and assist in gas transit. Through its visionary oil and gas strategy, Azerbaijan has solidified its standing as a globally acknowledged, dependable energy partner. As the country continues to adhere to this approach, its position will only grow stronger.