Azerbaijan is Only Route for Independent Supply of Turkmen Gas to Europe

Azerbaijan is Only Route for Independent Supply of Turkmen Gas to  Europe

Azerbaijan, 15 April / corr. Trend S. Aliyev/ Turkmenistan has agreed to supply 10 billion cubic meters of natural gas to the European Union each year. "It is not a big figure, but it is the first and very important step," Benita Ferrero-Waldner, the EU commissar on external relations and European Neighbourhood Policy said in his interview with The Financial Times on the results of the Turkmenistan-EU meeting last week.

The EU commissar sees three possible options to supply Turkmen gas to the European countries; all three routes offer transit of fuel via Azerbaijan. The first option offers the construction of 60km pipeline between sea facilities of Turkmenistan and Azerbaijan with a further supply of gas to the gas transport system (South Caucasus pipeline) starting not far from Baku. Most likely, this route offers to combine Turkmen projects with the infrastructure of Shah Daniz field in Azerbaijani sector of Caspian. This field is developed by the consortium of foreign companies (technical operator BP and commercial operator - Statoil) Shah Daniz is connected with Sangachal terminal via the pipelines. The sea fields developed by SOCAR do not possess enough infrastructures to transport 10bln cu. meters of gas to the shore.

The fuel is expected to be transported to EU within the second stage of project which envisages the production of 20bln cu. meters of gas and this project also will contribute to connection of sea projects of Turkmenistan and Shah Daniz field. The South Caucasus (SCP) gas pipeline has the capacity of 20bln cu. meters of gas per annum. European countries see SCP as the main part of NABUCCO pipeline.

One of the options by the EU commissar is connecting Turkmen gas fields with the onshore fields of Kazakhstan with their further joining to the route of Europe via Azerbaijan. The project envisages the construction of Trans Caspian gas pipeline. The preliminary cost of construction of underwater pipeline can make up $12bln. Its capacity may total to 22bln cu. meters per annum. The experts say that the technical conditions of construction of this pipeline are more favorable than that of Blue Stream (from Russia to Turkey via Black sea seabed). It is attributed to shallow parts in the Caspian and more favorable natural environment as compared with Black Sea.

According to Sabit Bagirov, the Head of Center for Political and Economic Studies and the former president of SOCAR, the transportation of Turkmen gas to EU and construction of Trans Caspian gas pipeline can be more important in case EU and Turkmenistan will reach to some agreement. According to Bagirov, the producer ( Turkmenistan) is interested in diversification of gas transportation routes and the consumer ( Europe) is interested in diversification of supply routes. The audit of gas reserves in this Mediterranean country can give impetus to gas supply from Turkmenistan to Europe. At present, some 50bln cu. meters of gas are produced in Turkmenistan contracts have been signed on this gas for the upcoming years. The audit of reserves will contribute to the forecast on volumes of gas supply.

The British Gaffney Cline Associates will audit the reserves. The first stage envisages the audit in the big gas filed South Yolotan-Osman. According to Turkmen specialists, the reserves of this field are more than hydrocarbon reserves of the fields developed in the country at present and enable to include it to four biggest in the world.

The final option suggested by Ferrero-Walnder envisages liquation of gas and its transportation via Caspian through tankers. Significant structure, especially special tankers fleet which is currently absent in Caspian, should be created to transport liquid gas. In addition, it is necessary to construct facilities on shore to keep liquid gas. Moreover, the railways and its transport park should be modernized to transport the liquid gas to the Black Sea shore of Georgia or to Turkey (via Baku-Tbilisi-Kars railway).

Over the recent period, the NABUCCO gas pipeline is considered as a key route of supplying gas from the Caspian region to Europe, but it is not the only route. The number of other directions includes such routes as Trans-Adriatic pipeline which will deliver gas from Greece to Italy. The gas to Greece will be transported via pipeline from Turkey.

Other route suggested to transport the gas from the Caspian region, is the White Stream. The White Stream project which was initiated by Prime Minister of Ukraine, Yulia Timoshenko, during her visit in Brussels in January, envisages the construction of the gas pipeline starting from Turkmenistan via Azerbaijan to the Georgian port of Supsa and onwards through the Black sea seabed, through the Crimea to the European Union countries.

The experts skeptically approach the realization of the project. The Editor of Energy Resources Department of Vedomosti newspaper, Svetlana Ivanova, considers that Ukraine will have lack of finance for it. The European Union does not consider Ukraine as a reliable partner (everyone remembers how the gas supply was ceased to Europe due to Ukraine's failure to reach an agreement with Gazprom). "Additionally, Gazprom activated preparations for construction of SouthStream. If the construction really begins in visible perspective, the Europeans will not spend on NABUCCO especially on White Stream so that they do not speak about it," - Ivanova said.

The doubts of the experts also mention possibility of EU and USA's refusing to support the project of the European countries (NABUCCO) in favor of the Ukrainian suggestion (White Stream), which is technically difficult to be realized (construction of underwater pipeline via the Black Sea).

Sabit Bagirov considers that although the realization of White Stream project is hardly possible, it does not equal zero. If there will be finance, no problems will appear in constructing this pipeline via Black Sea. Blue Stream gas pipeline has already been constructed and South Stream pipeline is prepared to be constructed via the Black Sea.

Earlier Azerbaijan's Minister of Industry and Energy, Natig Aliyev, said that in order to realize White Stream project, there is a need to consider its economy, security, ecological impacts. There is a need to exactly determine the route of gas supply because it will be required to construct underwater pipelines, as well as via the Black Sea to realize the project, Aliyev said.

The Minister stated that if Azerbaijan will have enough gas volumes for transportation via this route, this project can be realized. It may take place after opening of new gas fields in Azerbaijan, development of reserves in deep parts of Azeri-Chirag-Guneshli fields and other sources.

Turkmenistan's transporting gas to Europe will give an opportunity to it to independently sell its gas and become full-value player of the European gas market and it will positively affect economic attractiveness of the project. Currently, the Turkmen gas is sold on border with Russia and further is realized by Russian monopolist Gazprom. Mainly this gas is sold in Ukrainian market.

During the meeting of the heads of gas companies of Kazakhstan, Uzbekistan and Turkmenistan with the head of Gazprom at the beginning of March, a decision was made that proceeding from the national interests, considering international obligations to ensure reliable and uninterrupted supply of energy resources, from 2009 Middle Asian natural gas to Gazprom will be sold according to the European prices.

The Head of Center of Political and Economic Studies, Bagirov, said that considering the current prices, the forecasted prices for sale of Middle Asian gas to Gazprom may total $200-$230 per thous.cu.m. In addition, Gazprom forecasts the prices for Europe at a higher level.

Ivanova said that for 2008 Gazprom forecasts the growth of European prices up to $349 per thous cu.m. Russia's Ministry of Economic Development projects this figure at $381 thous cu.m.

"Gazprom, officials and experts expect cut in the European prices in 2009-2010, but it will not be significant because the gas prices are being tied to the oil prices which is growing continuously," Ivanova.

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