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Azerbaijan - new player in global gas market

Oil&Gas Materials 14 January 2011 23:32
Azerbaijan has long established itself as an active player in the global oil market. This was primarily contributed by the large-scale successful projects on production and transportation of hydrocarbons, including the development of the offshore Azeri-Chirag-Guneshli block and gas Baku-Tbilisi-Ceyhan oil pipeline.
Azerbaijan - new player in global gas market

Azerbaijan, Baku, Jan. 14 /Trend/

Deputy Director of Trend News Agency Seymur Aliyev

Azerbaijan has long established itself as an active player in the global oil market. This was primarily contributed by the large-scale successful projects on production and transportation of hydrocarbons, including the development of the offshore Azeri-Chirag-Guneshli block and gas Baku-Tbilisi-Ceyhan oil pipeline.
However, over recent years, with the discovery and development of huge gas reserves, Azerbaijan's importance has repeatedly increased as a major player in the global gas market. With the increasing of the natural gas demand on world markets, this country's role has considerably increased.

According to experts, proven gas reserves of Azerbaijan total two trillion cubic meters. Potential reserves are estimated at five trillion cubic meters. Largest gas field is Shah Deniz, of which reserves are estimated at 1.2 trillion cubic meters. Significant gas potential is accumulated on the Umid offshore gas field which was opened late last year in the Azerbaijani sector of the Caspian Sea, with reserves of 250 billion cubic meters. In future years, SOCAR (State Oil Company of Azerbaijan) and foreign companies will carry out exploration work on the structures of Absheron, Nakhchivan, Babak, Shafag, Asiman, Zafar, Mashal and others. Prospects for the discovery of gas reserves in these structures are quite high.

Today the Republic is one of the major players in the regional gas market. Azerbaijani gas is supplied to Turkey and Russia. Azerbaijani gas covers greater volume of consumption in Georgia.
Current week was marked with two important events in the gas sector - the signing of the Joint Declaration on the Southern Gas Corridor and the long-term contract for the supply of Azerbaijani gas to Iran.

A significant event in the gas industry this week became the Joint Declaration on the Southern Gas Corridor, which was signed by Azerbaijani President Ilham Aliev and European Commission President Jose Manuel Barroso, who is on visit to Azerbaijan. This document actually becomes the basis for the export of Azerbaijani gas to Europe that would allow the EU to diversify energy supplies to its own markets and increase energy security.

The five-year contract to supply Azerbaijani gas to Iran was signed during Iranian Oil Minister, the head of the OPEC oil cartel Masoud Mir-Kazemi's visit to Baku. This contract envisages delivering one billion cubic meters of gas in 2011, with an increase over next years.

As shown by the current situation, Azerbaijani gas is needed for all, even the countries such as Russia and Iran, which are named in the top three countries in terms of gas reserves in the world
The Southern Corridor includes: the Nabucco gas pipeline, Trans Adriatic Pipeline (TAP), White Stream, and ITGI (Turkey-Greece-Italy pipeline).

The beginning of Azerbaijani gas supplies on these routes is expected in 2017, when the first gas is received within the full-scale development of Shah Deniz (the second stage of the project). Within the first phase of the project, peak production could deliver over 8.6-9 billion cubic meters. Gas production may be brought up to 25 billion cubic meters per year under the second phase of development, of which 10 billion cubic meters can be exported along the routes of the Southern Gas Corridor.

Azerbaijan also plays an important role as a transit country for gas from Turkmenistan. Today, Azerbaijan is the only alternative direction for the delivery of Turkmen gas to Europe. The other two routes - through Russia and Iran can not become an alternative for the EU.

Today, Europe is looking for an alternative for gas supplies from Russia. In addition, Turkmenistan can not supply its gas via transit through this country, because Moscow does not provide its own territory and infrastructure to export gas from Central Asia, preferring to buy it on the border. Over recent years, the relations between Russia and Turkmenistan in the issue of gas supplies have considerably strained. In 2010 Russia reduced the volume of purchase of Turkmen gas from 40 billion cubic meters per year to 10 billion, explaining that through a decline in demand in the European market. This year the situation will be similar to last year.

Transportation of Turkmen gas through Iran is also unfeasible until solution of the political problems around the country. The EU's position on this issue is so ambiguous that even Iran, which has the second largest gas reserves in the world, is not considered as a source of supply in need of alternative sources of Europe.

Thus, good geopolitical position makes Azerbaijan the only alternative route for the transportation of Turkmen gas to Europe. To implement this project, it needs to create an infrastructure for transporting gas from Turkmenistan to Azerbaijan. Today, various options are considered, including the transportation of compressed gas for further decompression and sending via other routes.
However, the most effective project for transporting gas from Turkmenistan via Azerbaijan would become a Trans-Caspian pipeline route. The unresolved issue of the status of the Caspian Sea was described as an obstacle to the realization of this project. However, as Turkmen President Gurbanguly Berdimuhamedov stated at the end of last year, the issues to lay the Trans-Caspian pipeline should only be taken by countries participating in this project, that is official Ashgabat and Baku.

Signing of documents to export Azerbaijani gas in different directions will enhance energy security not only in Europe and other countries, but also its own energy security through diversification of Azerbaijan's supply routes. This process is today one of the fundamental energy policy of the country.

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