Central Asian gas supplies to Europe depend on Trans-Caspian project

Oil&Gas Materials 19 January 2011 18:33

Azerbaijan, Baku, Jan. 19 / Trend V. Zhavoronkova /

The first stage of implementing the Nabucco project has good prospects to proceed if Azerbaijan decides to supply gas extracted from the Shah Deniz field for this pipeline, European expert on energy Neil John Melvin said.

But the realization of the project will depend upon gas from Turkmenistan and Iraq.

"If Baku decides to give its gas from the Shah Deniz field for Nabucco, then the first stage has good prospects to proceed. But the problem is that the second stage must be agreed before the first stage is launched. The realization of the second stage depends upon gas from Turkmenistan and Iraq," Melvin, member of the European energy agency and expert of the Stockholm International Peace Research Institute (SIPRI), told Trend over the phone from Sweden.

One of the main sources of gas for Nabucco, and other projects within the Southern Corridor, is gas produced within the full-scale development of Azerbaijani large gas condensate field, the Shah Deniz. The partners developing the Shah Deniz field plan to sign contracts for the sale of gas from the second stage of the project development in mid-2011.

The expert said that the realization of the Nabucco project designed to transport gas from the Caspian region and the Middle East to the EU countries depends on two things: Baku's decision on where to deliver the gas, and delivering resources by Turkmenistan and Iraq for the second stage of the project.

Last week, President of the European Commission José Manuel Barroso paid a visit to Azerbaijan and Turkmenistan, both of which are considered main suppliers of gas for the Nabucco project. The result of his visit to Azerbaijan was a joint declaration on "Southern Gas Corridor" signed in Baku. It is considered by the project participants as an important step towards its establishment.

During Barroso's visit to Turkmenistan, President Berdimuhamedov expressed interest to supply gas to the European market. He called the Trans-Caspian gas pipeline the most attractive option. No agreements fixing the intention of Turkmenistan and guarantying the delivery of Turkmen gas to Europe were signed.

Andrew Reed, analyst for U.S. analytical company ESAI (Energy Security Analysis, Inc.), said that Turkmenistan at last made a public statement confirming its intention to transport its gas through the Trans-Caspian gas pipeline.

"President Berdimuhamedov made a statement because there is time for a decision. Europe needs a positive signal from Turkmenistan to make a decision," Reed told Trend via e-mail.

Turkmenistan has enough gas resources to meet its commitments to the Chinese and Russian markets, as well as to supply the Nabucco pipeline and TAPI (Turkmenistan-Afghanistan-Pakistan-India) with gas in case of constructing the necessary infrastructure, Melvin said.

"They are building the East-West pipeline now, which will somehow make the movement of Turkmen gas to the Trans-Caspian pipeline possible," Melvin said.

There are many ways of transporting Turkmen gas to Europe but the Trans-Caspian gas pipeline will be the most effective and the easiest if there is no politic underlying theme, he said.

"So, we are approaching a very important moment where both Azerbaijan and Turkmenistan, as suppliers, and Europe, as a consumer, are going to bind themselves to the Trans-Caspian pipeline and the Southern Corridor, including Nabucco pipeline," he said.

To find a way to transit Turkmen gas to the European market was Turkmenistan's long-standing ambition. This initiative was also supported by Azerbaijan, the expert said.

We are approaching a point now whereby all sides have to make a formal commitment to construct the Trans-Caspian pipeline, he said.

"Otherwise the idea of transporting Central Asian gas through the Southern Corridor supported by Europe has few chances to become a reality," he said.

The Trans-Caspian gas pipeline will have a length of about 300 kilometers and will be laid on the Turkmen coast of the Caspian Sea. The pipeline will connect to Azerbaijan, where it will link to the Southrtm Corridor, which includes the Nabucco pipeline project and is a priority for the EU.

Turkmenistan's position is that the consent of those countries through which it will pass (that is, Azerbaijan and Turkmenistan) is required for the laying of the gas pipeline.

Nabucco is worth 7.9 billion euro, with its construction scheduled to start in 2012 and the first supplies to be commissioned in 2015. The project's participants include the Austrian OMV, Hungarian MOL, Bulgarian Bulgargaz, Romanian Transgaz, Turkish Botas and German RWE, each having an equal 16.67 percent share. The pipeline's maximum capacity will hit 31 billion cubic meters per year.

He said that the way of transporting compressed natural gas through the Caspian Sea by tankers, which was mentioned by the Turkmen President, is technically possible, but is not the best option.

"This will increase gas prices and put the economic efficiency of the project under question. The question on the maximal possible volumes of transported gas occurs," he said.

According to BP, Turkmenistan's proven gas reserves as of early 2010 are estimated at 8.1 trillion cubic meters (fourth place in the world), and Azerbaijan's reserves are at 1.31 trillion cubic meters.

Badalova contributed to the article.