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Home Breaking News Will Turkmen gas displace Russian gas from the EU market?

Will Turkmen gas displace Russian gas from the EU market?


For more than three decades, that is, after the collapse of the Soviet Union, Azerbaijan and Turkmenistan were engaged in fierce disputes over the ownership of an oil and gas field in the Caspian Sea, which Baku called “Kapaz”, and Ashgabat – “Serdar”. As a result, the parties recently came to an agreement – they named the field “Dostlug”, which means “Friendship” in both Azerbaijani and Turkmen, and signed a memorandum on its joint development and production. In accordance with the document, 70% of hydrocarbons will go to Turkmenistan, 30% to Azerbaijan.

The reserves of the controversial field, discovered, by the way, by Azerbaijani oilmen back in 1986, are estimated at 60 million tons of oil (although some experts are inclined to double this figure) and 100 billion cubic meters of natural gas. After a long diplomatic war, the parties managed to come to a compromise solution, that is, joint development of the field, thanks to the adoption of the Convention on the Legal Status of the Caspian Sea, which also affects the interests of Russia, Kazakhstan and Iran.

By the way, the Azeri, Chirag and Guneshli oil fields, which have long been developed by Azerbaijan without the “permission” of Turkmenistan, were and probably still remain controversial for Baku and Ashgabat. But, what is most important, cooperation between Baku and Ashgabat on Dostlug may eventually result in the construction of the Trans-Caspian gas pipeline on the bottom of the Caspian Sea. This “bearded” project was very actively lobbied by the West as an alternative source of natural gas imports to Russia by the EU states. But – only at a declarative level: firstly, before the signing of the document on the division of the sea, no one risked investing in it; secondly, Russia and Iran opposed its implementation.

And although theoretically Western investors can invest in the construction of the Trans-Caspian pipeline already now, their real readiness is not visible. Meanwhile, connecting a pipeline with Turkmen gas with a volume of 30 billion cubic meters per year to the already existing export Southern Gas Corridor (SGC), through which Azerbaijani gas is transported through Georgia to Turkey and further to Europe, is beneficial to all parties, with the exception of Russia and some kind – Iran.

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If we talk about Azerbaijan, Turkmen gas will fill some voids in the Southern Gas Corridor – it is not working at full capacity now, there is not enough raw materials. But it is unlikely that Baku will take on the costs of building the pipeline, and Turkmenistan frankly does not have the appropriate funds.

But for the latter, gas exports to Europe are critically important. The situation is paradoxical: the country, which ranks fourth in the world in terms of gas reserves, cannot earn money from it in proportion to its natural wealth. First, the geography of its export is extremely scarce – it is focused on Central Asia and China, and to a very small extent – on Russia.

It was not possible to make money on supplies via the TAPI gas pipeline to Afghanistan, Pakistan and further to India: in addition to the negative commercial conclusion on the construction of the pipeline, the political situation in the region (the situation in Afghanistan, tensions between Pakistan and India) played a negative role. In a word, TAPI has been “under construction” for more than ten years, and there is no end in sight. As for the export of gas to China, Turkmenistan receives a low price for it – it has to repay a loan from the Celestial Empire for the construction of a gas pipeline. In general, sales markets are extremely limited, and accordingly, the level of gas production in the country, which has reserves of almost 20 trillion cubic meters, is low.

And here such luck is a theoretical opportunity (after all, only a memorandum was signed with Azerbaijan) to discover the western direction. The only opportunity for this is to build a pipeline along the bottom of the Caspian Sea (estimated cost $ 5 billion) and connect to the Southern Gas Corridor. For international financial institutions and large companies – the amount is not astronomical. And in the end, the political cost of this project may exceed the monetary value – after all, with its implementation, Russia will lose part of its gas “pie” in Europe. What was the cause?

Neither Russia nor Iran at a visible level put a spoke in the wheel of the laying of the Trans-Caspian gas pipeline, but – and this is the main thing – investors are still silent. It is quite possible that they are waiting for a proposal from Baku and Ashgabat to co-finance the project – on such conditions there are more chances not to miscalculate. On the other hand, it cannot be ruled out that investors are not eager to cooperate with Turkmenistan due to the extremely closed nature of this country and the unpredictability of its behavior in the legal field.

Presumably, this last consideration outweighs the West’s desire to significantly reduce imports of Russian gas and ensure the so-called energy security, which, by and large, cannot be guaranteed by any country experiencing a shortage of its own energy resources.

Apparently, the issue of building the Trans-Caspian gas pipeline can be resolved mainly in a bilateral format, that is, Turkmenistan – the European Union, a part of which is quite satisfied with both the usual Russian “political” gas and Azerbaijani. In general, only when the money is “put on the barrel”, all price and legal aspects are settled, then Azerbaijan and Turkey will come into play. There is no need for them to flutter now – this is, to a greater extent, the concern of Ashgabat.

What can we talk about today in the context of Turkmen gas entering the European market? The fact is that theoretically the problem of building the Trans-Caspian gas pipeline has moved off dead center, but so far we are talking about a conditional diplomatic breakthrough. So the actual laying of the pipeline remains at the dream level.

And since this is so, neither Russia nor Iran has any reason to “twitch”, and legally it would look ridiculous. It is possible that the “ecological problem” of the common sea can be attached to the issue, but it is unlikely that it is right now to raise it for both Moscow and Tehran. However, you can sit on the sidelines and watch the futile efforts to raise money for the construction of the Trans-Caspian gas pipeline, but it is not known what argument “against” Russia and Iran may appear if the money is suddenly found and all formalities are met.

In short, at this stage we can state the following: Turkmenistan and Azerbaijan have finally “made up” and demonstrate their readiness for cooperation in the Caspian basin – “friendship has won.” The most difficult thing remains – to back it up with money, so that the “gas shores” of Turkmenistan are really like that, and not “jelly”.

Irina Jorbenadze

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