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Turkmenistan can take advantage of energy-hungry Europe, Russia spat

06 March 2015 [10:15] - TODAY.AZ

/By AzerNews/

By Gulgiz Dadashova

The critical events of 2014 – intervention in Ukraine, ISIS violence and cheap oil – showed Europe once again the urgency of ensuring stability not only in the political field , but also on its energy front.

The European Union is now looking to push forward the realization of the Southern Gas Corridor project that will start with the Azerbaijani gas and then allow Central Asian gas to reach Europe.

The creation of energy hubs with multiple suppliers will be a solution for Europe, which as Maros Sefcovic, the European Commission vice-president in charge of Europe’s energy agenda said, “get tired of having a discussion on how to make it through the next winter”.

The EU imported 53 percent of its consumed energy in 2014, to a cost of about €400 billion, according to the European Commission. Six of the 28 EU member states are 100 percent dependent on Russian gas which makes up 27 percent of all gas consumed by the EU.

Moscow’s canceling of the South Stream gas pipeline to Europe reinforced Russia’s reputation as an unreliable partner, thus accelerating Europe’s search for alternative supply sources and with such a scenario, Turkmenistan is among the most benefiting sides.

Do’s and don’ts

Some might question why so many pipelines and huge volumes offered when Europe’s energy demand is not so big. The answer is diversification. Over-reliance on one supply, such as Russia or on one market – such as China in case of Turkmenistan, is not practical.

Dimitar Bechev, the senior visiting fellow at LSEE Research on South Eastern Europe, also notes that the matter isn't about volumes but about prices and the diversification of supplies.

“Demand in Europe may be stagnant yet countries in Central Europe and the Balkans are paying a premium for Gazprom deliveries and are vulnerable to cut-offs because of Ukraine. The Southern Gas Corridor looks feasible but the real challenge will be scaling it up from 16 bcm as it stands now,” Bechev wrote in an e-mail to AzerNews.

While the TAP project, one of the core links of the Southern Gas Corridor, will only supply roughly 2 percent of European demand, the project’s executives say capacity can be lifted to 20bn cm after 2020.

To secure those increased volumes, Europe turned its eyes to Turkmenistan, which has the world’s fourth-biggest gas reserves.

“As part of a revitalized European energy and climate diplomacy, the EU will use all its foreign policy instruments to establish strategic energy partnerships with increasingly important producing and transit countries or regions such as Algeria and Turkey; Azerbaijan and Turkmenistan; the Middle East; Africa and other potential suppliers,” new Union Energy Package said.

Diversification is also relevant for Turkmenistan, which is keen on reaching European consumers despite its key partners hunger for energy, namely China.

Turkmenistan, with its giant natural gas reserves certainly has enough gas to supply more markets. Following disputes with Russia, and a cold winds in geopolitical relations between the West and Moscow, there is no doubt European energy security would benefit from the Central Asian country.

Turkmenistan needs to diversify from its single customer policy, in view of a new competitive dynamic in between China and Russia as the latter has agreed to build the “Power of Siberia” pipeline running from Eastern Siberia to China.

New markets are particularly important given recent moves of Turkmenistan’s other customer - Gazprom. Brussels’ race against Beijing to secure Turkmen gas gathered pace after Gazprom announced it will decrease its imports from Turkmenistan. Recent developments show that Turkmenistan is showing renewed signs of interest toward expanding its Western export route.

However, there are many challenges to Turkmenistan’s participation in the Southern Gas Corridor, which could be realized with the Trans Caspian Pipeline, pipeline through the Caspian Sea to Azerbaijan.

The Caspian littoral states have yet to decide on the Caspian Sea’s status, at a time when Iran and Russia have expressed their opposition, in particular toward a pipeline running through the Caspian. Moscow also accused Europe of interfering in Caspian Sea affairs.

Speaking about numerous challenges to Turkmenistan’s joining the European gas race and Moscow’s possible counter moves, Bechev said pressure should be expected.

“I'm sure there'll be pressure - Caspian delimitation, Turkmens in big Russian cities, Turkmen leadership assets. Also positive incentives - better price for Turkmen gas which Gazprom gets at fire-sale levels,” he wrote.

Given the complications and too many parties involved in the decision-making process, the Trans Caspian Project has been in and out for nearly two decades.

Meanwhile, a key player in any negotiations will be Turkey, as the country holds leverage in pipeline politics after Moscow instituted to build Turkish Stream, a South Stream alternative under the Black Sea to Turkey.

The country has emerged as a key place from where to transit eastern gas to Western Europe due to risky Ukrainian territories. And now Turkey may take revenge for the EU-membership leverage that Brussels used to voice in many political discussions.

But there can also be another scenario, the EU that is not so willing to accept Russian gas on Russian conditions can accept Turkey in its membership and secure its energy routes.

In case Europe is to finance any pipeline, it would be better off doing so as part of an effort to diversify its sources of natural gas, rather than deepen its dependence on Russia.

Then, even Turkish Stream can be a friendly route to Trans Anatolian Natural gas pipeline, which has been named a strategic project for Baku, Ankara and Tbilisi.

“The Southern Gas Corridor can coexist with Turkish Stream which, in my opinion, will be a much more low-key affair geared toward Turkey's market and not the 63 bcm replica of South Stream,” Bechev assures.

Regarding a possible Iranian gas supply toward Europe, Bechev said Iran seems close to a deal but that he’d be cautious about its prospects as a gas exporter.

“Domestic demand there sucks up all extracted gas and dispute-ridden Iranian-Turkish trade in gas has shown Tehran is far from a reliable supplier. It all depends on whether the political opening brings in foreign investment to tap into new fields - but then again energy firms have to factor in political risk and plunging gas prices in the short and medium term," he wrote.

As to whether or not the Southern Gas Corridor can defeat its rivals, Bechev said that'll be very tough.

“Scaling up from 16 bcm a year will be a challenge. Azerbaijan has the commercial interest as does Turkmenistan and others but they are all vulnerable to Russian pressure. Moscow can live with the Southern Gas Corridor in its present shape but if the stakes go up it'll take a tougher approach,” he concluded.

The Southern Gas Corridor, stretching over 3,500 kilometers, crossing seven countries and involving more than a dozen major energy companies, is expected to transport gas from the Shah Deniz, the largest natural gas field in Azerbaijan and one of the biggest in the world.

Shah Deniz gas will reach Europe in 2020 with the expansion of the South Caucasus Gas Pipeline up to 23.4 billion cubic meters per year, as well as the construction of the TANAP and Trans-Adriatic Gas Pipelines. TANAP will be commissioned in 2018, while the TAP pipeline in 2020.

URL: http://www.today.az/news/regions/139050.html

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