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Nabucco won' influence Azerbaijan

Nabucco won' influence Azerbaijan
The year of 2010 in Azerbaijan?s energy sector has been marked with the start of natural gas export to Russia.

Nabucco project not to influence Azerbaijani gas export

Thus, on January 1 Azerbaijan started gas export to Russia. This event was important not only for Azerbaijan but also for Russia. But the peculiar feature of the signed contract is that the upper margin of the volumes of gas supplies has not been established.

The absence of the upper margin has allowed first to agree on raising export two-fold this year and bring it to 1 bn cubic meters. Meanwhile, the meeting of SOCAR president Rovnag Abdullayev and head of Gazprom Alexei Miller in the third decade of January in Moscow resulted in an agreement to raise Azerbaijani gas export to 2 bn cubic meters in 2011.

It should be noted that the agreement with Russia was not the only one. Thus, on January 13 of this year SOCAR and the National Iranian Gas Export Company signed an agreement on supplies of Azerbaijani gas to Iran for winter. The agreement envisions the daily supply of 1.2 mln cubic meters to Iran. But the signing is just a short-term agreement.

Currently the specialists of SOCAR and NICEG are preparing a long-term agreement on gas supplies to Iran expected to be signed in summer of this year. 500 mln cubic meters of gas will be supplied to Iran by the end of the year.

The whole volume of export will be organized by means of the gas produced from the SOCAR fields. There is a plan to send more than 2 bn cubic meters for export this year, including 1 bn cubic meters to Russia, 1 bn to Georgia and 500 mln cubic meters of gas to Iran by the end of the year.

Thus, Azerbaijan has taken the policy of multi-direction export of natural gas, thus continuing to implement the ideas applicable in construction of such oil export.

The appetites of Russia and Iran are not limited to these volumes. According to Gazprom president miller, Russia is ready to purchase as much gas as Azerbaijan can sell. Iran is also ready to raise purchase volumes to 5 bn cubic meters per year. In turn, Azerbaijan is also seriously inclined toward raising the volumes of export in these directions because it would have been senseless to spend $125 mln to expansion of gas compressor station in Astara and repair of Hajiqabul-Astara gas pipeline without prospects of raising gas export.

In the situation when the issue about the start of Nabucco pipeline construction remains the subject of debates, Azerbaijan has passed to the practice solution on creation of alternative, additional routes of its gas export. The situation with this gas pipeline is still unclear, in addition, the differences in the issue of price on Azerbaijani gas sold to Turkey and the absence of an intergovernmental agreement on Azerbaijani gas transit via Turkey to Europe is still unclear. Despite different optimistic statements that the sides will soon reach a definite agreement, there have been neither agreements nor contracts. The main goal is to reach prices on Azerbaijani gas compared to prices on the internal gas market of Turkey, as the price on Russian and Iranian gas exported to Turkey is calculated by a special formula bound to the oil price.

Azerbaijan does not want to set a fixed gas price. It wants to calculate this by such a formula. This hampers the construction of the Nabucco pipeline and the residential markets which in turn affects the term of the start of the second phase of Shah Deniz offshore gas condensate field project. The second phase of the Shah Deniz project requires investments of $20-22 bn. Therefore, it is first necessary to define the markets and conditions of Azerbaijani gas sale and then to start the second phase of the project. No investor would agree to pay so much money if he is not sure whether he would able to sell production.

That is, if there is no Nabucco, there is no the second phase of Shah Deniz and vice versa. If the European countries initially prepared the project for the Iranian gas, these plans were further changed and they stopped on the gas resources of the Caspian countries. The Transcaspian gas pipeline is also important for Nabucco. The construction of the gas pipeline which would connect two Caspian coasts would allow exporting natural gas of Turkmenistan and Kazakhstan to European countries via Azerbaijan by Nabucco. But there are also a number of reasons that challenge its construction. First, the political will of the countries, in particular, Turkmenistan, is needed. Second, this hampers the process and the unsettled status of the Caspian Sea. This pipeline is not unprofitable for Russia, because once it is launched, Russia will lose monopoly on Turkmen gas purchase.

According to the Russian side, the construction of the gas pipeline may harm the unique ecology of the Caspian Sea. There is a question here: is the Black Sea environment not unique, too? And what about the Blue stream pipeline that was also laid via the Black Sea though its sea environment is far more aggressive than Caspian"s? It turns out that in this case ecology is unimportant. Before, the Black Sea basin became transit for Russian gas export, it remained the breadbasket of the South of Russia and not only Russia. At the same time, no one has ever asked about the implications on this for the sea environment. It should be noted that gas pipeline is not a pipeline. In case of the failure oil leakage occurs that may have a really negative impact on the sea environment. In cases with gas pipeline, there will be no leakages even in case of failure. Thus, ecology has nothing to do with this issue.

The thing is different. Today Turkmenistan and Kazakhstan have the only way to export their energy sources to Europe that lies via Russia. And here Russia is also a monopoly which allows it dictate provisions. But if the Transcaspian gas pipeline project is implemented, there will appear an alternative access to Europe via the Baku-Tbilisi-Erzurum pipeline and possible connection to the Nabucco project. Competition is inevitable in case of an alternative route because a new purchase price can be proposed to Turkmenistan. The same might occur with Kazakhstan. The conclusion is that the Nabucco and Transcaspian gas pipeline projects are not threatening to Russia as an alternative to Russian gas because natural gas reserves are huge. But they can influence the price policy. Gas suppliers other than Russia can benefit in the result. Turkmenistan may have more attractive prices on gas supplies to European countries via new routes. If the Central Asian countries have an alternative route, they will have an alternative price. You see, the talks about construction of such a gas pipeline have already had a positive influence on the purchasing price on Turkmen gas. If this gas pipeline become true, it will be possible to count on bigger dividends.

In the established situation Azerbaijan is obliged to seek new markets to sell its gas. The new agreements signed with Russia and Iran pave way to export of gas from the Shah Deniz field. Both Iran and Russia have repeatedly stated that they are ready to purchase any volumes of gas Azerbaijan may offer. This is one of the possible alternative markets for the Shah Deniz project.

Now, it is also necessary to pay attention to such a project as gas export via Georgia and the Black Sea basin. Azerbaijan has never transported compressed gas via the Black Sea by special tankers and this is a new form for Azerbaijan. Studies in this direction have already started. Considering the fact that compressed gas is supplied to the United States from Europe, there will be no difficulties in supplying it via the Black Sea. For this purpose it is necessary to build a special plant to compress gas at one of the Black Sea ports of Georgia and acquire special tankers.

Azerbaijan has already taken first steps in all possible existing directions of gas export. This means that in case the Nabucco gas pipeline is not constructed, we will be able to find alternative routes to sell our energy sources and we will have something to choose between.

Thus, Azerbaijan needs appropriate conditions for implementation of the Nabucco project and European countries should think this over.

Rufat Abbasov


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