Southern Gas Corridor: The Dilemma of Azerbaijan Energy Policy
An energy security roundtable entitled 'Diversification Strategies' was held as part of the 51st Munich Security Conference and was attended by the President of the Republic of Azerbaijan Ilham Aliyev.
Important note from Ilham Aliyev's speech in Munich Security Conference about Southern Gas Corridor: "As regards all the other projects, including projects of diversification of the routes, it is just routes, not sources. And our source is new and our source is, if I may say so, fresh. Shahdeniz field has more than one trillion cubic meters of gas. Together with other fields our proven reserves are at least 2.5 trillion cubic meters. So it is a gas project for decades, for hundreds of years. It will seriously change the energy map of Europe."
Azerbaijan would like to passage to the gas period in a short time in the post-oil period and is becoming an important actor in the formation of Southern Gas Corridor in Europe. TANAP partners include: SOCAR (operator, 68 percent), BOTAS and TPAO (20 percent) and BP (12 percent). These figures explain Baku's increased impact on the TANAP project.
The volumes flowing through TANAP will increase from 16 billion cubic meters (bcm) annually, planned for 2020, to 23 bcm by 2023 and 31 bcm by 2026. There is also discussion about more ambitious capacities beyond 31 bcm. Some observers are speaking about up to 50 bcm, depending on the availability of Caspian gas volumes, not only from Azerbaijan but also from Turkmenistan, Iran, Israel and Eastern Mediterranean Sea in the future.
Turkey is more interested in natural gas of Iran and Turkmenistan for the TANAP project. Thus, the formation of cooperation with these countries in the energy field will help Turkey's gas import diversification policy. Therefore, the dispatch of Iranian gas via Trans Anatolian Natural Gas Pipeline (TANAP), which will be actualized with the collaboration between Turkey and Azerbaijan has gained strategic importance in Ankara's energy policies. Taner Yıldız, the Minister of Energy and Natural Resources of Turkey, stated that the Iranian gas will be an important supply source for Europe (The TEPAV - BP Energy Forum, February 26, 2014). Such a development is expected to be up to the completion of the TANAP project in 2018, if the sanctions against Iran are lifted. Iran could transfer gas from Azerbaijan and Turkmenistan to Europe, said the international affairs director of the National Iranian Gas Company
The EU Commission and Turkey are active in negotiating with Turkmenistan regarding deliveries of Turkmen gas into a projected Trans-Caspian Pipeline (TCP) to be connected via TANAP to Europe. Turkmenistan offers up to 40 bcm per year of gas to be fed into the Southern Corridor. The Turkmen leadership is interested in selling larger volumes on the European market and identifying a collective buyer for these quantities. Apparently, there is a conflict of interests between Azerbaijan and Turkey, in the issue of the gas transit to Europe. The main reason is that, Azerbaijan Energy Company SOCAR is opposed to Turkmen and Iranian gaz.
Azerbaijan's ruling party's purpose of protecting its own interests, and also Western and Eastern balancing policy of Baku, is jeopardizing the future of the Southern Gas Corridor. Firstly, the main reason of Azerbaijan’s opposition to the gas of Iran for TANAP project, despite insufficiency of its own gas, is Russia. In this way, Azerbaijan is preventing harm of Russia's energy transit policy in Europe. Because the gas of Iran will pose a serious threat for the Russian gas in Europe. In bypassing Iran, Azerbaijan intends to get rid of the Russia's pressure. Baku is turning the South Gas Corridor into a political bargaining project with Russia and the West. Secondly, the selection of TAP over NABUCCO was not only a commercial, but also a political decision as Russia put Azerbaijan under immense pressure to withdraw from NABUCCO in order to allow its competitor Turkish Stream to be built. Baku faced both political and commercial challenges because Gazprom gave a significant discount to its European customers in 2013. This was a significant bargaining chip for potential customers of the Shah Deniz Consortium. The selection of TAP over NABUCCO was a disappointment for the Central and East European countries of Romania, Bulgaria, Hungary, Slovakia and Moldova.
Orhan Gafarli
Ph.D candidate at Ankara University | Analyst on Russian and Caucasus Region | New Turkey Center For Strategic Studies