Worsening of relations in the triangle of EU-Russia-Ukraine.
Turkmenia before the master, “South Iolotan,” you must build a powerful gas-processing complex. According to the company McKinsey, the cost of gas at the “South Iolotan” will be among the highest in the world.
The beginning of autumn was rich in symbolic events that seriously affect the development of the Eurasian gas market. Firstly, the construction of gas pipeline “Nord Stream”, and on it went to the first gas. Secondly, the Council of Europe adopted the European Union mandate to negotiate with Azerbaijan and Turkmenistan under the contract to build the Trans-Caspian gas pipeline. Third, the implementation of the project “South Stream” joined the company BASF (Germany) and EDF (France).
Try to understand the meaning of these events. Commissioning of the “Nord Stream” seriously weakens the position of Ukraine, which may soon lose status as a key transit of Russian gas to Europe. And after it is launched and the “South Stream”, the Ukrainian gas transportation system and it will be possible at all to take into scrap metal. Therefore, the Ukrainian budget will lose a substantial part of their income. The salvation of the Ukrainian leadership could be the involvement of “Gazprom” in the shareholders’ Naftogaz of Ukraine “, or a specially created company, which owns a network of gas pipelines. But until that happens.
At the same time in Europe, continuing the fight for the right to conclude international agreements for the supply of energy. While this right is for heads of states – members of the EU. However, the EU leadership is trying to take an international gas policy in their own hands. And 12 September the European Commission was given a mandate to negotiate with Azerbaijan and Turkmenistan under the contract to build the Trans-Caspian gas pipeline, which should become an essential part of the project Nabucco. True, the joy was short of the EU. It’s already September 16 heads of “Gazprom», ENI (Italy), BASF (Germany) and EDF (France) have signed an agreement on joint gas pipeline “South Stream”, which is a direct competitor to Nabucco. Now the European Commission will have to compete with the heads of the leading EU countries: Germany, France and Italy.
Apparently, the leaders of countries – the EU Commission gave special rights to negotiate on the Trans-Caspian gas pipeline, so they do not believe in his promise. The fact that this project has been discussed for nearly 20 years, but so far no progress has not occurred.The fact that the agreement on the division of the Caspian Sea was signed only by Russia, Kazakhstan and Azerbaijan, Turkmenistan and Iran refused. Turkmenistan and Azerbaijan dispute the ownership of a number of fields in the Caspian shelf, which in the early 2000s resulted in exchanges of fire even to their ships. In these conditions it is difficult to assume that will quickly agree on the construction of the Trans-Caspian gas pipeline. All the more so that the authorities of Russia and Iran have already declared their opposition to the appearance of this gas pipeline.
We need to understand and which will be filled with the Trans-Caspian gas pipeline, if it will be built. At present, Turkmenistan delivers gas to Russia, Iran and China. And the supply in China will increase rapidly. Where did undertake to free gas for Europe? As the resource base of Trans-Caspian pipeline is newly discovered deposit “South Iolotan” reserves allegedly exceed 10 trillion. cubic meters. meters of gas. However, this is a very complex field that is similar in its characteristics from Astrakhan, which develops “Gazprom”.
Stocks Astrakhan deposit is about 2.5 trillion. cubic meters. m of gas, which can produce about 100 billion cubic meters. meters of gas per year. However, only produces about 15 billion cubic meters. m. Why? The fact that this gas is very expensive, as occurs at very great depths (more than 4 km) and contains a lot of harmful impurities (hydrogen sulfide and acid gases). In order to bring the Astrakhan gas to marketable condition, it must be cleaned of impurities in the gas processing plant. In principle, during the Soviet era, when started developing the Astrakhan field, the target product is considered to sulfur, rather than natural gas. Consequently, Turkmenistan, before master “South Iolotan,” you must build a powerful gas-processing complex. According to the company McKinsey, the cost of gas at the “South Iolotan” will be among the highest in the world (significantly higher than in the hard-to Shtokman field, located in the Barents Sea). Thus, we can state that the purpose of the European Union – to bring down the price of Russian gas deliveries through the resources of Turkmenistan is not feasible (the new Turkmen gas can not be cheap by definition).
If we assume that the trans-Caspian gas pipeline will be built and on it goes at least 20 billion cubic meters. meters of gas annually, with 10 billion cubic meters. m of Azerbaijani gas will fill the pipeline Nabucco. As a result, Europe will have a source of supply, independent from Russia. True, this highway will be held on an unstable area where a few smoldering frozen conflicts (Nagorno-Karabakh in Azerbaijan, Abkhazia and South Ossetia in Georgia, the Kurdish separatists in Turkey). It’s no secret that the gas pipeline connecting Iran and Turkey, regularly blow up terrorists. The European Commission has taken the back-breaking load, and if it manages to resolve all the contradictions and implement the project Nabucco, that its leaders would be worthy of the monument during his lifetime.
Shah Deniz endgame nigh...
By Robert M Cutler
MONTREAL - The approach of important deadlines for pipeline project decisions involving the Caspian Sea basin is accelerating developments in the region.
The president of the State Oil Company of the Azerbaijan Republic (SOCAR), Rovnag Abdullaev, has announced that an agreement with Turkey, long under negotiation, on terms for delivery of natural gas from the second phase of the offshore Shah Deniz development could be signed within a week, during a ceremony for the opening of an oil refinery in the Turkish city of Izmir, according to the APA news agency in Baku.
Abdullaev also said the Shah Deniz consortium will select within six weeks which pipeline project will carry Shah Deniz gas for
European distribution, according to reports. Proposals were submitted three weeks ago. The competitors are the Trans-Adriatic Pipeline (TAP), the Interconnector Turkey-Greece-Italy (ITGI), and the Nabucco pipeline. A fourth contender slipped in just under the wire at the end of September, submitted by Shah Deniz consortium joint operator BP, for a South East European Pipeline (SEEP).
Most developments over the past week focused on the Nabucco pipeline project, which is proposed to take 31 billion cubic meters per year (bcm/y) of gas from the region slightly over 3,900 kilometers through the South Caucasus and Turkey into Europe, crossing Bulgaria, Romania, and Hungary on its way to the Baumgarten gas hub in Austria.
Events paradoxically moved in the direction of project implementation even as the Nabucco consortium announced that its first gas may be delayed from 2017 to 2018, and Iraq announced that it would be unable to put gas into the pipeline for the time being. The project consortium had identified deposits near Kirkuk in the Kurdish region as candidates for supplying 7 bcm/y or more.
The demand end ramped up as European buyers, that is, the ultimate consumers, continued to get in line. Poland announced that it was contemplating building a pipeline link to Austria later this decade, so as to be able to import the gas for its own domestic use. Also, demand for the gas in Germany will increase due to the government's decision in July to replace nuclear power generation following the Fukushima disaster in Japan.
Three weeks ago, German-Austrian firm Bayerngas announced its intention to join the Nabucco project and take a "considerable" stake in its consortium. Bayerngas is a gas-procurement platform for a number of municipal utilities in southern Germany, regional utilities in Austria, and major industrial consumers. It intends to construct an 85 km pipeline named "Monaco" to link Austria with the Munich region in Germany for entry into service in 2021.
Nabucco's current shareholders are Austria's OMV, Bulgaria's Bulgargaz, Germany's RWE, Hungary's MOL, Romania's Transgaz, and Turkey's BOTAS; each of these owns one-sixth of the project consortium. Negotiations are planned in the coming weeks on the details of Bayerngas's acquisition of its own stake. At the same time, the Turkish firm Oezbal Steel Pipe has confirmed receiving an order for the production of pipe for the pipeline, with a prospective contract value of slightly over $500 million; such contracts involving "real money" are not decided lightly.
The industrial order for pipes from the Turkish firm comes only days after Turkmenistan's President Gurbanguly Berdimuhamedow confirmed to his Austrian counterpart Heinz Fischer over the past weekend that the government in Ashgabat has formed a special working group to prepare for delivering natural gas to Europe. The two presidents signed a bilateral memorandum of understanding on increasing energy cooperation between their two countries.
The Romanian press agency Hotnews reports that Berdimuhamedow has confirmed for the first time what this newspaper has long asserted to be the case, that Turkmenistan's gas for Nabucco will come from the South Yolotan deposit in the southeast of the country, through the East-West Pipeline that Turkmenistan is reconstructing and refurbishing at its own cost, arriving at its Caspian Sea coast.
At the end of last week, the volume of reserves in the South Yolotan were revised upwards once more by the British auditing firm Gaffney Cline in their latest iteration of the evaluation first undertaken in 2009. Three years ago, the firm set South Yolotan's holdings in the range from 4 to 14 trillion cubic meters (tcm) with the most likely scenario being 6 tcm. The new estimate sets the range at between 13.1 and 21.2 tcm, making it the second-largest in the world.
The higher end of the range would mean that this single deposit contains 10% of confirmed world gas reserves. The new, more detailed Gaffney Cline estimate tends to confirm its suggestion in 2008 that the South Yolotan-Yashlar complex holds about 26 tcm. It is not out of the question that upon closer inspection this figure rises further in subsequent iterations of the estimate. Industrial exploration of the South Yolotan field began already in 2009 when Turkmenistan signed contracts worth $9.7 billion with companies from China, South Korea, and the United Arab Emirates. China has committed to lend Turkmenistan as much as $8.1 billion to help develop the field.
About the Author: Sergey Justice – National Director of the Institute of Energy.