Thursday, March 22, 2012

Reliability of Gas supplies from Azerbaijan to Europe is a big question mark....

Reliability of Gas supplies from Azerbaijan to Europe is a big question mark....

Azerbaijan and Turkmenistan have identical problems which interfere with their profiting from natural gas reserves. Old infrastructure which is unreliable, insufficient pipeline capacity, inability to pipe across the Caspian without international agreements, and the need to finance new infrastructure construction and retrofitting of old facilities, inhibit the fulfillment of their grand national plans. Both national gas corporations must be willing to foot the bill for all of this modernization, even if it cuts deeply into profits. Unlike Azerbaijan, Turkmenistan has borrowed heavily from China for unspecific upgrades which will allow the production of 60+ billion cubic feet of gas per year. How it will manage to build that which is lacking is a big question mark, but it doesn't keep the govt. from offering more of their gas to everybody else....

Azerbaijan as a gas exporter – ambition and reality ....

History of the suspension (from 7 March) gas from Azerbaijan to Russia continues to grow into controversial details...

According to the company SOCAR, the Azerbaijani gas workers took eight days for the liquidation of the accident, and gas supplies to Russia resumed on March 15 this year. According to the source agency Trend, all the technical work, which were to regulate the pressure in the network have been completed that has restored gas exports from Azerbaijan to Russia: “Gas exports to Russia was restored during the night and now the problems in the supply of gas is not.”

Meanwhile, according to experts, the cause of an incident March 7 was an accident, associated with the critical state of transport infrastructure in Azerbaijan. Representatives of official Baku said that gas supplies to Russia will resume no later than March 14, and all the fallen volumes will be offset by (1). Despite sounding reassuring statements from Baku, the experts say: the volume of gas at the entrance to the Constitutional Court “Siyezen” to run the compressor station is not enough, and the gas to the Russian Federation is still not available. Since the beginning of March the Russian side has received less is 100 million cubic meters. meters of gas. A similar conclusion can be drawn when analyzing the data of the Central Supervisory Control FEC relied upon by the “Komsomolskaya Pravda”: from early March to Russia, Azerbaijan supplied to 4.9 million cubic meters of gas per day, although the daily supply plan specified in 7.6 million cubic meters. Deliveries ended March 7. In turn, the State Oil Company of Azerbaijan did not specify possible dates for the completion of repairs to the gas station near the border with Russia, which, according to them, due to inclement weather and snowfall. From the beginning, Azerbaijan has set in Russia 245.4 million cubic meters of gas – is a third less than the same period last year (2), reducing in February 2012 the export of gas by 8.7% compared to January (3) .

Recall, the contract of purchase and sale of Azerbaijani gas to SOCAR and “Gazprom” (with possibility of extension) was signed in Baku in mid-October 2009. According to the supplement to the contract signed in September 2010, in 2011, “Gazprom” was supposed to get two billion, and in 2012 – over two billion cubic meters of gas.Supplementary Agreement to increase the volumes of Azerbaijani gas to Russia’s purchasing up to three billion cubic meters was signed in Sochi on January 24 this year. However, last year planned volumes of gleaning the Russian side, which certainly raises questions about the ambitious plans for the future.

Note that this is not the first suspension of gas supplies from Azerbaijan due to force majeure. In early February, Azerbaijan has ceased to supply gas to Turkey and Georgia. Then it was due to technical faults on the platform, located in the Shah Deniz field. However, if the supply was restored within days.

By analyzing the incoming information from Azerbaijan, analysts in the production and transportation of “blue fuel”, expressed the view that the March interruptions in gas supplies to Russia due to technical problems, which also appeared on the Shakh-Deniz field. But this time, unlike the February episode of their removal required much more time.

Of course, it was premature to draw any far-reaching conclusions. At the same time, two consecutive failure in the supply of natural gas for export speak for themselves.One can only speculate about the reasons for the technical problems – whether they were the result of fault on the platform or the lack of staff, who it serves.

It is interesting that these technical problems were synchronized in time with the ordinary ambitious statements about the President of Azerbaijan bright prospects for the country as an indispensable exporter of gas, including to European markets. As a result, the development of new gas fields and pipeline construction, said Ilham Aliyev, “five or six years we will be able to supply our partners with gas in large volumes. Present level of gas production and export for us is not enough. We have a lot of potential. I note that during the next at least a hundred years, Azerbaijan will be an important gas supplier on the European market. “ As a result, “Azerbaijan in the coming years will make an important contribution to energy security. Our country, located in the Caspian Sea region could become a reliable supplier of gas to European consumers” (4). As a step in that direction meant Azerbaijan and Turkey signed a memorandum of understanding to establish a consortium that will build the pipeline Transanatoliysky (TANAP) for the supply of gas from Shah Deniz field to Europe via Turkey.

According to Minister of Energy of Azerbaijan, Ilham Aliyev, who was quoted by Wall Street Journal, in the near future, Baku and Ankara signed an intergovernmental agreement on Transanatoliyskomu pipeline, which will be a continuation of a shortened “version of” gas pipeline Nabucco (Nabucco-West) from the Turkish-Bulgarian border to the Austrian Baumgarten. According to some sources, the initial capacity of the pipeline Nabucco (31 billion cubic meters) can be reduce by half, and the capacity will allow it to deliver TANAP 10 billion cubic meters of Azeri gas per year to European markets and a further 6 billion cubic meters in the domestic needs of Turkey.

The possible political motives of the Baku-sounding optimistic statements entirely transparent, but attention is drawn to the absence of specific figures or their very approximate. Recall that since October 2010, Azerbaijan has a secret list data on gas production by foreign contractors (5). Information about the actual holdings of such structures as Umid and Apsheron, and Babak, Nakhchivan, Zafar-Mashal, is extremely controversial. It is estimated unaffiliated observers gas reserves in the country (about 1.2 trillion cubic meters), besides sometimes artificially inflated the power, not as significant as in other states of the Caspian basin – Turkmenistan, Iran and Russia.

Who is the main export flow – about 5 of the total volume of 15 billion cubic meters produced in Azerbaijan natural gas – is sent to Turkey. However, even a doubling of the volume of deliveries (imagine such a possibility in theory) is clearly not put Azerbaijan in a row with such recognized gas exporters like Turkmenistan (70 bcm), Iran (46 bcm) and Russia (350 bcm) ( 6.) So, sometimes sounding assessment of the prospects for gas production in Azerbaijan (50 billion cubic meters by 2025) are represented, to put it mildly, somewhat exaggerated. It is even difficult to understand for whom they are intended.

There is an assumption that the primary obligation to ensure for Azerbaijan to the Turkish export direction today, and disruptions in the supply of gas to other partners (in this case – Russia) are related as cause and effect. Here, of particular concern is the fact that in both cases referred to the disruption in the supply of power engineers in Azerbaijan was not possible to compensate for the cessation of receipt of gas from Shah-Deniz field from other fields, which calls into question the reliability of supplies of Azeri gas exports as a whole.

Possible politically motivated as the incident on March 7, and the next maneuver around the project Nabucco, we reserve the scope of this brief remarks. We can not, however, not to mention the dramatically increased interest in Azerbaijan and Central Asia from the U.S.. This may reactivate the “frozen conflicts” and, of course, will not escape the attention of Moscow and Tehran. In particular, attention is drawn to an unprecedented military-technical deal between Tel Aviv and Baku in the amount of $ 1.6 billion is highly doubtful that Israel has made such a big deal in arms in the volatile region without the consent of Washington (7). And, of course, military construction in Azerbaijan amid escalating threats to Iran from Israel and the United States more rhythmic work of gas pipeline corridors will not help here.

Azerbaijan, touting itself as almost a major future supplier of gas to Europe (now through Transanatoliyskogo European gas pipeline and its continuation as a “shortened” Nabucco), may not meet the expectations of European consumers. Reliability of supply from Azerbaijan was a big question.

(1) On the accident on the pipeline in Azerbaijan / /

(2) of Azerbaijani gas for two weeks did not come to Russia / /

(3) Azerbaijan decreased gas export by 8.7% in February / /

(4) Azerbaijan is preparing a new investment program to become a major supplier of gas to Europe in 100 years / /

(5) Azerbaijan secret list of data on natural gas production from its core deposits – Shah Deniz / /

(6) Alec Rasizade. Azerbaijan’s Prospects in Nagorno-Karabakh with the End of Oil Boom / / Iran and the Caucasus 15 (2011). P. 314.

(7) N. Kolchugin South Caucasus countries in the region who is able to support U.S. and NATO in a probable war against Iran / /

Andrei Areshev | 21.03.2012 |

Source - Strategic Culture Foundation

Trans-Caspian pipeline pact to energize EU gas project...?????
By Robert M Cutler

MONTREAL - Azerbaijan and Turkmenistan have reached agreement on the construction of the 300-kilometer undersea Trans-Caspian Gas Pipeline (TCGP), according to a source in the government in Turkmenistan, Deutsche Welle reported last week.

The agreement in principle would have been reached earlier this month in a succession of talks and conferences in Brussels and Berlin. The European Union received a mandate from the European Council in September 2011 to facilitate negotiations between the two energy-rich Caspian Sea littoral states. Trilateral meetings have been taking place since then.

Questions of implementation remain to be settled, but the report of an agreement in principle, overcoming bilateral diplomatic disputes, is definite also from the Azerbaijani side. It is reported in particular by multiple sources that draft texts of two agreements have been agreed among negotiators.

Of these, one would be a trilateral political document in support of the EU's Southern Gas Corridor (SGC) project for taking Caspian Sea basin natural gas to European markets, and the other an intergovernmental agreement between the two states concerned with respect to the undersea gas pipeline itself.

Turkmenistan had already indicated its willingness to supply 40 billion cubic meters per year (bcm/y) of natural gas to the Nabucco pipeline project, which was originally planned to run from the Caspian Sea coast of Azerbaijan through Georgia and Turkey to southeast Europe and finally to Austria via Bulgaria, Romania, and Hungary.

Those plans are now being reconfigured in light of the recent bilateral Azerbaijani-Turkish agreement to construct a Trans-Anatolian Gas Pipeline (TAGP, also called TANAP after its initials in Turkish) for transshipment to Europe of natural gas from Azerbaijan's own offshore deposits.

Of the 40 bcm/y that Turkmenistan would like to supply, 10 bcm/y might come from offshore developments with the remaining 30 bcm/y sourced from deposits in the southeast of the country and taken to the Caspian Sea coast via the so-called East-West Pipeline that Ashgabad has been refurbishing over the past several years, in anticipation of this possibility.

Those quantities are now likely to transit through the TAGP, if not also through another projected pipeline, the SGC's White Stream project, which could take gas from Azerbaijan through Georgia and underneath the Caspian Sea to Romania and the European Union: and this, in principle, not necessarily to the exclusion of the TAGP route either.

However, given the rapprochement between Turkmenistan and Azerbaijan that has been underway for a number of years and culminated in this agreement in principle, it is possible that Turkmenistan would in the first instance favor the TAGP, in which the State Oil Company of the Azerbaijani Republic (SOCAR) will be a majority-owning principal.

Turkmenistan is now counting on the EU to alleviate any Russian opposition to the project. Meetings between Brussels in Moscow on the subject have already begun. What is certain is that the prospect of TCGP construction together with the carriage of Turkmenistani gas to Europe will catalyze the implementation of the SGC project and route selection for this in particular.

In that connection, the EU has increased its representations to the government in Baku concerning its wish to receive gas supplies not only from the second-phase development of the offshore Shah Deniz deposit but also from other Azerbaijani offshore projects presently under exploration and development, either by SOCAR on its own or in cooperation with Western firms and consortia.

An earlier, discarded version of the White Stream pipeline project had planned that if would surface offshore from Ukraine for engineering reasons before re-descending to the sea floor and continuing on to Romania. Now there has been a thaw in bilateral Ukrainian-Turkmenistan relations, with the possibility that Ukraine could import gas from Turkmenistan via a separate undersea pipeline from the Georgian coast.

Russian commentators view that possibility as an attempt by Kyiv [Kiev] to pressure Moscow for concessions in the renegotiation of prices in the bilateral gas supply agreement from Russia to Ukraine. But also, Ukraine, Turkmenistan, and the EU have common interests in preventing the implementation of the South Stream pipeline long touted by Russia for sending gas across the floor of the Black Sea from Russia to Bulgaria and the EU.

Russia has never specified where that gas might come from, but in practice. It could really only come now from Turkmenistan, in which case Russia would have no need for the Ukrainian pipeline system to transit that gas from Russia to Europe.

So even if Ukraine were to decide to help Russia, somehow torpedo the TCGP and/or some parts of the SGC, then it could still see itself left empty-handed when Russia might subsequently decide to forsake the Ukrainian route for gas to Europe in favor of its own pet project for South Stream....

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