European Commission includes Trans-Caspian Gas Pipeline in list of priority energy projects

Victoria Panfilova, columnist of Nezavisimaya Gazeta, specially for Vestnik Kavkaza
European Commission includes Trans-Caspian Gas Pipeline in list of priority energy projects

The construction of the Trans-Caspian Gas Pipeline and the import of Turkmen gas remain an important part of the EU’s energy security strategy, Chargé d'affaires of the EU Delegation to Ashgabat Lubomir Frebort said. According to him, the EU-Turkmenistan summit will be held as part of the meeting of the Southern Gas Corridor (SGC) Advisory Council in Baku in February.

The European Union fully supports Turkmenistan’s policy of diversifying its gas export markets. "The construction of the Trans-Caspian Gas Pipeline and the import of Turkmen gas remain an important part of the EU’s strategy in the field of energy security and diversification of gas import sources, and the new European Commission recently included it in the updated list of priority energy projects," Frebort said at the forum in Ashgabat dedicated to the importance of Turkmen neutrality in international cooperation. The upcoming meeting of the Advisory Council on the Southern Gas Corridor in Baku on February 28 provides an opportunity for a bilateral EU-Turkmenistan summit with the new EU Energy Commissioner to move this dialogue further, Frebort added.

In addition, he noted that the EU Special Representative for Central Asia proposed to hold a symposium in the first quarter of 2020 in Ashgabat to discuss particular actions for the implementation of the new EU Strategy for Central Asia, adopted in 2019. Frebort believes that Turkmenistan will benefit from active interaction with the EU through this regional strategy. "Besides the current bilateral cooperation projects, the new instrument of the European Commission for neighborhood, development and international cooperation, which has been allocated 93.1 billion euros, will allow the EU to offer new partnership opportunities to Turkmenistan from 2021," the chargé d'affaires of the EU Delegation to Turkmenistan added.

Last year, the discussion on the prospects for the construction of the Trans-Caspian Gas Pipeline, which provides for the transportation of natural gas from Turkmenistan to Europe through Azerbaijan, Georgia and Turkey, was resumed. The discussion was prompted by a series of actions taken by representatives of the European Union to support this project.

Head of the club of political scientists 'South Caucasus' Ilgar Velizde told Vestnik Kavkaza that the Trans-Caspian Gas Pipeline project, connecting Turkmenistan and Azerbaijan, has been discussed since the 1990s and aims to ensure export of Turkmen gas to the west. However, the situation has been stalled due for several reasons. "It is not enough for the European Commission or Ashgabat simply to wish to build the Trans-Caspian Gas Pipeline. Although it is not technically difficult to built it. It only requires the construction of a three-hundred-kilometer pipeline between the Turkmen sector of the Caspian Sea and the Azerbaijani sector of the Caspian. For example, the Nord Stream and Turkish Stream pipelines were built in more difficult environmental conditions. If these projects have been implemented, the Trans-Caspian Gas Pipeline is not difficult project. The question is, who will build the pipeline? Who will act as investor? It is often said that the project can be implemented at the expense of international financial organizations, such as the European Bank for Reconstruction and Development or the Asian Development Bank. But so far this is not the case," Ilgar Velizade said.

The expert also noted that a consortium has not been created over many years, there is no data on the volume of gas supplied to Western markets, so it is not known which pipe diameter should be used. This is an important issue. But it's unclear at what price Turkmen gas will be supplied. The transit price is unknown either. And in general, no specific negotiations are underway.

It is assumed that the Trans-Caspian Gas Pipeline will be connected to the SGC system, which allocates certain, not large, volumes for external conditional suppliers - a maximum of 10 billion cubic meters of gas. The system is designed to pump Azerbaijani gas. If a decision is made on pumping Turkmen gas, then it will be necessary to talk about strengthening the capacity of the SGC. These are additional costs that the SGC consortium must bear.

"The fundamental question is that the Turkmen side has not yet conducted substantive negotiations with European buyers on the issue of delivering its gas to specific countries' markets. There were general statements following President Gurbanguly Berdimuhamedov's visit to Germany and a number of other European countries. But no information was yet available on competitive agreements," Velizade noted.

It is also worth considering the fact that in recent years there has not been a sharp increase in hydrocarbon production in the Caspian states. All data and forecasts suggest that we should not expect the appearance of additional gas volumes in Turkmenistan. Moreover, the situation with the loading of existing export pipelines pumping Turkmen gas is not so rosy.

The Turkmenistan-China gas pipeline exported 36 billion cubic meters of gas, with the pipe capacity of 55 billion cubic meters. Pipelines going to Iran were filled with maximum 8 billion cubic meters of Turkmen gas per year, although they were designed for 20 billion cubic meters. However, Turkmenistan has no such opportunity for several years. The construction of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline has begun, which will also require additional gas volumes. It is not entirely clear what is left for the Trans-Caspian pipeline.

According to Velizade, the European Commission has repeatedly made statements about its intention to build the Trans-Caspian Gas Pipeline. The current statement can be seen as a political factor for the implementation of this project. But if there is no real economy, then no political statements can accelerate its implementation.

According to Doctor of Political Sciences Sergei Zhiltsov, Azerbaijan politically supports the Trans-Caspian Gas Pipeline project, although Turkmen and Azerbaijani gas are competitors now. The TANAP pipeline will deliver natural gas produced from the Shah Deniz-2 offshore gas field in Azerbaijan. It is also important to take into account Ashgabat’s position that it plans to sell gas at the border, after which - that is, in a hypothetical Caspian pipe - the fuel becomes the property of the buyer.

"Despite the data on production and exports, a number of Caspian littoral countries and Western states maintain interest in the Trans-Caspian Gas Pipeline project. This is primarily due to the desire of the young Caspian littoral states to keep oil and gas companies interested in production projects. The difficulties that consortiums face when developing the Caspian fields, reduced their interest in the region’s hydrocarbon resources. They are mostly considered promising reserves, the role of which may increase in the future. In addition, the Caspian countries are striving to take advantage of the geopolitical situation. The western sanctions against Russia, the continuity of the EU and U.S. energy policies aimed at laying pipelines bypassing Russia, reinforce the Caspian states' interest in using these factors in their own interests," Sergey Zhiltsov told Vestnik Kavkaza.