The Problems of Caspian Gas–Why the Soviets Left It In the Ground

[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 

A.Areshev:

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.

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(1) On the accident on the pipeline in Azerbaijan / / http://www.fondsk.ru/news/2012/03/13/ob-avarii-na-gazoprovode-v-azerbajdzhane.html

(2) of Azerbaijani gas for two weeks did not come to Russia / / http://kp.ru/online/news/1109328/

(3) Azerbaijan decreased gas export by 8.7% in February / / http://abc.az/eng/news/main/63338.html

(4) Azerbaijan is preparing a new investment program to become a major supplier of gas to Europe in 100 years / / http://abc.az/rus/news/63148.html

(5) Azerbaijan secret list of data on natural gas production from its core deposits – Shah Deniz / / http://abc.az/rus/news/49541.html

(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 / / http://www.arms-expo.ru/049051124050055049048048.html

Andrei Areshev | 21.03.2012 |

Source - Strategic Culture Foundation