Region 16:50 17/04/2014

Azerbaijan key factor in EU energy diversification: Reality or Ambitions

Current geopolitical atmosphere and recent developments over Ukraine and consequences around West-Russia axis make Europe more seriously and in fast and furious manner think over the diversification of energy resources and reduction of its energy dependency from Russia. Energy resources rich Azerbaijan has long been considered a potential provider of gas to Europe or a transit country for consumption of Caspian gas. Primary for this reason several energy projects were designed but they were not analyzed and seriously thought over until the situation reached to its escalation point.

The Southern Gas Corridor three projects that are designed to deliver gas to Europe from Caspian (TANAP, TAP and TCP) raise major questions: Whether Azerbaijan will be able to provide enough gas for the whole Europe? Will it be a transit country for the gas from Turkmenistan or Iran? And the major pinpoint: would it be willing to do so, going over Russian interests? Well, let’s see!

In recent weeks European leaders and different officials re-launched their talks about the diversification of their energy routes and reduction of the dependence from “interventionist” Russia. They send signals about readiness to continue TAP and TANAP and about their commitment to Trans-Caspian pipeline project (TCP). European Commission President José Manuel Barroso called $.45bn worth decision to develop the 2nd stage of Azerbaijani Shah Deniz gas field “a strategic door opener” for stronger EU energy security, Britain’s foreign secretary William Hague, while speaking about Sothern gas corridor pointed to Turkey and Azerbaijan as an “important plan of Europe’s future plans” to transfer Caspian gas to Europe.

Said and Done! The EU has taken over certain steps to accelerate the process. On 07 2014 The Trans Adriatic Pipeline AG (TAP) and the Interconnector Greece-Bulgaria (ICGB) have signed an agreement laying the foundations for linkage of the two projects and thus bringing gas from Azerbaijan to Bulgaria, a country heavily dependent from Russian gas. TAP constructions are to be launched in Albania already in 2015 while preparations have already started. Those steps clearly illustrate the EU's commitment to realization of the projects. Nevertheless, the fact that already two out of 7 shareholder European companies (Statoil and Total) one after another sold their assets in Shah Deniz II project indicate that the project is not as attractive as it may seem; either it is not profitable or for certain reasons its realization is questioned.

However, even though the construction of those pipelines can be considered as an alternative route of energy consumption for Europe, the estimated volumes of gas TAP and TANAP projects can deliver to Europe is less than 10% EU consumes every year. The analysis and numbers presented by different sources, both Russian and Western posit that the amount of gas that actually would be piped through TAP to EU in 2019 is small (10bn cubic meters per annum), which represents just 2 per cent of the 500 bcm of Europe’s annual consumption. The TANAP is expected to carry 23 bcm in 2023, and 31 bcm in 2026, the latter is equal to 6% of EU’s gas consumption. So, the statement released by Russian energy giant Gazprom’s managers that Azerbaijani gas is “just about enough for a barbeque” turns out to be true.

What comes to the capability of Azerbaijan to serve as a transit country for delivery of Turkmen gas to Europe the prospects is not promising either. Understandably, TCP is of great interest for Europe and Turkmenistan, on its turn, doesn’t mind to sell its gas to Europe; however there are some obstacles that hinder the implementation of the project. First, Turkmenistan has signed a contract with China in terms of selling 65bnm gas annually to China and it hardly manages to do so as the volumes of its major gas field South Elotan has certain limits for annual production. Thus, it would be difficult and almost impossible to deliver to EU high volumes of gas. Second, there is a new project that Turkmenistan would be more interested in (the Turkmenistan- Afghanistan-Pakistan-India pipeline). Lately it has been showing much more progress than TCP and has much international support than TCP. Adding Russian factor, who has quite high interest in control and resell of Turkmen gas, to the overall image, TCP as well remains hang in uncertainty and in inconstancy.

Thus, in spite of the “large talks” it looms large that the capability of TAP, TANAP and TCP projects to secure Europe with natural gas is too low. The EU leaders clearly understood this, considering that its energy imports by 2035 would climb up to 80% and that’s why they try to find alternative sources like Iran.

In the media some talks have been circulated referring to official visits of European and Azerbaijani leaders to Iran that EU wants to take Iranian gas to Europe through Azerbaijan. Even if there are such plans their realization is even more challenging than the aforementioned ones. The recent freeze in U.S.- Iran relations, rough rhetoric towards each other and Iran –Russia major energy deals raise serious doubts whether Iran would like to play by “western rules” and contribute to energy diversification of Europe.

Here comes the final question whether Azerbaijan taking into account its geographical location, relations with Russia and frozen conflict over Nagorno Karabakh Republic would run over Russian interests. As Barooso indicated EU is worried about Russia’s unpredictable moves, and said that the project TAP will be realized only if Azerbaijan manages to avoid Russia’s pressure. The recent developments don't indicate that it is likely. Just few days ago President Ilham Aliyev, after the recent CIS chief of staff meetings in Baku cut the funding of TANAP for 2014 and the construction of gas pipeline was delayed till 2015. Simultaneously, the construction of TAP was as well delayed based on unclear explanations and justifications.

Conclusively, taking into account the challenges TAP, TANAP and TCP face, the unrealizability of Iran's involvement in the energy diversification of Europe in the near future and the potential Russian pressure on Azerbaijan it turns out that Azerbaijan is not able to play a key role in energy diversification process of EU, at least not in the near future.

Nelli Minasyan
 



Source Panorama.am
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