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GAS

Europe plan to control Azeri gas in jeopardy

London, August 3, 2012

Europe's plan to secure and control a supply of Azeri natural gas, backed by legal agreements, is in jeopardy as Azerbaijan joins forces with Turkey to own and operate the main export pipeline.

By creating a so-called Southern Corridor to bring in large volumes of central Asian gas, the European Commission hopes to reduce dependence on Russian gas and avoid supply disruptions caused by disputes between Russia and Ukraine over gas deliveries via Ukrainian territory.

The Commission's initial plan was for European utilities to build a single pipeline to transport gas from Azerbaijan's Caspian Sea through Turkey to European markets, all under EU regulation and with limited possibilities for diverting gas en route.

Azerbaijan and Turkey are following their own agendas in developing the gas corridor, however, which in many ways directly oppose European interests and make legally binding commitments with Europe unlikely.

The Azeri government and the consortium of companies developing the Shah Deniz 2 offshore gas field have made clear that they prefer two separate pipelines.

Azerbaijan and Turkey will build the Trans-Anatolian Pipeline (TANAP) to supply Turkey's domestic market and carry gas to the EU border. A second will run from the Turkish border to major EU markets, with two proposed routes under consideration.

"TANAP is connected in the first instance with the interests of Azerbaijan and Turkey and not with any third country," Fikrat Sadykhov, political science professor at Baku's Western University said in a paper for Azerbaijan's Diplomatic Academy.

The Azeri government hopes to get a better deal for its gas supplies, and Turkey plans to use gas transit as a political lever in its European Union accession talks.

The European Commission and the government of Azerbaijan in 2011 agreed in a joint declaration to develop the Southern Gas Corridor together.

"Those agreements set the terms under which gas will eventually reach Europe. Once ratified, they provide the legal guarantees needed," said Marlene Holzner, a European Commission spokeswoman.

But lawyers say the agreements are of no significance without a committed gas supplier. The Shah Deniz consortium - led by BP, Statoil and Azeri state energy company Socar - is currently the only viable supplier of central Asian gas.

"Unless a creditworthy gas supplier has signed a long-term agreement to supply, this memo is meaningless," Kirk Lovric, a lawyer at Hunton & Williams in London, said. – Reuters




Tags: London | Turkey | Europe | gas | pipeline |

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