TANAP: Everything is just beginning

The TANAP pipeline is laid from the Georgian-Turkish border to the western border of Turkey, from where it will be delivered to Europe. The full implementation of the project will make it comparable in scale with the Baku-Tbilisi-Ceyhan (BTC) oil pipeline project.

President Nazarbaev congratulated Erdogan on completing the construction of TANAP.

Prelude to TANAP

To assess the true significance of this project, it is important to recall that it is the "reincarnation" of a large, and unrealized, Nabucco project. Large gas reserves in Turkmenistan were known for a long time. Europe in the nineties had plans to hold this gas to its consumer. In 1998, the American company Enron took the initiative to build a gas pipeline connecting the sea with Turkmenistan and Azerbaijan. But already at the initial stage, disagreements arose over quotas for the volumes of gas pumping. The presidents of the two countries ran a chill, and the negotiations actually stopped. Then came the problems with Enron. And then this project was generally forgotten, since the company actually went bankrupt.

The project of transporting Turkmen gas to Europe received a new breath after the Nabucco project was launched in 2002. The project had a clear geographical beginning and an end: The pipeline was to start in Turkmenistan, and end in Austria and Germany. Azerbaijan acted in this project, primarily as a transit country, and the length of the planned pipeline route was to be 3300 km. The design capacity of Nabucco was also comparable to the current capacity of TANAP: 26-32 billion cubic meters per year. The project was discussed for 11 years; a consortium of European companies was created to implement it. After the initial design, its price rose 1.5 times to 7.9 billion euros. When BP after the 2008 crisis made its own calculations, the project cost associated with a rise in price of metals in the world market rose to 14 billion euros. At this point the project ceased to exist in 2013.

It is important to note one more circumstance. All these years, Turkmenistan has consistently guaranteed Europe the supply of 40 billion cubic meters of gas annually. And he added that he would supply gas on a fob basis, right on his border. The rest is for European countries. The price of gas, he did not call, although the circumstances changed very quickly. Russia, which has long bought and resold Turkmen gas to other countries, began blocking the export of gas from Turkmenistan, citing at the same time the fullness of its gas storage facilities. Following this, Turkmenistan began close cooperation with China's state oil company CNPC. It procured gas production and construction of the gas pipeline, however, it began to dictate its own price conditions to Turkmenistan.

In the same years, other projects began to appear for pumping gas from the Caspian region and Azerbaijan to Europe. The 2004 draft AGRI envisaged the export of 4 billion cubic meters of liquefied gas a year from Turkmenistan via Azerbaijan and Georgia to Romania. It quickly fell out of the agenda, because a priori it was expensive: in the ports of these countries it was necessary to build plants for processing gas.

The last project in this series, which remained in the talks, was the White Stream project, which presupposes the supply of Azerbaijan-Georgia-Black Sea-Ukraine-Europe gas.

The project developed dramatically

A joint declaration on the construction of South Ossetia was signed in 2011. Its construction began simultaneously with the implementation of the Russian - Turkish project "Turkish flow".

Turkey during this period tried to implement both the Turkish Stream and TANAP projects, not taking into consideration that they to some extent competed. At some point, this has even begun to cause concern for Baku. The laying of the foundation of the TANAP gas pipeline took place on March 17, 2015 in the Turkish province of Kars. But the talks between Baku and Ankara intensified only against the background of the crisis in Russian-Turkish relations. Since December 1, 2015, the joint project of Russia and Turkey on the construction of the transit gas pipeline "Turkish Stream" has been suspended. Turkish President Recep Tayyip Erdogan accused Moscow of breaking contract obligations and promised to find new suppliers of fuel.

The implementation of the project was hampered not only by intrigues of Gazprom, which sees that Azerbaijan enters a temporary gas shortage for the domestic market. And even the constant bending of protests in Italy, the formal basis of which were environmental requirements. But the main problem for Azerbaijan was the issues related to the financial crisis: a sharp drop in oil prices, devaluation and economic recession.

The construction of the pipeline was not an easy task from a financial point of view. The price crisis and the subsequent devaluation hit the Azerbaijani economy hard. TANAP costs about $ 8 billion, its shareholders - SOCAR (51%), SOCAR Turkiye Enerji (7%), BOTAS (30%), BP (12%).

Azerbaijan's decision to force the construction of Yuganskneftegaz coincided with a change in the world energy balance, when gas began to come to the forefront. This circumstance became an asset of the Azerbaijani government. The ability to find new windows of opportunity is always in price. The gas will be equal to oil in the world energy balance by the end of the next decade. Moreover, the political role of gas will be greater than that of oil, which is clearly visible today.

As always in such projects, the policy was periodically included in the implementation of this project on the most equal levels.

Problems

Under the gas pipeline projects, one can study the geopolitics of the regions. When Russia decided to abandon the transit of gas through Ukraine, it began to stretch the northern line of gas pipelines - the "Nord Stream". The general principle was this: the gas pipeline must cross as few transit countries as possible. Nevertheless, the implementation of the second part of this project (Nord Stream-2) faced noticeable resistance from the United States, which threatened sanctions for companies that participate in the project. So far, within the framework of these discussions, it has been possible to win some preferences for Ukraine, which will still receive part of Russian gas. When the idea of ​​Nabucco and South Korea appeared, to take a position in the markets of Southern Europe, decided to monopolize this direction and came up with the project "South Stream".

The scale of the war in Syria is determined not only by the "Arab revolutions", but also by the persistent desire of a number of gas producing countries (Qatar, Iran) to build a gas pipeline to the Mediterranean.

It is possible to recall how during the stay of the Nabucco project in 2008, the State Counselor of Turkey, Ali Jan, proposed the construction of the Nabucco gas pipeline through Armenia, motivating its offer with military actions in South Ossetia. Everything seemed to be logical, but this proposal was voiced on the eve of the so-called "football diplomacy" between Turkey and Armenia, as well as the Zurich agreements. That is, it had a sufficient political flavor.

At one time, after the discovery of the South Pars deposit, Russia's efforts to prevent Iranian gas from entering Europe became visible. Gazprom was then ready for any participation in this project, if only the alleged gas flows from Iran turned to the East, towards Pakistan and India. Today Iran holds the same position with regard to Turkmen gas

From the very beginning, the TANAP project has been the subject of intersection of many geopolitical, infrastructural and economic interests. Initially, Russia was calm about the idea of ​​implementing this project. In the end, by the volume it is still about one-twelfth of the Russian supplies to Europe. At the same time, Russia feared that the creation of such a long and sufficient infrastructure would open the way to Europe for Turkmen gas. In addition, she periodically put obstacles.

According to the chairman of the board of directors of the TANAP consortium Saltuk Duzyol, TANAP and the Turkish Stream will not compete until the Trans-Anatolian gas pipeline starts operating at full capacity. It is assumed that the throughput of TANAP will reach 31 billion cubic meters of gas per year by 2026. The capacity of each of the two threads of the Turkish Stream will be 15.75 billion cubic meters of gas.

There are purely economic moments associated with future gas prices, with the filling of gas pipelines. Let's start with the fact that he will not soon begin to bring income. To build a pipe is not everything, we still need to prepare a resource base. Back in October 2017, talking about the resource base of TANAP in an interview with RT, the director of the Energy Development Fund Sergei Pikin: "If the first stage of the Shah Deniz field was brought to a projected capacity of 9 billion cubic meters for seven years, the second phase can be delayed stronger". https://russian.rt.com/world/article/439405-tanap-azerbaidzhan-turcia-gazoprovod RT October 13, 2017.

The problem of the future filling of TANAP with Turkmen gas is also not so simple. Chairman of the Board of the Society of Russian-Turkmen Friendship "Compatriot" Maksat Saparmuradov believes that Berdymukhamedov therefore went to Turkey, that he has nothing to offer to Ankara and Baku. He believes that the Trans-Caspian pipeline will not be built, even if the Convention on the status of the Caspian Sea is signed and the matter is not only in the competition between Russian and Turkmen gas. The question lies on the political plane. This is a border issue. President Berdymukhamedov does not allow Russia to close the Afghan border, where big problems are brewing. And financially, Turkmenistan is going through hard times and this crisis has been going on since the time of Niyazov.

An interesting variant is proposed by Iran: to arrange swap supplies of Turkmen gas not only in TANAP, but also in Pakistan, provided that Ashgabat refuses to construct the TAPI (Turkmenistan-Afghanistan-Pakistan-India) gas pipeline. "By the way, Azerbaijan has been using Iranian gas pipelines to receive gas from Turkmenistan.

The heightened interest in the status of the Caspian Sea, of course, is largely due to the completion of the construction of TANAP and the possibility of pumping it and Turkmen gas. Moreover, the new gas pipeline is built with a certain capacity reserve and is designed for a trans-Caspian gas corridor, which can be opened after determining the status of the Caspian. It is assumed that the adoption of the Convention on the legal status of the Caspian Sea may occur already this year. However, it is desirable that negotiations on dividing the bottom and other long-standing conflict issues between Azerbaijan, Turkmenistan and Iran end before the adoption of the Convention.

Iran's participation in TANAP and the "Southern Gas Corridor" seems very hypothetical. The sanctions regime against Iran were not abolished, and even intensified. Secondly, being one of the largest gas powers in the world, Iran, nevertheless, does not have sufficient volumes for serious gas exports. Thus, Igor Pankratenko, a member of the scientific council of the Iranian Institute for Central Asian and Afghanistan Studies "Iran-East", says.

As for the triangle Turkmenistan-Azerbaijan-Iran, then, in his opinion, there is a swap mechanism. "It is conditioned not only and not so much by the gas deficit of the parties, but by pipelines' routes, for example, it is cheaper for Tehran to buy gas in Turkmenistan to supply a number of provinces than to drive it across Iran." As for TANAP, this issue is considered in a broader sense - it is a question of Ashgabat's direct participation in filling the "Southern Gas Corridor", not including Iran in this scheme, "Pankratenko told the" Bulletin of the Caucasus. http: // investikavkaza.ru/analytics/Azerbaydzhan-priglashaet-Turkmenistan-k-sotrudnichestvu. html

The project of the Southern Gas Corridor (SGC) has not yet been completed. But already now they are beginning to raise questions on the revision of the price for transporting gas through Turkey. This is reported in particular by the Turkish political scientist Guntei Shimshek http://www.haberturk.com/yazarlar/guntay-simsek-1019/1991212-tanaptan-gaz-nasil-akacak

SGCs are concerned about high gas transportation prices for TANAP, which will affect the price of gas. It proposes already today to work out a new price formula for gas, which will be transferred to Eskishehir. And taking into account the situation with prices for all alternative routes of gas supply to Turkey and Europe. However, all these are solved problems.

The project came to the finish line

From time to time, there are disputes over what kind of project is essentially the Southern Gas Corridor - political or economic. The question itself is conditioned by the fact that the revenues from this project will hardly be comparable with the incomes from ACG and BTS. But the question itself is scholastic. Azerbaijan practically had no other direction for selling its gas. After all, the region is saturated with gas. TANAP was an inevitable economic decision, although, of course, all the political dividends of the project were calculated.

Despite all the problems, the importance of this project cannot be overestimated. Azerbaijan, Georgia and Turkey have strong energy ties for years ahead.

Secondly, for the first time a corridor for pipe gas from a region extremely rich in gas was broken through. In Turkmenistan, its reserves are estimated at 10 trillion. cubic meters, in Iran in 40 trillion. It is not excluded and the option of filling TANAP with gas. From Iraqi Kurdistan.

Third, this creates a special relationship between Europe and the South Caucasus region. And it is no coincidence that Turkey, insulted by the fact that it is held for long for the doors of the European Union, expects to become the largest gas hub of the region and in this capacity to dictate even gas prices.

Fourthly, in the geopolitical sense it is an attempt to "turn" the CAR countries towards Europe. This is one of the reasons for the active political participation of the US in gas pipeline projects in Europe.

Infrastructure projects have another property that they begin to pull up other sectors of the economy. This is particularly noticeable in the relations between Azerbaijan and Turkey: At the end of this decade, Azerbaijan's investments in Turkey will amount to almost $ 20 billion.

Analysts are increasingly converging on the fact that by 2040 the volume of gas pumping from Azerbaijan can reach 56 billion cubic meters of gas. This figure was voiced more than once. It does not seem exaggerated, especially if you recall all the expectations associated with the new gas fields: Absheron Umid - Babek Shafag-Asiman, etc. In other words, the project is supposed to be self-sufficient even without Turkmenistan.

But involvement in the project of Turkmenistan has too much political and economic importance to refuse from it. In the same May days, Georgia and the European Commission came to an agreement on joint financing of the commercial engineering of the gas pipeline project along the Caspian seabed, which will connect Azerbaijan and Turkmenistan. Haqqin.az agency was advised by Georgi Vashakmadze, advisor to the Georgian Prime Minister on the East-West energy corridor. Formation of documentation for the financial support of the project will take about a year to pass in two stages and will be sponsored by the European Commission. The World Bank and Georgia itself. This already happened.

In the issue of the Trans-Caspian gas pipeline, Azerbaijan has always maintained a neutral position: negotiate with Turkmenistan, build a pipeline, and through its territory we will miss this gas. The same was confirmed by the Minister of Energy of Azerbaijan Parviz Shahbazov who said on the air of the IFOR channel that Azerbaijan has both political will and technical capabilities for transporting Turkmen gas to South Caucasus in Europe. But we note here the position of the consortium for Shah Deniz (at least, the old one), the idea of ​​involving Turkmen gas in TANAP there is perceived without enthusiasm, believing that any gas transported through the SCS will be able to bring down the cost of Azerbaijani gas.

If the estimates for the Trans-Caspian gas pipeline prove to be positive (the result is expected in a year), then the standard procedures for creating the consortium will follow. But the following is very important: the new gas pipeline will be an independent transport segment. Vashakamadze specified that in 2011 the European Commission made a legal opinion that the issue of the status of the Caspian Sea does not concern the TAP project, if an independent carrier does this.

Already today we can say that the project will cost relatively inexpensively. The Trans-Caspian gas pipeline project involves the construction of two pipeline lines: the first with a capacity of 12-15 billion cubic meters, then the second pipeline will be built, with a throughput capacity of 15-16 billion cubic meters. These are two independent parts of each other. The cost of the entire Trans-Caspian project from the Turkmenbashi coast to the Sangachal terminal with a capacity of 30 billion cubic meters of gas does not exceed $ 1.5 billion. The reason is that Turkmenistan has already laid the East-West gas pipeline, injecting about 3 billion cubic meters of gas from gas-rich deposits in the southeast of the country to the Caspian coast. As for the legal status of the Caspian Sea, it will probably be adopted. All parties are in a hurry.

In other words, everything is just beginning.