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They said volumes moving along this Southern Gas Corridor initially will be relatively small, but its very existence will encourage Turkmenistan and other Caspian basin gas producers to resist Russian pressure to use its planned South Stream system instead.
“We have a lot more work to do before the Shah Deniz project reaches its final investment decision, but we’re moving ahead,” said Greg Saunders, senior international affairs director at BP PLC, which is the project’s primary multinational participant.
The European Union’s successful pressure in June to keep Russian companies from buying financially strapped DESFA, Greece’s national gas transmission operator, also was significant, several panelists added.
State Oil Co. of the Azerbaijan Republic (SOCAR) acquired DESFA instead, securing a strategically important gas grid that improves both countries’ energy security, according to Anthony Livanios, chief executive of Energy Stream CMG GMBH in Frankfurt. SOCAR expects to take control of a 66% interest in DEFSA during 2014’s second quarter, it said on Sept. 16.
“Greece will be the first EU member to receive Caspian gas,” Livanios said. “It will strengthen Europe’s energy market and stabilize the eastern Mediterranean by increasing cooperation between Turkey and Greece. TAP has been the best economic news in Greece in the last 5 years because of the additional gas supplies and the transit fees it will collect.”
Russia will continue to ship gas to Europe by pipeline, but completion of the SGC will be a significant step in the EU’s gas diversification strategy, noted Christian Bursmuller, who heads the energy, transport, and environment section in the EU’s delegation to the US.
Amos J. Hochstein, deputy assistant secretary for energy diplomacy in the US Department of State’s Bureau of Energy Resources, said the SGC’s completion will be critically important for both the EU’s and Azerbaijan’s energy security. “But it won’t bring about EU gas supply diversification by itself because it initially will supply only 10 billion cu m,” he said.
“It will be necessary to look at interconnections within the region, and where LNG, nuclear, and renewables fit in. More broadly, decisions in Azerbaijan and Turkey are connected to decisions in Europe. Selecting TAP in June was important, but we must work now to help remove any roadblocks and make sure it gets built.”
The Shah Deniz consortium’s selection of TAP was important because it not only creates a strategic corridor to Europe for Caspian Basin gas, but also was more realistic financially than Russia’s South Stream project, said Matthew Bryza, a former US ambassador to Azerbaijan who now directs the International Center for Defense Studies in Tallinn, Estonia.
He said it was tragic that Romania, after being one of the region’s strongest SGC supporters, lost out when TAP was selected over the competing Nabucco West proposal, while Bulgaria’s ambivalence over both routes was a mistake since its continued dependence on gas from Russia now looks likely.
Why ties persist
Margarita Assenova, who directs the Jamestown Foundation’s Balkans, Caucasus, and Central Asia program, said Bulgaria’s Socialist Party leadership and Russian energy interests have a close relationship. “Russia supplies 90% of Bulgaria’s gas, and Lukoil sends crude there to be refined,” said. Although Russia’s gas sales to Bulgaria are relatively modest, it would like to build crucial South Stream project segments there, Assenova said.
“The previous government made only one mistake, and that was to place a moratorium on shale gas exploration, particularly since Chevron was already there,” she said. “Offshore development in the Black Sea is questionable, so the government seems mainly interested in preserving Bulgaria’s relationships with Russia.”
Bryza said, “I think we’re beyond the period where we draw lines representing pipelines on maps and try to increase our strategic position as Russia does. The economic well-being and efficiency of our European partners’ economies is very important to the US.”
Iran’s long-term potential as a major gas supplier, if its government can get sanctions against it removed, also should not be overlooked since its South Pars field is the world’s largest, Livanios said. “It would like to exploit any infrastructure, including exports through the SGC, if possible,” he said.
Advocates for completing an Azerbaijan-to-Europe gas pipeline will need to work hard to keep the project in the US global energy policy foreground, Bursmuller said. “I’ve noticed since arriving in Washington 3 years ago that the SGC no longer seems hip because of shale gas and LNG,” he observed.
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