Giving new life to the idea of bringing Caspian natural gas to European markets, Turkey and Azerbaijan will go ahead with plans to build the Trans-Anatolian Natural Gas Pipeline project (TANAP), in a move that is welcomed in Europe as a major step towards reducing dependence on Russian natural gas.
Turkey's Prime Minister Recep Tayyip Erdogan and Azerbaijan's President Ilham Aliyev called the $7 billion (5.6 billion euros) inter-governmental agreement signed on June 27th "historic." The 2,000km pipeline will have an initial annual capacity of 16 billion cubic metres, and could be expanded to transport other sources of gas.
TANAP is expected to be completed in 2018, around the same time the first gas exports from the Shah Deniz II gas drilling project in the Caspian Sea come online.
In a related development, the Shah Deniz gas producers' consortium on June 29th announced Nabucco-West -- a shortened version of the decade-old Nabucco pipeline project -- would be one of two final contenders to bring Azerbaijani gas to Europe from Turkey via Bulgaria, Romania and Hungary and Austria. The consortium is set to make a final decision next year between Nabucco West and the Trans-Adriatic Pipeline, which runs from Turkey to Italy via Greece and Albania.
In Ankara, officials anticipate Turkey's role as a major transit country will strengthen its bargaining power vis-a-vis the EU and Russia, while increasing its own energy security and relations with Azerbaijan.
"This is not only a very optimal way to meet European gas diversification needs, but also very important for our country as it increases Turkey's role as a transit country," Mahmut Mücahit Fındıklı, chairman of the Turkish parliament's Energy Committee, told SETimes.
Findikli said the project has regenerated Nabucco instead of destroying it.
Jan Sir, a Caspian energy expert at Charles University in Prague, said the project "keeps alive the strategic rationale" behind a southern energy corridor skirting around Russia.
"For Azerbaijan, it opens new export opportunities and provides the desired diversification of external relations and stable income," he said. "It is clear that with the opening of the Caspian to the West, Turkey's Caucasus connection would become stronger and Russia would lose much of its influence over the post-Soviet region," he told SETimes.
Russia remains Turkey's No. 1 supplier of gas. The country is the second-largest market for Russian gas monopoly Gazprom. But now that Turkey has its foot solidly in the gas market, Russia may view alternatives to its South Stream pipeline from Russia to Bulgaria as a threat to its dominance in the Europe.
For Hilal Pataci, the director of Future Energy Leaders at the World Energy Council's Turkish Committee, the agreement between Baku and Ankara may "turn into a problem in Russia- Turkey relations in the upcoming years."
However, she said both Turkey and Azerbaijan have more to gain than lose because the deal "will increase Turkey's geographical importance during the process of EU negotiations while Azerbaijan will have a partnership with the EU countries."
"[The project] will provide sustainable partnership and acceptable prices via Turkey to the EU countries," she told SETimes.
Turkey buys natural gas from Azerbaijan at $320 per thousand cubic metres, much below the approximately $460 per thousand cubic metres it pays for Iranian and Russian gas.
Evrim Eken, a Turkish energy analyst at St. Petersburg State University's School of International Relations, believes that Turkey can use this "price card" against Russia. By giving Baku the possibility of direct access to the EU market, Turkey could also push Azerbaijan for additional price discounts.
"A possible merger with Nabucco-West is a worse scenario for Russia," she said, adding that Moscow "can use all possible leverages to prevent the project."
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Distributed via Southeast European Times