THE STORY OF GAS (3)
By Maria Beat
Today’s Zaman
Oct 27 2009
Turkey
Political analysts say the world’s growing demand for Russian oil and
gas saved the Soviet regime from its natural collapse and prolonged
the life of the Soviet empire until 1991.
Though true as it may be, it was that demand that contributed
to Russia’s successful integration into the Western economy and
resulted in establishing sound relations built on cooperation with
such countries as Germany and Italy and to build potential strong
enough to withstand the collapse of the Soviet Union and to continue
developing further.
As for Turkey, it became a Russian gas consumer back in the 1980s with
a launch of the Western Corridor pipeline to bring 8 billion cubic
meters (bcm) of natural gas through Ukraine, Moldova and Bulgaria to
Turkey. It remained the sole source of Russian gas supply to Turkey
until 2004, when the state-of-the-art Blue Stream underwater pipeline
became operational. The Western Corridor Agreement, due to expire
in 2011, was further extended for another 20 years in August during
Prime Minister Vladimir Putin’s visit to Turkey.
The inauguration of Blue Stream in the autumn of 2005 almost coincided
with the start of the first Russian-Ukrainian gas crisis to cause
disruptions in its supply to the West — actually, for the first time
since the 1970s. Without overestimating the economic impact of the
crisis on the West, since there was not a serious gas supply shortage
experienced at the time, it still deserves to be mentioned as its prime
impact was rather of a political nature: In the winter of 2006 the
world at large came to realize that Russia was back as an aggressive
player. It was in 2006 as well when the Russian government announced
Russia’s becoming an energy superpower as a primary national goal.
The revelation that Russia was in the position to leave Western
Europe freezing in mid-winter, having shut the gas valve, was of a
shocking nature for the European Union’s new member countries, who
were deeply concerned with the state of their gas affairs. As such,
they did not pay enough attention to the fact that, of all the Russian
gas consumers in the region, Turkey was the only country immune to the
Russian-Ukrainian gas row. Two gas pipelines from Russia ensure regular
gas deliveries, without bottlenecks and interruptions, to Turkey.
Building pipelines
For natural gas, pipelines are the ultimate means of transportation,
provided that the gas is not liquefied. Once built, a pipeline draws
the gas supplier and the consumer closer together and the costlier
its construction is, the stronger the supplier-consumer bond becomes.
Logical as it sounds, this assumption implies as well that, when a
dispute or conflict of interest happens, its resolution is next to
impossible. Hypothetically, a resolution could be still found provided
that a political will is present but … there is always a "but."
Pipelines are a fashionable business today, largely focused on the
Black Sea region, in the past decade this business has led to the
construction of the state-of-the-art underwater Blue Stream pipeline;
the second longest pipeline in the world, the Baku-Tbilisi-Ceyhan
(BTC) pipeline, which transports Caspian crude oil; and the first
Caspian gas pipeline, the Baku-Tbilisi-Erzurum (BTE) pipeline. By
coincidence or not, all of them come to Turkey, making it a regional
energy hub and a sound player in the world energy market.
Turkey drew the attention of Russia’s energy sector in the mid-1990s
when its all-powerful Gazprom decided to build the Blue Stream line by
crossing the bottom of the Black Sea from Izobilnoe in the vicinity
of Novorossiysk to Samsun in northern Turkey and to deliver 16 bcm
of natural gas a year without passing through transit countries.
Successfully completed in 2004 and officially opened a year later,
today Blue Stream ensures direct Russian gas supplies to Turkey.
Largely, regional pipeline construction issues have topped the agenda
of international business since the 1990s and two developments of
prime importance have triggered this process. They are the 1991
collapse of the Soviet Union which resulted in the emergence of oil-
and gas-rich post-Soviet economies and the adoption of the Caspian
region policy by the United States administration in the mid-1990s.
Later on, two regional pipelines came into being to deliver Caspian
crude oil and natural gas to the world markets by establishing a
new southern export corridor bypassing Russia. Of them, the BTE
gas pipeline became the second successful US pet project in the
Caspian after the BTC oil pipeline. Commissioned in 2007, it is a
major channel for natural gas deliveries from Azerbaijan to Georgia,
Turkey and later Europe, with a sound potential to ensure Caspian gas
supply for the Nabucco pipeline, provided of course that Azerbaijan
agrees to continue supplying gas.
As for Azerbaijan, since its independence it has become a prime
player in the regional oil and natural gas markets. It is estimated
that geological analyses to be completed in 2015 will prove that its
natural gas reserves are almost 3 trillion bcm, with potential to
increase the overall gas production in the country to up to 45 bcm a
year in another seven years. As of 2009, Azerbaijan’s gas production
stands at 28 bcm a year.
Built at the cost of $900 million, the 690-kilometer-long BTE line came
into being as a modified version of the Trans-Caspian Pipeline (TCP)
originally envisaged by the US to bring natural gas from Turkmenistan
through Azerbaijan and Georgia to Turkey and further on to European
clients. Nevertheless, while being actively pursued by the Clinton
administration initially, the project lost momentum right after its
high-profile endorsement in November 1999 and was speedily replaced
with the BTE pipeline to bring gas from the newly discovered Shah
Deniz off-shore Azerbaijani block in the Caspian Sea to Erzurum in
northern Turkey through Georgia. In operation for almost two years
now, the BTE is expected to reach an additional capacity of 20-30 bcm
a year shortly, which implies higher volumes of natural gas pumped
to the world’s markets through Turkey, bypassing the Russian gas
exporting system.
As was the case with the BTC, the construction of the BTE was largely
triggered by the idea of ending Russia’s long-existing monopoly
over the transportation of Caspian energy reserves to world markets
and both projects were considered an absolute success story until
Aug. 8, 2008, when the Russia-Georgia War broke out. Apparently
when designed, the BTE was expected to improve the security of the
international gas supply business by saving its transportation from
bottlenecks and interruptions. Correct as it may have been initially,
the expectation lost its ground in August 2008 when the pipeline was
temporarily closed and gas production at Shah Deniz put on stand-by
due to the military hostilities between Russia and Georgia. Moreover,
Georgia’s image as a safe transit channel for commodities and energy
resources transportation from the Caspian region to the world markets
was severely damaged and the international community started looking
into other transit options for oil and gas deliveries from the Caspian
to the world markets.
Attention was immediately drawn to Armenia, though there were political
complications there too, as the closed Turkish-Armenian borders were
unanimously recognized as an obstacle. In the year that has passed
since then, there has been a dramatic change in the existing status
quo as Turkish-Armenian relations experienced a major breakthrough,
bringing both countries to the final stage of opening the border and
establishing diplomatic relations.
This surprising development is likely to result in a crucial change
in the regional energy pipeline construction plans, with the potential
to make Armenia a new transit corridor in the southern export route to
the world markets. The approach is actively pursued by the US and the
EU, and the Nabucco pipeline, as the focus of their energy attention,
could use Armenia as a new transit route in the Caucasus, replacing
Georgia. This brave scenario is more than speculation considering
that a whole network of bypass pipelines functional in the Soviet
times still exist in Azerbaijan and Armenia.
Dependence vs. independence
Energy reserves largely come to Europe from the Persian Gulf,
northern Africa and Russia. As such, energy dependence is an issue
of prime concern for Europe, as the European Security Strategy
specified in 2003. While energy dependence is an accepted fact of
life, overdependence on any country for key oil or gas supplies is
fraught with the danger of disturbing national energy security. Still,
the EU countries, being the world’s greatest importers of energy,
are dependent on gas imports: from 32 percent of its gas for Italy to
nearly 100 percent for Bulgaria, Estonia, Finland, Latvia, Lithuania,
Romania and Slovakia. More than 30 percent of EU’s gas imports come
from Russia and while the imports are duly diversified for Western
Europe, new EU members from Central and Eastern Europe almost entirely
depend on Russian gas.
As such, countries like Italy and Germany take the existing gas supply
situation as normal and regard closer ties with Russia as a business
opportunity and strategic necessity, while the others, mainly the
former "people’s democracy" regimes concerned with Russia’s dominance
in energy matters, fight against their dependence on Russian gas.
While comfortable for Old Europe, energy dependence is unacceptable
for them and their chief aim is to strive for energy independence. As
the best solution to achieve energy independence, the diversification
of gas supply sources coupled with the construction of alternative
pipelines have been chosen as the best of available options, with
the focus of attention on the Central Asian and Caspian reserves and
the construction of the Southern Corridor pipeline system which is
to include Nabucco as an imperative.