Eurasia Energy

Realizing Gas from Azerbaijan's Shah Deniz Project in the Caspian

Wed, 26 Jan 2011 15:24:39 -0600

On January 26, the Dinu Patriciu Eurasia Center held a discussion with BP Azerbaijan's Vice President for Shah Deniz Development Al Cook on realizing gas from Azerbaijan’s Shah Deniz project, on which critical decisions and developments are expected in coming months. The event provided an opportunity to assess project plans, consider how they relate to Azerbaijan’s priorities, review issues related to the roles of Turkey, the European Union and other key regional players, and talk about Shah Deniz issues that pertain directly to the United States. Eurasia Center Director Ambassador Ross Wilson moderated the discussion.

The Caspian Basin is one of the 21st century’s most important new sources of hydrocarbons. The realization of large-scale oil exports from Kazakhstan and Azerbaijan in the late 1990s owed itself in part to effective diplomacy by the United States with the regional players, as well as bold decision-making by key international oil companies. In recent years, attention has turned to natural gas – the growing need for alternative sources of gas, as well as the pipeline infrastructure challenge of moving that gas to market. Azerbaijan’s Shah Deniz project is widely regarded as the next large-scale source of gas for a major new pipeline system to Europe.

Al Cook is the Vice President for Shah Deniz Development of BP Azerbaijan, responsible for the integration of the 20 billion dollar gas project including construction of off-shore facilities, expansion of the Sangachal terminal and the South Caucus pipeline system as well as the marketing of Shah Deniz gas in Europe. At BP, he has served in a number of major project development and commercial role including the North Sea, Gulf of Mexico and most recently in Vietnam.

Who Will Play the Lead in Eurasia's Pipeline Opera?

Alexandros Petersen — Mon, 24 Jan 2011 10:54:09 -0600

European Commission President Jose Manuel Barroso was in Turkmenistan last week negotiating ways the Caspian country's vast natural gas reserves might ameliorate European dependence on Russian resources through the so-called Southern Energy Corridor. Coming on the heels of a successful agreement inked in Baku to bring Azerbaijani gas to the European Union, Barroso's meeting in Ashgabat instead indicated the need for more talks in the coming months.

It has long been conventional thinking in the West to see Turkmenistan as ‘a bridge too far.’ Though European leaders have longed for access to Turkmenistan’s 8.1 trillion cubic meters of proven gas stores, substantial impediments to any southern corridor project have prevented the opportunity to connect European consumers with Turkmen producers. However, Ashgabat’s decision to diversify away from Russia and China by shaking hands on the TAPI pipeline to Pakistan and India, and the expression late last year of their willingness to construct a trans-Caspian pipeline that could connect to a project supplying Europe, have put the concept of a southern corridor firmly back on the table. European decision makers must react quickly to this opportunity, but must also press for the adoption of the most logical project.

There have traditionally been a number of factors preventing the construction of a pipeline from Turkmenistan to Europe: the country is often thought to be simply too far away, given the technical restraints on the length of pipelines and the difficulty in crossing the Caspian; Turkmens have often been reluctant to negotiate with European leaders, and; the ongoing dispute between Azerbaijan and Turkmenistan over ownership of the off-shore Serdar/Kyapaz gas field has prevented cooperation between the two nations.

These obstacles have led to suggestions for Iraqi, rather than Turkmen gas, to be linked into the southern corridor. Moreover, the completion of the 1,139 mile China-Central Asia pipeline, which connects China’s Xinjiang province with Turkmenistan, has led many to assume that Ashgabat would concentrate on strengthening its ties to Beijing’s enormous market, at the expense of Europe. However, developments in recent weeks suggest that Turkmenistan may be on the way to overcoming many of these obstacles. The agreement to construct the 1,700 km TAPI pipeline, connecting the gas rich field of Dauletabad in southern Turkmenistan to the expanding markets of Pakistan and India, is a hugely ambitious project given the need to pass through the unpredictable provinces of Helmand and Kandahar in war-torn Afghanistan. Though the pipeline cannot be built until the security situation in Afghanistan improves, the deal demonstrates Ashgabat’s determination to diversify away from Russian and Chinese demand.

Secondly, after years of ambiguity or silence, the Turkmen government has finally expressed its willingness to work with Azerbaijan on the construction of a trans-Caspian pipeline, which could link up to a project transporting gas to the huge European market. In November, both the president and deputy prime minister expressed their willingness to supply Europe with as much as 40 billion cubic meters, or bcm, of gas annually via a pipeline crossing the Caspian and South Caucasus.

Though these proposals remain far from concrete, they do place the three primary southern corridor projects back in the spotlight. The largest of the three, the Nabucco pipeline, aims to deliver 30 bcm of gas to Europe, beginning in Turkey and finishing in Austria; the Italy-Turkey-Greece Interconnector, or ITGI, is the smallest solution to opening the southern corridor with a capacity of less than 10 bcm; while the Trans-Adriatic Pipeline, which aims to transport gas from the Caspian to Albania, Greece, and Italy, is the shortest pipeline, with a flexible capacity of around 20 bcm. Its plans also allow for the reverse flow of gas, an important option in case of future gas cutoffs, such as those experienced in Eastern Europe in 2008. Perhaps most importantly, however, a project the size of Trans-Adriatic does not – at least initially – require gas from anywhere other than Azerbaijan. Southern corridor construction can begin as negotiations with Turkmenistan continue.

Though the Nabucco project is undoubtedly the most discussed of the three, this does not mean it will necessarily win out. In fact, given the timeframe the Turkmens are implying (completion by 2015), it appears more likely that a smaller project will be adopted. This needs to be recognized by European decision makers, who should be pushing for the most realistic proposal to be agreed upon as soon as possible. While the Turkmens are currently interested in the southern corridor, the rapidly changing nature of Eurasian energy geopolitics in recent years ensures that there are no guarantees this enthusiasm will persist. Furthermore, given the uncertain prospects of the TAPI project, it would make sense to undertake a more stable mission in the southern corridor. For these reasons, European decision-makers should perhaps more seriously consider the medium sized Trans-Adriatic Pipeline, which is the most cost effective of the three projects and has the added ability to expand its capacity relatively easily.

Richard Morningstar, the United States’ Special Envoy for Eurasian Energy, recognized these developments in his recent suggestion that Nabucco is “not the only project” worth considering.

The southern corridor is both a vital source of energy for the expanding European gas market and a potential political asset in countering the dominance of Russia and China. Turkmenistan’s changing attitude provides an opportunity that cannot be missed, but Western decision-makers should take advantage of it prudently and support the project that makes the most sense.

Alexandros Petersen is senior fellow at the Atlantic Council’s Eurasia Center and director of research at the Henry Jackson Society. This article was originally published in the Hurriyet Daily News & Economic Review. Photo credit: Azertag

Making Europe Count in the Caspian

Borut Grgic — Thu, 13 Jan 2011 09:20:24 -0600

After a along period of political neglect the EU is finally responding to its critics by sending the President of the EU Commission, Mr. Barroso on a Caspian tour. The choice of countries is especially important – Azerbaijan and Turkmenistan. Clearly, energy is at the forefront of Mr. Barroso’s agenda. European Union is expecting to source a large portion of its future gas imports from the Caspian region, which means relations with Azerbaijan and Turkmenistan have to excel.

Ever since Russia began applying politics to gas, the European energy experts have been advocating greater EU energy diversity. As Europe’s own supplies of primary energy are on a decline – namely less and less natural gas – our dependence on imports will grow in the short to medium term. For this reason, how the EU structures its relationships with external energy suppliers maters a great deal. There will always be a way to improve our internal energy market efficiency – better integration of the energy markets of the member states, more competition in areas like production and supply of electricity, and more renewable energy. But there is no way Europe will be able to altogether avoid importing energy from third parties, ever.

The EU-Russia energy dialogue, which over the last four years has been burdened by politics, has complicated and compromised Europe’s engagement with the countries in the Caspian region. In the eyes of many EU capitals it is simply not worth further complicating relations with Moscow in exchange for better political cooperation with the Caspian countries like Azerbaijan and Turkmenistan.

But the fact is Europe needs an independent dialogue with the Caspian energy producers not burdened by relations with Moscow, and Mr. Barroso’s visit is a step in the direction.

The Caspian region is rich in natural gas and oil. It is said to be one of the biggest untapped reserves of natural gas in the world today. As the EU energy demand increases and EU shifts its dependence from coal to cleaner fuels like natural gas, the Caspian abundance in natural gas can supply the new EU demand in natural gas. Second, the geographic proximity of the Caspian to the energy markets of Southeastern and Central Europe is double added value for the EU. The old Soviet block, now part of the EU club has a particular problem when it comes to energy diversity. Countries like Romania, Bulgaria, Slovakia and others are almost 100 percent dependent on imports of gas from Russia.

By bringing the Caspian gas to this region, Europe will be better off as a whole, as will each of the central and southeastern EU member states. But there is the other side of the coin to consider as well. What added value is a closer energy partnership with the EU for countries like Azerbaijan and Turkmenistan? First of all, Europe is not the only bidder for the Caspian gas. There are others like China, Iran, India, and of course, Russia. China and India combined are the fastest growing economies in the world; China will soon be the biggest economy. Judging by the number of new kilowatt hours of electricity that are added on a month to month bases in China and India, the energy demand in the east is greater than in Europe. China is offering top dollar for access to Caspian energy. In addition to offering a competitive price for long-term gas contracts, Russia and China are also offering the Caspian countries political partnerships, technology transfers and cooperation in security matters.

So far, the EU has done the energy talk, but has less than enthusiastic in structuring a genuine political and security partnership with countries like Azerbaijan and Turkmenistan. In Brussels the debate is either about energy or lack of democracy in the Caspian region. But for Baku and Ashgabat to feel compelled to work with Europe, they need to get a political deal in return for their energy.

For example, Azerbaijan has been pushing the EU to recognize its territorial integrity and sovereignty rights. Armenian military forces still occupy close to 20 percent of Azerbaijan’s land 17 years after the two countries fought a war over Nagorno-Karabakh. Armenia won the war, but its position has subsequently weakened due to the country’s economic decline, international isolation and dependence on Russia. On the other hand, Azerbaijan’s position has strengthened thanks to its growing energy exchange and international links. In the eyes of Baku, Europe’s support for its cause has been less than straightforward and helpful. Azeri leadership cannot understand why in the case of Georgia Europe’s support for territorial integrity is straightforward, but when it comes to Azerbaijan, the EU Commission prefers to keep silent.

There is also the visa free travel issue, a policy the EU has been at pains explaining in the Balkan context, and has as of recently lifted the visa restrictions for all Balkan countries except Kosovo. To Azerbaijan, which someday hopes to join the EU, visa restrictions strike as unjust, especially in the context of business and student travel.

Mr. Barroso has a tall order of issues to address on his Caspian tour, and need to come home with an energy deal. But to score points on the energy front, he would be wise to offer some political carrots as well to his interlocutors in Baku and Ashgabat.

Borut Grgic is a nonresident senior fellow at the Atlantic Council and founder of the transCaspian initiative at the EPC in Brussels. This article was originally published in the Hurriyet Daily News.

Innovantion and Stagnation in Eurasia

Alexandros Petersen — Mon, 04 Oct 2010 03:01:00 -0500

For the countries of the greater Black Sea region and Central Asia, the question of how to diversify their economies away from resource dependency or government-dominated industry is central to long-term growth and future political stability. Economic diversification is an explicit policy of energy-rich states such as Azerbaijan and Kazakhstan, and fostering innovation is a key part of that effort. This week, for example, Baku is set to announce its plans for Azerspace, a program to launch Azerbaijani satellites into orbit. But even as the Georgian government encourages software development and Azerbaijan seeks to become Eurasia’s telecommunications hub, experts question whether the dominant approach to fostering innovation in Eurasia is the right one.

In a discussion on October 1, 2010, at the second annual Black Sea Energy and Economic Forum in Istanbul, Andrew Prozes, the Global CEO of LexisNexis, a pioneer in providing information online, and Internet visionary Paul Twomey, former President and CEO of ICANN, the Internet Corporation for Assigned Names and Numbers, emphasized the building-blocks that must be in place for genuine innovation to flourish in any economy. These include intellectual property rights, traditional property rights (to be able to grow a business, hold on to it and potentially sell it), sound technical and business education, research and development incentives, available credit and capital markets and respect for the rule of law. All these are sticking points in the Eurasian context. Twomey, especially, emphasized not just technological innovation, but process innovation—that is, openness on the part of government and the private sector to operate and cooperate in new ways.

Obstacles and risks are not limited to the Eurasia space. The desire to maintain the status quo, entrenched relationships between government ministries, state-owned or controlled companies and de-facto monopolies—all these challenges were and sometimes are still present in telecommunications and information technology in North America and Western Europe. Genuinely fostering innovation is therefore at least a twenty-year process; it requires commitment from the private sector and hard work in bringing entrenched interests onside, or getting around them.

The former Soviet region does have its own particular challenges. Ian Hague, co-founder and and lead manager of Firebird Capital, an investment firm working in the former Soviet space, pointed out that Eurasian governments are not in principle averse to the concept of innovation. As with the cases of Georgia and Azerbaijan, business and government have understood the importance of economic diversification through innovation. But as Hague termed it, Eurasian states tend to see the fostering of innovation as a top-down exercise that the state leads and sometimes controls. Its transformative effects are therefore stifled.

Lt. Gen. Brent Scowcroft, National Security Advisor to US Presidents Gerald Ford and George H. W. Bush and Chairman of the Atlantic Council International Advisory Board, also touched on this subject at the Black Sea Energy and Economic Forum. According to him, some Eurasian governments fear innovation, particularly in information technology, and see it as a potential political threat. The extent to which a government tries to control information is a key indicator of a country’s capacity for innovation.

Scowcroft’s comments get to the heart of the matter. Eurasia is one of the parts of the world most in need of entrepreneurial spirit in order to break through ossified modes of operation left over from the Soviet period. Yet as long as the political environment is not ready for the pluralism that comes with business innovation, genuine economic diversification will remain a ways off. Nonetheless, both the wealthy resource-based economies of the region such as Azerbaijan and Kazakhstan, and the struggling economies such as Moldova or Kyrgyzstan need a flowering of innovation to avoid long-term stagnation. The solution lies in more open politics.

Alexandros Petersen is a nonresident senior fellow with the Atlantic Council's Dinu Patriciu Eurasia Center.

Balkans Get New Energy Line

Borut Grgic — Tue, 03 Aug 2010 09:39:28 -0500

Back from the dead, the Balkan economies are picking up steam. Consumers are spending again and managers are expanding their production lines. This is good news, save one problem – energy supply. The Balkan energy markets are insufficiently supplied, not diversified enough, and still over dependent in some case on energy sources that emit unacceptable quantities of CO2 into the atmosphere.

The Balkan markets face an energy conundrum – how and from where will this region get new energy to support its vibrant economic growth? There are several options, and some countries have already made their arrangements. Serbia for example, sold its national oil and gas company to the Russian Gazprom.

The good news for the Balkans comes from the Caspian in the form of the recently signed Azerbaijan-Turkey transit deal that sets the transit price for Azerbaijani gas passing through Turkey. For the Balkan energy planers this is an opportunity to tap into a steady and price-competitive natural gas market.

Azerbaijan, the western state on the Caspian shores is a major producer of natural gas and of oil. It has been the darling of the big western oil companies for over a decade now, because its energy markets are open to direct foreign involvement. In light of this, an international consortium is developing and operates the Shah Deniz natural gas field where the local oil and gas company SOCAR has only a minority share. This structure helps ensure that market principles rather than politics drive the deals froward, and that the price of natural gas is transparent. The Russian model is vastly different from this, and Moscow already showed us how it runs its energy relations with third parties – gas is used as a source of political influence.

The Balkan states, all on track to becoming EU members, should find Azerbaijan’s Caspian alternative to the Russian gas interesting. First, it is a market driven set-up, and second, Azerbaijan has no hang-ups about spheres of influence, and like the Balkan countries, is pursuing a future within the Euro-Atlantic structures.

For a long time the main roadblock to accessing Azerbaijan’s gas was Turkey. Ankara has an ambition to become an international energy hub, and this has stood in the way of agreeing a transit formula with Baku. No more. This agreement was finally signed last month between the two heads of state. A provisional plan on how to get the Azeri gas to the Balkan consumers is already in the making. Gas will be piped via the existing infrastructure from Azerbaijan to Georgia to Turkey and on to Bulgaria. It will then be available for pick up on the Bulgarian border.

Second, the connection to Azerbaijan can yield a future connection to Turkmenistan. Azerbaijan and Turkmenistan are already working on a way to link their gas lines under the Caspian Sea. Turkmenistan is considered to have one of the world’s largest deposits of natural gas.

Now is the time for big strategic vision in the Balkans. The Albanian Prime Minister has already voiced his interest in turning Albania into a mini gas hub, by using the country’s favorable geographic position to offer natural gas in LNG form to international buyers and link Albania with Italy under the Adriatic Sea. Macedonia has similarly expressed an interest in new and stable supplies of natural gas. Kosovo’s energy market is under-supplied, and Pristina desperately needs to figure out a way to bring up its energy supply in order to keep alive its post-independence economic boom. Burning lignite coal, which is the current plan, is not an environmentally responsible decision, which in the end will cause problems for Kosovo in its negotiations with the EU.

Natural gas from the Shah Deniz field will be available as early as 2014. The field is already in the development phase, and the consortium is talking to interested buyers. The volumes of natural gas from this field are limited, so there's not much room for deliberation. Energy security is a good pretext then, and a good reason for the Balkan leaders to pay an official visit to Baku still this year.

And then there is Nabucco, the project that never seems to stop being planed. Should the Balkan states count on it to ensure their own energy security? The answer is no, for two reasons. First, the Nabucco pipeline is about shipping gas from the Caspian to the Baumgarten trading platform and from there to third markets in Western Europe. As the energy price in Western Europe is higher, buying gas in Baumgarten is likely to be much more expensive for the Balkan countries than buying it directly from the Caspian suppliers. Second, the pipeline is still a paper tiger, in other words, it continues to lack financing and real political support to make itself operational.

Borut Grgic is a nonresident senior fellow at the Atlantic Council. He is the founder of and senior advisor to the TransCaspian project, EPC Brussels, and an expert in EU, Balkan and Caspian relations, political economy and frozen conflicts. Photo credit: Cambridge Forecast.

Borut Grgic: Azerbaijan as a Source for Natural Gas

Borut Grgic — Fri, 18 Jun 2010 10:06:44 -0500

Borut Grgic, nonresident senior fellow at Atlantic Council, was recently interviewed by the Azeri Press Agency of Azerbaijan. The interview transcript is presented below.

“Turkey is already over dependent on Russia, so Ankara is keen to receive gas from Azerbaijan”

- Azerbaijan and Turkey have recently signed a package of agreements on gas supplies to Turkey. How would you comment on this agreement? Do you think that all the problems and concerns about Nabucco project will be solved?

- This is an important breakthrough for Azerbaijan and for Europe’s Southern energy corridor. For one, Azerbaijan managed to increase the price Turkey is paying for gas, secure new gas contracts with Turkey and agree on a transit fee turkey will charge. This enables Azeri gas to be bought and sold on the European market even if Nabucco is not built. Now that we know the price of Turkish transit, Azerbaijan can sell its gas to Balkan countries through the Turkey-Greece interconnector. These are all interesting markets for Azerbaijan, as their energy needs are rapidly expanding with economic growth, and they are increasing gas consumption as they begin to switch out of coal in line with EU commitments. Once present on the market with gas, Azerbaijani state oil and gas company, SOCAR will also have opportunities to enter the Balkan downstream market. These countries will eventually become part of the EU common market, which means SOCAR will have assets on the EU market. And it’s worth noting that these assets are still much cheaper than on the central or western EU markets. So it’s a deal for SOCAR either way.

- Russian Prime-minister Vladimir Putin said that there is no competition between the Azerbaijani and Russian supplies to Turkey. Is it really true or Russia may worry about enhancing of Azerbaijan’s role as a gas supplier?

- When you have two suppliers, which supply the same good, there’s competition by default. But as long as Turkish energy market keeps expanding in line with Turkey’s growing economy, there’s ample room for both suppliers. The question is also weather Russia can supply more gas to Turkey. The answer is probably yes. And therefore, Azerbaijan’s gas is a source of direct competition. But then again, Turkey has a strategic and inherent interest in diversifying its gas intake. Turkey is already over dependent on Russia, so Ankara is keen to receive gas from Azerbaijan as this is in line with its energy security strategy. From the perspective of Turkey, diverse supply of gas is also good for price - it helps drive down the price closer to the market price. Finally, Turkey is also investing in LNG facilities, so in the future; it will also be able to buy gas from the spot market.

- US have always been pointing out that Turkey and Azerbaijan should encourage Turkmenistan to be involved into European gas supplying projects. What do you believe Turkey and Azerbaijan can do in this situation?

- The best Turkey and Azerbaijan can do is realize gas flow from Azerbaijan through Turkey to Europe. Once AZ gas is sold on the European market and Turkey shows it to be a reliable transit rout, Turkmenistan will soften its position and the trans-Caspian interconnector (or a commercially sound alternative) will be built.

Borut Grgic is a nonresident senior fellow at The Atlantic Council, and founder and director of the transCaspian initiative. Photo credit: Getty Images

Azerbaijan - Turkey High Stakes Gas Deal

Boyko Nitzov and Galib Abbaszade — Thu, 27 May 2010 09:47:11 -0500

Ever since the beginnings of the modern petroleum industry in Azerbaijan in the mid-19th century, the country has, despite being a major oil exporter, also been a net gas importer.

It was only recently that production from Phase I of the Shah Deniz gas-condensate field picked up, along with output of associated gas at the Azeri-Chirag-Guneshli (ACG) field. Several smaller fields operated by SOCAR, the national oil and gas company, have also contributed. For the first time in its history, in 2007 Azerbaijan was able to discontinue gas imports from Russia and begin exporting to Turkey via the South Caucasus Pipeline (SCP). So far, exports have run at a low level, well below SCP’s initial capacity of 6.7 billion cubic meters per year (bcmy), which will eventually be increased to 20-22 bcmy. However, with the removal of major impediments to exports of gas from Azerbaijan to Turkey, exports will rapidly grow – to Turkey and beyond. If only Azerbaijan and Turkey could come to an agreement.

Negotiations between Azerbaijan and Turkey have been dragging on primarily because the two sides could not agree on the price, volume, and terms and conditions for transit of Azeri gas via Turkey. Under the previously signed contract for export of up to 6.6 billion cubic meters per year (bcmy) of gas to Turkey, the price was set rather low, at $120 per 1,000 cubic meters, even though it could be renegotiated once per year. Besides, BOTAS, the Turkish gas company, insisted on buying Azeri gas and then reselling it to customers in Europe, a policy which prompted some observers to note the emergence of “Gazprom lite”.

These issues should have been resolved during the recent visit of Turkey’s PM Recip Tayyip Erdogan to Baku, where he discussed with President Aliyev of Azerbaijan the gas price, a visa deal, and the Nagorno-Karabakh dispute. It was expected that the gas agreement would be signed on May 17, during the visit, but surprisingly the deal was postponed due to undisclosed “minor technical issues.” It is now scheduled to be closed in early June in Istanbul, where Turkey plans to hold a gas summit with EU participation. Reportedly, the delay is more pomp than circumstance, as the actual contract between SOCAR and BOTAS has been put to paper and is now just waiting for the ink during a nicely appointed occasion.

Hopefully, the delay will be the last one. At stake is not just Nabucco, which has so far failed to subscribe suppliers of gas, but also Turkey’s credibility and ambition to become a gas hub serving the Balkans and Europe, along with Azerbaijan’s long term position as an exporter of natural gas.

Most of the oil and almost all of the gas produced in the Caspian basin still reach international markets via pipelines across Russia. Russia buys most of Turkmenistan’s gas, all of Kazakhstan’s and Uzbekistan’s, and has offered to do the same with Azerbaijan’s gas. The absence of direct outlet to international markets has delayed the development of the Shah Deniz field in Azerbaijan and stripped the country from a new major source of export earnings. Nabucco has also suffered, since Iran, which often plays along with Russia in the Middle East, is currently the only other potential source of gas for the pipeline.

Some of the delay was caused by geopolitical factors. Turkey’s recent move to reconcile with Armenia was met with consternation in Baku, which seeks to orchestrate regional energy and cooperation projects in a way that bypass Armenia. The delay may actually hurt Azerbaijan more than anyone else, since without an outlet to markets it will be impossible to proceed with Shah Deniz II, now due in 2017. Turkey has requested 6-7 bcmy from Shah Deniz II, which will produce an additional 16 bcmy on top of the current 9-10 bcmy from Shah Deniz I. That would make available some 10-12 bcmy of gas per year to Nabucco, still quite short of its ultimate capacity of 31 bcmy, but possibly just enough to proceed with the project.

But Nabucco is not the only way to take natural gas from Turkey to Europe. On May 20, Germany’s E.ON Ruhrgas joined the Trans-Adriatic Pipeline (TAP) project along with Norway’s Statoil (which also participates in Shah Deniz and SCP) and Switzerland’s EGL. The project will deliver gas from Greece (which is already connected to Turkey by a 36 inch pipeline) to Italy. The move peeved both the Nabucco partners, who now include Germany’s RWE, and the participants in the Italy-Greece-Turkey Interconnector project (ITGI), a project that also aims at bringing Caspian gas to Italy via Turkey and Greece. ITGI is promoted by Italy’s Edison, Greece’s DEPA, and Turkey’s BOTAS, and Bulgaria’s Bulgargaz has expressed desire to join it. However, only Nabucco, in which BOTAS participates as well, will commit itself to developing the extra transiting capacity in Turkey that is needed for any of these projects to succeed.

In the puzzle, Azerbaijan and Turkey remain the key. During the “gas summit” which convened in Prague in May 2009, EU offered trade and transport facilities to the two countries so that the so-called “Southern Corridor” could become a viable avenue for exports of Caspian oil and gas. At the time, European Investment Bank President Philippe Maystadt said the bank has held funding talks with the consortium behind Nabucco and those behind the two other proposed pipelines to bring Caspian gas to Europe -- the TAP pipeline and the ITGI. Options for bringing gas into Turkey from Iraq and Egypt were also considered.

In early June in Istanbul, another gas summit will convene and another milestone may be passed. Keep your fingers crossed.

Dr. Boyko Nitzov is Director of Programs and Galib Abbaszade is an intern for the Dinu Patriciu Eurasia Energy Center at the Atlantic Council. Photo credit: Reuters Pictures.

Bulgaria Energy Sector

Tue, 06 Apr 2010 15:36:42 -0500

In this Eurasia Center issue brief, Boyko Nitzov, Director of Programs of the Atlantic Council’s Patriciu Eurasia Center and a team of experts (Ruslan Stefanov, Valentina Nikolova, and Dobromir Hristov) from the Center for the Study of Democracy in Sofia, Bulgaria, provide sector review, findings and recommendations about energy in Bulgaria in response to the need to enhance energy security and develop consistent sustainable energy policies.

The broader Black Sea-Caspian region is the world’s nexus of energy and geopolitics. The band of countries stretching from Eastern Europe to Inner Asia presents some of the greatest opportunities and most daunting challenges for energy development, transport and economic growth. As a member of both EU and NATO, Bulgaria finds itself increasingly involved in broader regional, Eurasian, and transatlantic aspects of the energy sector. The issue brief looks at both challenges and opportunities and suggests ways to enhance competition, improve governance, and promote a sustainable energy agenda.

Dinu Patriciu Eurasia Center:
The Dinu Patriciu Eurasia Center aims to address the energy-related challenges in one of the world’s most crucial geographic and economic areas which includes Black Sea, Caspian and Central Asian countries. The Center strives to promote greater regional integration and support multilateral dialogue on global energy issues in a regional context by creating a unique network of policy and business decision-makers. The Center encourages a collaborative, problem-solving approach to the region’s energy security issues by combining cutting edge research with high-level gatherings of key energy security stakeholders from governments and business.