By Régis Genté
By the end of October, a new US company seemingly created for a sole purpose, Trans Caspian Resources (TCR), announced its intention to build “an interconnector between two off shore gas fields in the Caspian Sea—Azerbaijan’s Azeri Chirag Gunsehli and Turkmenistan’s Banka Livanova (former “East” part of the Magtymguly oil field, within the Block 1”)”.
Though modest with 42 nautical miles long (77 km.) between the two natural gas deposits, the project is nothing else than a new version of a Trans-Caspian gas pipeline, that has been discussed since a quarter of a century.
That’s why this renewed avatar of the Trans-Caspian pipeline was welcome with circumspection, as the last of a series of projects that were announced, lobbied, scrutinized, and finally abandoned.
The interconnector project, which was proposed several times by the Azerbaijani side in the past, is of a modest scope not only because of its very short length and by the volumes it could carry (between 10 and 12 billion cubic meters of gas per year).
It is also modest in its nature.It will not connect the two shores of the Caspian Sea, as all the previous projects, but two offshore platforms and will rely on the existing BP-operated Azeri-Chirag-Gunashli (ACG) oil field.
The idea is not to trade the gas production from the Banka Livanova deposit but, initially at least, only the “associated gas” of the Turkmen field, that is flared so far.
That helps the proponents of the project presenting it as a feasible and environment friendly one.The TCR representatives are saying that these amounts of associated gas which could be traded to the Azerbaijani and the South Caucasian markets, as Azerbaijan’s own gas production is currently below the targeted volumes.
The last years, Baku was obliged to import gas from Iran and Russia to meet its growing internal demand.
At the time being, TCR company is looking for investors not to fund the project per se but firstly to finance the feasibility studies meant to assess the project’s technical and commercial viability.
Only then will its cost be clear.However, using the already existing infrastructures on the Azeri side, starting with the ACG field ones, construction costs are estimated between 500 and 800 million dollars, which is much cheaper than a fully Trans-Caspian pipeline.
Notwithstanding the modesty of the project, the ambitions seem to be more important.The project could be an initial step toward transiting larger volumes across the Caspian. “It will serve as a proof of concept that Turkmen gas can be delivered westward, should the government of Turkmenistan be interested in expanding gas exports to new western markets”, declared to Eurasianet Allan Mustard, a former U.S.
ambassador to Turkmenistan and co-manager of Trans Caspian Resources.
The announcement didn’t come as a surprise.Since two years, people linked with the new US company have been advocating for the project.Often putting ahead what looks like geopolitical argument. “The United States knows that the less Europe must depend on Russia for its energy supplies, the less susceptible it is to pressure from Moscow and, by default, the better off NATO is.
European nations are actively seeking alternatives to Russian energy resources.Azerbaijan is trying to cement its position as the key energy hub in its region, while Turkmenistan is weathering a severe economic crisis and is desperate for new and dependable markets for its natural gas”, wrote for example Luke Coffey and Efgan Nifti, in May 2020.
The geopolitical side appears between the lines in the background of the Trans Caspian Resources company and the biography of its people.The Florida-based company was founded last April and is headed by Allan Mustard, a former U.S.
ambassador to Turkmenistan, and Bert Watson, a longtime American energy lobbyist. “The composition of TCR’s team sheds some light on potential drivers behind the project.The company is led by a government relations manager and consists of former BP managers, a former U.S.
ambassador to Turkmenistan, an Azerbaijani-American businessman”, notices Rauf Mammadov, a Washington based scholar on energy policy.
Mammadov underlines that “it will be somewhat speculative to call the initiative as U.S.government’s geopolitical move, although the realization of the project is ultimately aligned with the United States’ strategic objectives.
It is a project of common interest for all the stakeholders, including the U.S., Azerbaijan, Turkmenistan governments, and BP and Shah Deniz consortiums.” But that could bring the project back to what blocked the previous ones: the kind of tacit veto put by Russia and Iran to lay a pipeline across the bottom of the Caspian Sea.
Moscow and Tehran for long resisted to agree on the legal status of the Caspian Sea (is it a lake or a sea?How should the five Caspian littoral states divide and use of the seabed?).
The optimistic articles and opinions published since a year about the new Trans-Caspian pipeline project argue that we now can rely on the 2018 Convention on the legal status of the Caspian Sea, on which agreed the five Caspian States. “But they forget that Iran didn’t ratified the Convention yet and that the document is full of measures, especially on environment, that give Russia and Iran enough leverages to block new infrastructures projects designed to cross that Sea”, a Western diplomat following the Caspian basin issues, who asked to not be named, told us.
Now, TCR needs to convince Baku and Ashgabat to support the project.Actually, as TCR seems to be much closer to Baku than to Ashgabat, the lobbying work has to start firstly with the Turkmen side. “What is unclear to me is the political will of the two parties involved to get this project started, once a feasibility study is conducted and its findings are made public.
In particular, I’m not sure whether the Turkmen government itself will stand on project implementation, given Ashgabat’s very slow pace of decision-making in terms of energy policy”, says Luca Anceschi, professor of Central Asian Studies at Glasgow University and author of the book Turkmenistan’s Foreign Policy Positive Neutrality And The Consolidation Of The Turkmen regime.
Two senior staffs from regional energy companies confirm this assessment, telling us that the “dictatorial nature of the Turkmen regime makes the decision making very slow, due to the fear that drives Turkmen top officials”.
However, one should notice that Mr.Mustard was allowed to present “the proposal during the 26th Oil and Gas of Turkmenistan International Conference”, last October.
More importantly, recalls Rauf Mammadov, “the Trans-Caspian Resources was founded a few months after Berdimuhamedov‘s visit to Azerbaijan, where the Turkmen president hailed a new phase between Ashgabat and Baku.
Then, Mr.Berdimuhamedov and his Azerbaijani counterpart, Ilham Aliyev, signed several intergovernmental agreements facilitating economic and trade partnerships”.A move that could not remain unnoticed by observers of the region.
On 21st of January 2021, the two heads of State even signed a Memorandum of Understanding on joint exploration and development of another hydrocarbon deposit, the Dostluk Field.
A clear sign that Ashgabat is willing to overcome the old obstacles over the Caspian resources. “TCR could not find a better time to undertake a project to contribute to the realization of the Trans-Caspian pipeline project.
Still, for the project to move ahead it will require a more solid cooperation between Ashgabat and Baku”, says Mammadov.
Turkmenistan, who enjoys the fourth largest natural gas proven reserves in the world, has a lot of incentives to go ahead with such a project.But its commercial and industrial implications require to act quickly, as the energy markets are more and more volatile as the transition towards green energy accelerates. “Unless implementation is happening rapidly, there is a big question mark on profitability windows for Caspian gas flowing westwards, giving the volatility of the market and, most significantly, the changing demand structure on the European side”, warns Luca Anceschi.The post Trans-Caspian pipeline: A new modest project with a big ambition? first appeared on Chronicles of Turkmenistan.