Trans-Caspian Gas Pipe Project Resuscitated in Turkmen-British Meeting

nCa News and Commentary

Ashgabat, 21 September (nCa) --- The Thursday meeting between President Berdymuhamedov and Malcolm Wicks, British energy minister, gave the kiss of life to the long-comatose trans-Caspian gas pipeline project.

The coverage of the meeting by the Turkmen TV and TDH, the official news agency of Turkmenistan, suggested that some kind of understanding had been reached about the definite revival of the trans-Caspian option.

Using the identical text to report on the meeting, the Turkmen TV and TDH say, “The sides discussed the prospects of southern rout of export of Turkmen energy resources to Europe. ‘British Petroleum’, highly experienced in marine shelf activity, is likely the most possible partner of Turkmen specialists.”

A press release by the British embassy in Ashgabat is equally upbeat. Quoting Wicks, it says, “The United Kingdom is keen to work with Turkmenistan to develop its energy sector through experience sharing and bilateral co-operation.”

The press release quotes further: “I hope that following this visit, the UK will be able to share our experience and expertise in addressing strategic energy issues. These include exploitation of hydrocarbon resources, diversification of international energy markets, licensing arrangements to encourage foreign investment and exploitation of trans-boundary resources,” the Minister said.

The British embassy press release also says that following the meeting, the minister noted, “I have been impressed by how Turkmenistan is considering the many options available to it, including the opportunities for energy trade with the EU. This would also allow Turkmenistan to get a market price for its energy resources and gain access to a large and growing energy market.”

The talks were described by the Turkmen media as ‘open and trust-building.’

Berdymuhamedov said that Turkmenistan attaches high priority to the production and refining capacity of its hydrocarbon resources and their transportation to the world markets.

In addition to his meeting with Berdymuhamedov, Wicks had consultations with the top officials of the oil and gas sector of Turkmenistan. The Great Britain and Turkmenistan signed a protocol for cooperation.

nCa Commentary: We have commented earlier that trans-Caspian is not pie in the sky – it is a very real project. As far as Turkmenistan is concerned, one can see no hurdles in its implementation.

However, there are several external factors that need to be taken into account. The pipe planners would need the patience and precision of a diamond cutter.

Turkmenistan has never opposed the trans-Caspian project in absolute terms. In fact, trans-Caspian was the first project that Turkmenistan followed seriously. The talks broke down at the very last moment because because of two reasons: 1. Azerbaijan had second thoughts about sharing the pipe capacity after discovery of Shah Deniz; and 2. There was some misunderstanding about a tranche of payment between the pipe planners and Turkmenistan.

The regional environment has changed considerably since then.

The two projects – the BTC oil pipe and BTE gas pipe – were conceived almost simultaneously. Both were meant to bypass Russia in transporting the hydrocarbon resources of Central Asia and Caspian region to the European markets via Turkey.

Kazakhstan and Turkmenistan were expected to put their oil and gas in the pipes. However, Kazakhstan remained almost indifferent to the idea for a very long time. That has changed now. In his recent visit to Turkmenistan, President Nazarbaev of Kazakhstan said clearly that trans-Caspian is a viable option for export of energy resources to the world markets.

With Kashagan slated to come into production by the end of this decade, the idea of trans-Caspian suddenly becomes very attractive.

Both Turkmenistan and Kazakhstan have vast reserves of gas – and oil – in the Caspian sectors. A 30-bcm gas pipe can easily be filled with combined output of Caspian sectors of Kazakhstan and Turkmenistan.

The gas is there, the political will has grown, and the financing is no problem. All should be well with the trans-Caspian project.

However, the wiser counsel suggests that there is no need to irritate Russia unnecessarily. Instead of describing the project as a way to bypass Russia, it is better to portray it – truthfully – as the shortest possible route for taking Central Asian gas to Europe.

In addition, the pipe planners may need to go the extra mile by supporting the Turkmen claim that the gas would not be diverted from any other commitments to feed the trans-Caspian pipe.

Taking the Turkmen, or Kazakh, gas to Baku would not be a problem – The distance is short and the sea is not very deep. However, export of gas from offshore locations is somewhat different from exporting the output of mainland deposits. A different approach is involved in all areas including piping the gas from the field to the hub, the most economical method of sulfur removal, processing and compression, the storage facility and finally the metering station from where the gas enters into the main trunk.

All of this should not be a problem if BP takes the anchor position in the revived project because it has the expertise in all these areas.

The immediate hurdle is the differences between Turkmenistan and Azerbaijan. There are at least three fields in the Caspian bed that are claimed by both the countries. Moreover, there is a deficit of trust although the sides have already entered into talks that may lead to confidence building measures. The pipe planners would need to put their weight to steer the talks in the right direction.

Also, it is not advisable at this stage to attach trans-Caspian project firmly with Nabucco. As the things stand today, Nabucco is neither here nor there. At this stage it would be better to concentrate on taking the Central Asian volumes to Turkey and from there one can use any convenient route to distribute the gas to European buyers.