Page 6 - FSUOGM Annual Review 2021

FSUOGM COMMENTARY FSUOGM

Baku could hint that Ashgabat is finally adopt- standards set out in international agreements,
ing a more pragmatic stance in negotiations. including the 2003 Framework Convention for
Marking a similar change in tack, Iranian the Protection of the Marine Environment of
President Hassan Rouhani said in late December the Caspian Sea. Both Moscow and Tehran have
that Tehran was interested in pursuing joint off- indicated they may use this proviso to block TCP.
shore projects with Baku, in a likely reference to And again, it is important to stress that Tehran
the Alov block. In the previous year, Iran’s NIOC still has not ratified the convention.
and Azerbaijan’s SOCAR signed a memoran- It is also premature to assume that Turkmen-
dum on joint exploration work at the site. istan will show the flexibility needed to make
progress in negotiations with Azerbaijan. The
Trans-Caspian hope? so-called hermit nation is highly distrustful of
Azerbaijan and Turkmenistan could stand to its neighbours, traditionally spurning closer
gain from a significant boost in revenues if Dost- co-operation.
luk is developed. More importantly, though, the Azerbaijan, on the other hand, will prior-
deal raises the prospect of the pair establishing itise sending more gas of its own to Europe
a pipeline connection. This link would enable before it considers taking Turkmen volumes.
Turkmen gas to reach Europe via the Southern The country is looking to double the capacity
Gas Corridor (SGC), which began handling of the Trans-Adriatic Pipeline (TAP) section of
Azeri gas in late December. SGC to deliver 20bn cubic metres per year of
The TCP has been discussed since the fall gas. This supply would be sourced from further
of the USSR, but has never got off the ground development of Shah Deniz and other Azeri
because of territorial disputes. Initially it was fields such as Absheron, operated by France’s
proposed that the pipeline would handle onshore Total.
Turkmen gas, although discussions have recently Furthermore, supply is only one part of the
focused on a scaled-down plan that would con- picture. The International Energy Agency (IEA)
nect offshore Turkmen fields such as those oper- forecasted in its latest World Energy Outlook
ated by Malaysia’s Petronas to SGC. that European gas demand would never again
Russia has long opposed the project, viewing reach the level it did before the pandemic. While
it as a threat to its gas market share in southern its imports are expected to continue growing, as
Europe. So too has Iran, which would rather see indigenous supply diminishes, there is plenty of
Turkmen supplies pass through its own territory existing capacity spare and various new projects
to Azerbaijan, earning Tehran considerable tran- in the pipeline to meet this increase.
sit revenues and potentially paving the way for The Southeastern European markets that
Iranian gas shipments to Europe. TCP would target are already well-supplied by
The latest agreement between Azerbaijan and Russia. There are also new LNG import projects
Turkmenistan is “huge news indeed. Last obsta- that are underway in Greece and Croatia, as
cle to a fully-fledged shore-to-shore Trans-Cas- well as plans to bring Israeli and Cypriot gas to
pian natural gas pipeline disappears,” Robert the region via the EastMed pipeline. Given the
Cutler, senior research fellow at the Energy Secu- substantial distances at play, Turkmen gas may
rity Program of the NATO Association of Can- struggle to compete with these alternatives.
ada, wrote in a tweet on January 21. What is more, Turkmenistan is used to sell-
This interpretation is optimistic, however. ing its gas under large, long-term, oil-indexed
The Caspian convention allows subsea pipelines contracts. European buyers, on the other hand,
to be built under agreements between affected increasingly favour shorter-term, more hub
countries, rather than needing approval from all price-based deals that offer offtake flexibility. As
five littoral states. But countries can only advance such, Ashgabat might struggle to find a middle
such projects if they comply with environmental ground with customers. ™

Source: BP.

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