Page 47 - bne magazine September 2020 russia melting

bne September 2020 Eurasia I 47
“Second, there is no one currently willing or able to play the role of commercial champion for TCP. If an international oil company were given an upstream stake in Turkmenistan, it would be in a position to develop the resource base needed to fill the pipeline and act as its commercial champion.
Looking at how TCP measures up regarding political support, Stein concluded: “No doubt TCP has political support – Azerbaijan and Turkmenistan, as well as both the United States and the EU, have consistently voiced that support. But as we have seen from experience, political support is
“Not only is the cost of developing the gas high – given that Turkmen gas has a high sulfur content – but the entire delivery chain is also expensive”
However, the Turkmen government continues to prohibit foreign investment in onshore gas production."
Even if the requirements of an adequate resource base and a competent commercial champion were met, it would be unlikely that Turkmen gas could be delivered to Europe profitably, said Stein.
He continued: “Not only is the cost of developing the gas high – given that Turkmen gas has a high sulfur content – but the entire delivery chain is also expensive. While Turkmenistan has constructed an East-West pipeline connecting its large fields with the Caspian Sea, it has not installed the compressors needed to move 30 bcma of gas. Add to that the cost of TCP itself just to get the gas across the Caspian.
To deliver the gas to Europe, the string of pipelines that constitute the SGC could be expanded, but at most only by 15 bcma, which would mean additional investment in brand new infrastructure for the remainder.
“A final economic challenge is the
fact that Turkmen gas is condensate light, unlike [Azerbaijani] Shah Deniz gas-in essence, Shah Deniz condensate subsidizes its gas. A detailed evaluation of the economics of Turkmen gas is contained in a 2018 report from the Oxford Institute for Energy Studies. The basic conclusion, unsurprisingly,
is that Turkmen gas would not be price competitive in Europe.”
a necessary, but not sufficient condition for success. It does not substitute
for and cannot itself create
the commercial and economic preconditions for success.”
Flip side
He added: “The flip side of political support is political opposition. While Russia opposed the 10 bcma SGC, it ultimately decided to instead compete with the project. In the case of TCP, the threat of much larger volumes of Turkmen gas entering Europe could motivate more serious Russian efforts to block the project.”
Stein advised: “TCP has great political appeal and is destined to remain alive for many years, if only on PowerPoint presentations. In the meantime, it will provide fodder for politicians
and bureaucrats (ignorant of or not understanding commercial realities) and be a continuing source of income for consultants and would-be project promoters.
“Finally, there is a downside to policymakers focusing attention and efforts on grandiose projects like TCP that are unrealistic, or on creating new, duplicative structures (the Three Seas Initiative comes to mind), which are mostly just empty rhetoric. Such efforts risk diverting needed attention away from more realistic but less sensational policies, such as market liberalization and integration.”
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