New pipe­line could heat up Azer­bai­jani-Rus­sian nat­u­ral gas ri­valry

An­a­lysts say al­though Azer­bai­jan’s gas was un­likely to re­place all of Rus­sia’s sales to Europe, it poses a sig­nif­i­cant threat, and along­side other fac­tors such as the re­cent con­flict be­tween Baku and Yere­van in Ar­me­nian-oc­cu­pied Nagorno-Karabakh, the pipe

Daily Sabah (Turkey) - - Money -

>> AZER­BAI­JAN’S ties with Rus­sia, which are al­ready strained by the con­flict in oc­cu­pied Nagorno-Karabakh, will face fur­ther pres­sure with the launch of a gas pipe­line that is poised to re­place Moscow’s ever di­min­ish­ing gas sales to Europe and Turkey later this year.

The $40 bil­lion South­ern Gas Cor­ri­dor (SGC) will draw from Azer­bai­jan’s gi­ant Shah Deniz II field in the Caspian Sea and has the back­ing of the Euro­pean Com­mis­sion as it seeks to curb Europe’s de­pen­dence on Rus­sian en­ergy.

It also has the sup­port of Turkey, which stands with Baku in its right to de­fend its land in the Ar­me­nian-oc­cu­pied Nagorno-Karabakh re­gion.

The fight­ing has spread to Azer­bai­jani cities close to the SGC, but BP in Azer­bai­jan, part of a con­sor­tium of com­pa­nies in­volved in the project, told Reuters it was go­ing ahead as planned. “As of now, all our business oper­a­tions in the re­gion con­tinue as nor­mal, and our plans re­main un­changed,” a BP spokesper­son said. At the same time, Rus­sian am­bi­tions to ex­pand its pipe­line ca­pac­ity to Europe risk be­ing thwarted by U.S. sanc­tions.

An­a­lysts say Moscow has good re­la­tions with Ar­me­nia and Azer­bai­jan and a prag­matic re­la­tion­ship with Turkey that has over­come past crises and dif­fer­ing stances on Syria.

Com­pe­ti­tion for gas sales, how­ever, is par­tic­u­larly un­wel­come as Rus­sia’s econ­omy suf­fers be­cause of the im­pact of the COVID-19 pan­demic on oil and gas de­mand.

Over the last week, Rus­sian Pres­i­dent Vladimir Putin has spo­ken re­peat­edly to the Ar­me­nian Prime Min­is­ter Nikol Pashinian but not to Azer­bai­jani Pres­i­dent Il­ham Aliyev.

ECO­NOMIC STRAIN

Rus­sia’s cen­tral bank said gas ex­ports fell to $11.44 bil­lion in the first half of this year from $18.65 bil­lion (TL 145 bil­lion) in the cor­re­spond­ing pe­riod of 2019.

The coun­try’s pipe­line gas ex­port­ing mo­nop­oly Gazprom plans to ship at least 170 bil­lion cu­bic me­ters (bcm) of gas to Europe this year, down from 199 bcm in 2019.

In the first half, nat­u­ral gas ex­ports from Gazprom to Europe, in­clud­ing Turkey, fell 18% to 78.94 bcm. To Turkey alone, they de­clined by more than 40%, to 4.7 bcm.

Azer­bai­jan, mean­while, has pumped al­most 7 bcm to Turkey over the last two years via the ex­ist­ing Trans Ana­to­lian Nat­u­ral Gas Pipe­line (TANAP), part of the SGC. From the fully com­pleted SGC ex­pected to be­come op­er­a­tional at the end of the year, Turkey will re­ceive 6 bcm of Azer­bai­jani gas per year, while 10 bcm is ear­marked for Europe.

Dubbed the “Silk Road” of en­ergy, both the TANAP and the Trans Adri­atic Pipe­line (TAP) are a part of the multi­na­tional SGC nat­u­ral gas project.

It is sup­ported by the Euro­pean Com­mis­sion and fi­nanced by the World Bank, the Euro­pean Bank for Re­con­struc­tion and De­vel­op­ment (EBRD) and the Asian In­fras­truc­ture In­vest­ment Bank (AIIB).

TANAP con­nects with the 878-kilo­me­ter TAP at the Turk­ish-Greek bor­der in Kipoi, which then crosses to Greece, Al­ba­nia and the Adri­atic Sea be­fore com­ing ashore in south­ern Italy.

Dmitry Mar­inchenko, an an­a­lyst with Fitch, said Azer­bai­jan’s gas was un­likely to re­place all of Gazprom’s sales to Europe but poses a sig­nif­i­cant threat. “How­ever, with other fac­tors, most of all an in­crease in liq­ue­fied nat­u­ral gas im­ports, the start of gas sup­plies from Azer­bai­jan leads to heat­ing up of the ri­valry,” he said.

Gazprom did not re­spond to a re­quest for com­ment.

Allseas’ deep sea pipe-lay­ing ship Soli­taire lays pipes for Nord Stream 2 pipe­line in the Baltic Sea, Sept. 13, 2019.

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