Turkmenistan-Azerbaijan deal can change Europe’s energy map
Until the collapse of the Soviet Union in 1991, the legal status of the Caspian Sea was governed by a series of Soviet-Iranian treaties concluded in 1921 and 1940. Following the collapse of the USSR and the creation of four new littoral sovereign states, questions soon arose as to the legal nature of the Caspian Sea. The resolution of this question was crucial to the determination of how the huge amounts of natural resources, especially oil and natural gas, it contains are to be divided.
Negotiations among littoral states of the Caspian Sea — Azerbaijan, Russia, Kazakhstan, Turkmenistan and Iran — have been ongoing since 1992 on exactly what parts of the Sea belong to which country. Finally, in 2018 the leaders of these five countries signed the Convention on the Legal Status of the Caspian Sea, which paved the way to the resolution of long-standing disputes, including the one between Azerbaijan and Turkmenistan.
Azerbaijan has been a major oil and natural gas producer. In fact, the first commercial production of oil was started in Azerbaijan in the mid-19th century.
During the last fall’s 44-day-war with Armenia, Azerbaijan liberated its long-occupied areas and won the war.
This positive outcome of the war in Karabakh has apparently also been helpful to Azerbaijan in reaching its goal of settling the dispute with Turkmenistan. On January 21, 2021, the governments of Azerbaijan and Turkmenistan announced that after thirty years of negotiations the two countries have decided to jointly develop a huge oil field in the middle of the Caspian Sea — which was the major point of contention between the two countries.
This agreement is over oil field Azerbaijan used to call Kapaz. For Turkmenistan it was named Sardar. Now both countries have decided to give it a new name — Dostluk — which means “friendship” in both Azerbaijani and Turkmen languages. Azerbaijanis and Turkmens share close ethnic and linguistic kinship, both originating from the Oguz branch of Turkic peoples.
Experts estimate that the Dostluk field contains natural gas and at least 50 million tons of oil.
This agreement could also pave the way for the transit of Turkmenistan’s massive gas reserves to Europe.
The aforementioned Caspian Sea Convention of 2018 removed legal hurdles for the construction of submarine pipelines in the Caspian Sea. The Convention confirmed at Article 14(3) that a pipeline route requires agreement only between countries through which the pipeline crosses.
However, the dispute around the Dostluk oilfield was a major obstacle for any significant Azerbaijan-Turkmenistan cooperation in the Caspian Sea. The agreement is “huge news indeed. Last obstacle to a fully-fledged shore-to-shore Trans-Caspian natural gas pipeline disappears,” tweeted Robert Cutler, senior research fellow at the Energy Security Program of the NATO Association of Canada.
“Development of Dostluk should give Turkmenistan a modest new revenue stream, but more importantly it also opens up the prospect of a direct gas connection between the two countries, which would prove more lucrative, and have far reaching significance,” regional energy analyst John Roberts of the Atlantic Council says.
Turkmenistan has the fourth-largest reserves of natural gas in the world: an estimated 19.5 trillion cubic meters (688 trillion cubic feet), nearly 10 percent of the world’s total. They include the Galkynysh gas field, with 2.8 trillion cubic meters of recoverable reserves alone, making it the second-largest gas field in the world.
With such an abundance, Turkmenistan could be rivalling the world’s biggest gas exporters like Russia, Qatar and Norway. Instead, landlocked in Central Asia, it has until now had only limited opportunities for diversifying its natural gas exports, with 90 percent of it going to China, and no opportunity to export it to lucrative European markets.
A pipeline to carry Turkmenistan’s gas across the Caspian Sea to Azerbaijan and onward to Turkey and Europe was planned in the late 1990s, sponsored by a consortium of Shell, Bechtel and GE. But that project collapsed following the discovery of Azerbaijan’s huge Shah Deniz gas field, after which it became more expedient for Baku to develop and export its own reserves.
If constructed, a Trans-Caspian gas pipeline would find the already operating transit route to Europe called the “Southern Gas Corridor” — the EU-backed transit route of pipelines which have been supplying Azerbaijani gas to Turkey since mid-2018, and which on December 31 began supplying Azerbaijani gas to Greece, Bulgaria and Italy. The pipelines will deliver 16 billion cubic meters of gas per year. Of this volume, Turkey will get 6 bcm and Europe will get 10 bcm. Of those 10 bcm, 8 bcm will be exported to Italy, while 2 bcm will be exported equally to Greece and Bulgaria, and the rest to the surrounding markets.
The two main pipelines which make up the corridor — the TANAP pipeline through Turkey and the Trans Adriatic Pipeline across Greece, Albania and the Adriatic Sea to Italy — currently operate at only half capacity, and the full route could easily be expanded to carry gas from Turkmenistan.
Europe gets 40 percent of it supplied by Russia, which has itself been aggressively developing new Europe-bound pipelines in an effort to discourage potential rival suppliers and secure its position as the continent’s dominant provider.
In the face of such competition, the future of any Turkmenistan gas exports to Europe is likely to lie in Brussels and the extent to which the European Union is prepared to push the development of a Trans-Caspian gas pipeline and wean itself off of its dependence on Russia.
The Biden Administration’s support will also be crucial to the success of the project as the United States is strongly interested in strengthening the energy independence of its European allies.
