The Race for Caspian Gas

Point of View by Alexandros Petersen, adviser to the Wilson Center's European Energy Security Initiative

Feb 02, 2011

When European Commission President José Manuel Barroso visited Azerbaijan and Turkmenistan in mid-January, he might as well have sounded the starting gun in the final sprint to secure Caspian natural gas for European consumers. This is in fact the last leg of a marathon, which began after the construction of the famed Baku-Tbilisi-Ceyhan (BTC) oil pipeline from the Caspian to the Mediterranean. This feat—the longest oil pipeline in the world at the time—connected the landlocked sea's oil with world markets and opened the starting gates for several natural gas projects to follow suit. The most prominent of these proposed projects are Nabucco: a Turkey to Austria pipeline on the grand scale of Verdi's opera; South Stream: Russia's equally epic challenge to the western-oriented Nabucco, as well as two smaller, but probably more manageable, projects: the Interconnector Turkey-Greece-Italy (ITGI) and the Trans-Adriatic Pipeline (TAP), both of which would connect Azerbaijani gas through the existing Turkish energy grid to consumers in Southeast Europe and Italy. Many of Europe's consumers, particularly in Central and Eastern Europe, are overly dependent on Russian natural gas for heating and cooking in the winter. Moscow's wrangling with Kyiv over the transit of gas through Ukraine for the past six years has resulted in supply disruptions farther down the line, spurring a once lackadaisical Brussels to lobby heavily for alternative routes to non-Russian supplies in the Caspian or the Middle East through Turkey. But the key question is how to secure these resources. Nabucco has received the most attention. With an eventual capacity of 31 billion cubic meters (bcm) of gas a year, it would bring volumes to market from Azerbaijan. To be filled, however, natural gas from Turkmenistan or Iraq would have to be linked in. ITGI and TAP are smaller, less strategic projects, but would only need Azerbaijani gas. That might play to their advantage in the final sprint. In the end, the line judge sits in Baku. Since Azerbaijani resources are initially earmarked for all three Western-oriented projects, the winner of the race may not be determined by European diplomacy, but by the commercial concerns at Azerbaijan's state oil company. Barroso's coaching is important, but greater understanding of Caspian energy geopolitics will determine who goes home with the black gold.

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