CASPIAN GAS PAIN…. A
car in the garage beneath the Department of State in Washington sports the bumper sticker “Happiness Is Multiple Pipelines.” The driver presumably is one of the lovers of complexity who struggle with events in Central Asia and the Caucasus. If multiple pipelines float his boat, this is high tide.
Vast reserves of oil and gas, as much perhaps as in the Arabian peninsula, lie beneath the geographically intimidating and politically volatile territory around the Caspian Sea. The natural markets for this energy are hundreds of miles away, in Turkey and Western Europe. Pipelines to connect supply and demand are moving from the planning stage to finance and construction. Gas pipelines through Russia are developing most rapidly. Oil, however, may find new routes that avoid Russia entirely.
For natural gas, Russia’s Blue Stream project aims to lay pipe from Stavropol in southern Russia to Dzhubga on the Black Sea, then across the seabed to Turkey’s Samsun, to connect to a land-based line to Ankara. The $3 billion Blue Stream line, backed by gas producer Gazprom, would carry Russian gas that would be replaced in the Russian market by gas from Turkmenistan and possibly other sources.
Competing against Blue Stream is the Trans-Caspian Pipeline Project (TCPP), a Western-backed proposal to bring gas from Turkmenistan into Turkey across the Caspian Sea, Azerbaijan and Georgia–without passing through Russian territory. For much of its length, the TCPP natural-gas pipeline would run parallel to a long-planned oil pipeline from Baku, the Azerbaijani capital on the Caspian’s western shore, to Tbilisi in Georgia, across the Turkish border to Erzerum and eventually to the Turkish port of Ceyhan on the Mediterranean.
But the TCPP is hung up over financial conditions set by Turkmenistan’s autocratic ruler, Saparmurat Niazov. Although details of the negotiations are sketchy, it appears that neither the TCPP’s private developers (a Bechtel-GE-Shell consortium) nor the U.S. Export-Import Bank are eager to guarantee loans to the financially rickety Turkmenistan government. The consortium effectively put down its tools a year ago. The project, if not dead in the water, is at least becalmed.
Blue Stream, however, is moving forward. Gazprom’s construction arm, Stroitransgaz, is building the Russian leg of the line, with Italy’s ENI handling the seabed construction and Turkey’s Botas doing the work in Turkey. The work is scheduled for completion in 2002. If Blue Stream lives up to its advertising, Turkey will increase its energy dependence on Russia, which already supplies two thirds of its gas. And Turkmenistan will remain dependent on Russia as the only market for its gas, the source of nearly all of the country’s foreign exchange.
For Caspian oil, however, a non-Russian route seems more likely. Over the past year, the proposed Baku-Tbilisi-Ceyhan oil pipeline has picked up support from the Azerbaijan International Operating Company, the consortium led by BP-Amoco and SOCAR, Azerbaijan’s state-owned oil company, and from Chevron, a major investor in and developer of offshore Caspian oil.
Most important, however, is support from Kazakhstan, where recent discoveries indicate reserves that rival the North Sea. If Kazakhstan commits to the Baku-Tbilisi-Ceyhan route for moving oil from the Tengiz field (half owned by Chevron) and the even larger offshore Kashagan field in the northern Caspian, the line will quickly move from pipe dream to pipe-reality.
A Russian route for Tengiz oil has been built, a relatively small-diameter pipeline from Tengiz to the Russian Black Sea port of Novorossiisk. But disputes with Russia about taxes and the distribution of revenues have delayed the first shipments through the line. In any case neither the line nor the port can handle the volume of oil that the Tengiz and (especially) Kashagan fields can produce. As a result, Kazakhstan’s President Nursultan Nazarbaev, according to The Economist magazine, told American envoy Elizabeth Jones that Kashagan oil will flow through the Baku-Ceyhan line (presumably reaching Baku by barge).
There remains one strong hope for a non-Russian route for gas. A large gas find in the Shah-Deniz field Azerbaijani sector of the Caspian Sea could supply markets in Turkey in competition with, or in addition to, Russian gas flowing through the Blue Stream pipeline. Earlier this year Azerbaijan and Turkey signed agreements that envision such a deal, along with construction of a gas pipeline that, like the TCPP, would parallel the Baku-Tbilisi-Ceyhan oil line. Parallel construction would improve the economics, and the security, of both projects.
If a Baku-Tbilisi-Ceyhan gas line moves decisively toward construction, Turkmenistan’s erratic President Niazov may see the value of an alternative to dependence on Russia. That could bring the Trans-Caspian Pipeline Project out of the doldrums.