Near the end of June 2013, after years of negotiations between companies and European countries, an agreement for the export of natural gas from the Shah Deniz – Phase II offshore field in Azerbaijan was announced. The agreement would see the construction of the 870 km long Trans Adriatic Pipeline (TAP), from Azerbaijan westward to Europe, with an initial capacity of about 10 billion cubic meters per year, which can be increased in the future to 20 billion. The gas-producing consortium decided not to use the Nabucco-West pipeline and replaced it with TAP, which will link to the Trans-Anatolian gas pipeline (TANAP) near the Turkish-Greek border, and then cross Greece, Albania, the Adriatic Sea until it reaches the pipeline grid tie-up in southern Italy, which supplies gas to European countries (France, Switzerland, Germany, Britain, and Austria). The pipeline will also supply gas to Eastern European countries such as Bulgaria, Albania, Bosnia-Herzegovina, Montenegro, and Croatia. Choosing TAP is considered to be a major victory for those advocating the so-called Southern Gas Corridor, which supplies Europe with natural gas while bypassing Russia. The companies involved in TAP are: Axpo (Switzerland, 42.5%); Statoil (Norway, 42.5%); and E.ON Ruhrgas (Germany, 15%). Meanwhile, the Shah Deniz consortium partners include: BP (UK); SOCAR (Azerbaijan); and Total S.A. (France). All three companies have access to shares in TAP. The gas productive capacity of Shah Deniz II is about 16 billion cubic meters per year, added to the productive capacity of Phase I which is about 9 billion cubic meters of gas annually. The cost of developing the field is about $25 billion. The operators developing the field are, in addition to BP, Statoil, SOCAR, and Total S.A., LUKoil (Russia), the National Iranian Oil Company (NIOC), and TPAO (Turkey). LUKoil and NIOC were brought in to the project at the insistence of Azerbaijan, which wanted to involve the companies of neighboring countries to maintain good relations and ensure the project moves forward without hindrance from these countries. Oil and gas exports from the Caspian region have important strategic implications, beyond the addition they provide to global oil and gas supplies in international markets. To be sure, shortly after the collapse of the Soviet Union in the early 1990s, the United States waged a massive campaign in the media, exaggerating the size of petroleum reserves in the Caspian region, even portraying these as a replacement to oil supplies from the Arab Gulf region. Many international oil companies rushed to get a stake in the Caspian after countries there opened their door to foreign investment. This was not possible under the Soviet Union, which had restricted investment to Soviet companies, meaning that production was limited compared to the huge reserves there, as Soviet investment focused on northern Russia and Siberia. After the collapse of the Soviet Union, strong competition ensued among international companies to gain access to the Caspian region, and snatch exploration concessions there. However, many of them soon found it difficult to operate in this region, due to the lack of adequate infrastructure, and more importantly, the difficulty and high cost of exporting given the remoteness of the markets and near impossibility of directly exporting oil and gas using tankers as the Caspian is a landlocked sea. This meant that long stretches of pipelines had to be built first through several countries before reaching export markets. This is not to mention the disputes and the use of political influence in this competition, especially in what regards the Russians, who wanted to guarantee a share for their companies, in addition to putting pressure to guarantee the export pipelines would pass in Russian territory and maintain Russian interests in these neighboring countries and former allies. For its part, the United States also focused on developing petroleum resources in the Caspian, and appointed a full-time ambassador to follow up on the petroleum industry in this region, something that the United States had not done even in the Gulf. US policy focused on two main areas: Exporting petroleum either eastwards (to Asian countries, especially China), or westwards (to Europe), providing that this does not take place through either Iran or Russia. US hostility to Iran during that phase is clear, starting with the occupation of the US embassy in Tehran in the early 1980s, all the way to the Iranian nuclear program and the sanctions imposed on Iran. As concerns Russia, meanwhile, the US goal in the Caspian is to keep the former republics of the USSR away from Moscow's influence in parallel with undermining Russian interests, and breaking Moscow's dominance on gas exports to Europe, and finally, supporting Europe in finding alternative energy resources, especially natural gas, away from relying on Russian gas imports. There are many reasons why TAP was chosen. Economic reasons include the success of the project in guaranteeing the sale of large quantities of gas to European countries as soon as exports begin, while political reasons include pressure put by the countries concerned, especially those that the pipelines will cross, or those that pledged to purchase the gas for many years to come. It is worth mentioning that Greece will receive about $310-340 million per year in return for allowing the gas to flow through its territory. The pipeline will also enhance Turkey's status as a transit hub for large quantities of oil and gas from the Middle East and the Caspian Sea. Other pipelines through Turkey, in addition to TAP, include the Kirkuk-Ceyhan pipeline, with a design capacity of about 1.6 million barrels per day, and the Arab gas pipeline that will transport Egyptian gas to Europe via Turkey, currently under construction. * Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
