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Southern Gas Corridor, Milestones and Other Turk- Men Gas Export Options (Via Turkish Stream)

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Southern Gas Corridor, Milestones and Other Turk- Men Gas Export Options (Via Turkish Stream) SOUTHERN GAS CORRIDOR, MILESTONES AND OTHER TURK- MEN GAS EXPORT OPTIONS (VIA TURKISH STREAM) by Oğuzhan Akyener ABSTRACT rate and future of Southern Gas Corridor will be evaluated from the view of capacity EU is the biggest energy importing structure point through assessing potential shippers, in the world and Russia is her major suppli- and of economic parameters, then the place er. EU energy security troubled by increasing of Turkmen gas in SGC will be evaluated. political conflicts with Russia rushes EU to In addition, for Turkmen gas exportation to diversify her energy supplies. EU, other two possible roots: through Iran & "EU is the biggest energy Turkey and Russia & Turkey (through new One of the most popular candidates for EU’s popular line Turkish Stream) will be analyzed importing structure in future energy supply is the Caspian resources in terms of economic parameters affecting the placed in between Russia, Azerbaijan, Turk- end market competition. the world and Russia is menistan, Iran and Kazakhstan, however, as of today (due to political reasons) only Azeri her major supplier. EU and Turkmen natural gas resources have the INTRODCUTION priority for EU’s future energy security strate- energy security troubled gies. These strategies under the forth corridor Caspian, involving Russia, Turkmenistan, by increasing political concept by EU were partly realized through Kazakhstan, Uzbekistan, Azerbaijan, Iran, is southern gas corridor (SGC) initiated by the most important region according to the conflicts with Russia Azerbaijan. In such a corridor Azerbaijan is proved gas reserves potential in the world planned to be the main supplier country and (46,3% of the world share1). Moreover, due rushes EU to diversify to a greater extent Turkmenistan and others to the geographical properties (being located as well. While Azerbaijan and Turkey will be in the middle of the important consumers; her energy supplies. One the transit countries and EU and also Turkey China-India-EU & Turkey), importance of will be the markets in demand. Caspian region for world gas politics is in- of the most popular can- creasing. As there are no important political obstacles didates for EU’s future for Azerbaijan as the supplier, demand market Due to the nature of the development pro- energy supply is the Cas- or transit countries however; unreconciliated cedures of huge gas projects, long term plan- political situation of the Caspian Sea is one of ning is vital for logical estimations. Therefore, pian resources." the most important milestones for potential at least 2035 supply and demand potentials supplier Turkmenistan to flow its gas through with the economic fundamentals have to be Caspian to Azerbaijan stepping forward with studied. "According to the in- the corridor since early 2000. Moreover, the political encouragements and support of EU Map 1 is giving brief information about the formation giving on the and US, and related parties have not been 2035 supply and demand potentials estima- enough to take tangible steps to resolve the tions of Caspian and related regions. map, there is an unbal- problem. According to the information giving on the anced gas equation due However, in any case, even if the linkage of map, there is an unbalanced gas equation due to total high demand and insufficient total to total high demand and Turkmen gas to Azerbaijan flowing through the demand market is assumed politically supply potential from the Caspian (except insufficient total supply possible, another important matter will be Iran). So, minimum additional 600 bcma the economic fundamentals as a determining volume of gas will be demanded annually in potential from the Caspi- factor for consideration. the region. This shows the increasing impor- tance of Caspian resources and from the sight an (except Iran)." In this paper, initially by assuming the polit- of huge demanders; “First comers will get ical conflicts on Caspian is resolved, success much from the cake.”. Moreover, current sit- ENERGY POLICY TURKEY Page 124 "The first stage of SGC is Map 1: 2035 Estimations (Demand – Supply potentials).2 the delivery of Shah Den- uation shows that due to the previous agree- SGC IN FOUR STAGES iz Stage 2 gas to EU as ments and existing infrastructures EU will get it is continuing. The sec- the greatest part. In general, resources and planned infrastruc- tures for SGC can be studied in four stages ond stage; future Azeri From the general sight; videlicet, middle according to their tangibility; world (including Asia & Europe) also needs gas (mainly from Umid/ Iran, Iraq, North Africa, East Mediterranean, SGC STAGE 1 Persian Gulf & some Pacific resources for Babek and Absheron) is their future gas security (So, LNG will play The first stage of SGC is the delivery of Shah a key role). Deniz Stage 2 gas to EU. It is continuing. In planned to be transport- that concept, capacity expanded SCP (SCPX), After showing the unbalanced gas supply-de- TANAP and TAP is planned to transport 10 ed to EU via SCPFX, mand potentials in the region and the strug- bcma Azeri gas to EU/Italy Hub after 2018. gles growing up, to focus on EU’s main en- The view of SGC Stage 1 is given in Table 1. TANAPX and TAPX after ergy security targets related with Caspian gas 2025." resources: SGC STAGE 2 • For political reasons and diversity of re- The second stage; future Azeri gas (main- sources, Caspian gases have to be trans- ly from Umid/Babek and Absheron) is ported to EU. planned to be transported to EU via SCPFX, • Initially, Azeri gas and then Turkmen gas TANAPX and TAPX after 2025. (Note: TAP will be transported. capacity is with the maximum expandable 10 "The third stage as on bcma, and it can be 20 bcma. So, for addi- • For additional supply potentials and de- tional gas flow above maximum capacity, new the table projects; Iraq creasing the transportation costs, Iran – infrastructures have to be constructed). The Iraq and West Mediterranean resources view of SGC Stage 2 is given in Table 2 – Iran – Eastern Mediter- will be able to be adapted to the supply system. SGC STAGE 3 ranean gas is thought to • All transportation will be through Turkey be transported through via pipelines. The third stage as on the table projects; Iraq – Iran – Eastern Mediterranean gas is to be Turkey to EU. These ideas are called popularly as Southern transported through Turkey to EU via: Gas Corridor (SGC). In order to have a more coherent analysis, SGC will be divided and • Free capacity of TANAP or TANAPX investigated in four stages. • Possible expanded capacity of TANAPX (TANAPFX) Page 125 FIRST ISSUE SOUTHERN GAS CORRIDOR, MILESTONES AND OTHER TURKMEN GAS EXPORT OPTIONS (VIA TURKISH STREAM) Time Period To Start After 2018 Related Countries / Political AZ (Supplier), GEO & TR (Transit), EU/ITALY (Market) Structures No risk Resource (Existing proved resources in Shah Deniz Gas Field waiting to be developed. Very low reserve risks, those can be negligible.) No risk Finance (All shareholders have necessary finance.) No risk Infrastructures / Production (All are in the construction period) No risk Infrastructures/ (SCPX (through AZ & GEO), TANAP (through TR), TAP (in EU). Transportation All are in the construction period) No risk Market (Enough market capacity in Italy Hub, completed sales agreements) Low level risk Economics (Transportation costs, decreasing oil & oil effected energy prices.) No risk Political Support (Full political support from AZ, GEO, EU) No risk Agreements (All related agreements are signed) No risk Related Legislations (Legislative structures are clear and defined.) Result Successful Volume (bcma) 10 Effect on EU 2035 Gas Less than 2% Demand (%) Due to increasing competition in EU, gas sale price might go down Future Risks & Weak Points to unexpected levels. This decrease in sale prices may make the project uneconomic due to transportation costs. Table 1: SGC Stage 1 analysis. • Revival of NABUCCO Notes about the Table 5: The view of SGC Stage 3 is given in Table 3. • Overall expectations are taken into con- SGC STAGE 4 sideration. • “OK” means; there is no risk or no high “Only the Turkmen and The fourth stage: Turkmen gas is to be trans- risk or possible. ported to EU via Trans Caspian Pipeline Iranian gas export to EU • “Successful” means; will be completed (TCP) and forward infrastructures in Turkey successfully. and EU. via forth corridor may be • “POTENTIAL” means; there is poten- tial for being successful. impossible due to eco- For evaluation of all steps, political support, resources, finance, market potentials, eco- As seen on Table 5, only the Turkmen and nomic reasons.“ nomics, related infrastructures and related legislations (on the related period) have to be Iranian gas export to EU via forth corridor considered jointly. The view of SGC Stage 4 may be impossible due to economic reasons. is given in Table 4. This table also shows that economics is the most important item in addition to political All these criteria will be evaluated shortly on a support for such gas project to be successful. standard table for each stage. When generally estimating the netback prices OVERALL CRITICS FOR ALL FOUR and tariffs of each stage on the Table 6, Ira- STAGES nian and Turkmen gas economic risks can be ENERGY POLICY TURKEY Page 126 OĞUZHAN AKYENER Time Period To Start After 2024 (In best case) AZ (Supplier), GEO & TR (Transit), EU (Market) Related Countries / Political (Note for EU Market: With preference due to existing Structures infrastructure Italy or Balkan markets can be selected) Medium Level Risk Resource (Hence being in appraisal stage, proven reserves is not clear yet.) Low Level Risk Finance (Low oil prices may make contractor or AZ government to delay some investments on development projects.) Low Level Risk (No risks for technology, know-how, equipment supply but Infrastructures / Production risks for infrastructures completion time.
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