TANAP and the importance of the project on international stage

Tural Shirin

Abstract/Intro:

For almost two hundred years, Azerbaijan have been actively involved in petroleum and gas industry and is regarded as one of the birthplaces of the ‘black gold’. According to 2016 statistics, Azerbaijan have been producing more than 800,000 barrels of oil per day, and almost thirty billion cubic meters of natural gas annually, outstanding figures for small South-Caucasian state with a population of just 10 million. [1] However, as the second decade of this century advanced, the Republic of Azerbaijan have made serious bid for returning the major status in global oil and gas industry.

Trans-Anatolian Natural Gas Pipeline – TANAP

On the last month of 2011, the Republic of Azerbaijan and the Republic of Turkey signed the Memorandum of Understanding (MoU) with the State Oil Company of Azerbaijan Republic (SOCAR) within the project of the TANAP. Thereafter, the project was officially established and the process of construction authorised. [2] The primary target of the pipeline is to extend the reach of natural gas produced from Shah Deniz-2 gas fields to Turkish and mainly to European market. The abovementioned gas field have a potential of producing 16 billion cubic metres (bcm) of gas per annum, almost all for export markets. Turkish counterpart of SOCAR – BOTAŞ, has secured usage of 6 bcm for Turkey, whilst the remaining 10 bcm were contracted by number of European companies – mostly from Italy. [3]

Advantages of the Project

Integrating Azerbaijan to European markets.

TANAP is, arguably the greatest opportunity for Azerbaijan to integrate with Energy Market of Europe, as well as to establish itself as a secure transit country. In a long-term instance, the project will drastically increase gas exports of the country from 8.1 bcm to almost 24 bcm annually. [4] On a domestic level, TANAP will provide a great moment to develop resource industries to that of global standards.

Balancing against decline in oil exports.

Without any doubt the oil crisis of recent years has hit the oil production in Azerbaijan, which has been significantly declined. Therefore, the growth in export of natural gas from Azerbaijan will provide additional income, that will let the government increase amount of existing assets and hence, maintain the economic growth of the country.  Once the pipeline is constructed, the country would extremely benefit from successful diversification of export based from regional market to European.

Contribution of TANAP to the image of Azerbaijan on international arena

TANAP is the pioneering project in realisation of Southern Gas Corridor. Many specialists regard it as the most important energy project of Azerbaijan. Statement, issued by European Commission, which was eventually signed by almost dozen of states, including the United States and the United Kingdom, is a promising factor for establishing close trade links with Western Hemisphere in the future. Potentially, the pipeline can reverse the increasing tendency of criticism towards the Republic of Azerbaijan from European states and multinational institutions. In a possible long-term instance, energy trade with Europe may create an opportunity for Azerbaijan to exempt from patronage of Russian Federation, and hence, achieve a long-desired economic and political proximity with other nations.

Concreting bonds with Neighbouring Turkey

After successes in Baku-Tbilisi-Ceyhan (BTC) Oil Pipeline and Baku-Tbilisi-Erzurum (BTE) Natural Gas pipeline in previous decade, two neighbouring states – Turkey and Azerbaijan – have extended mutual prosperity in energy sector. With a help of TANAP project, Turkey will be a step closer in solving the problem of low gas storage, which accounts for 5% of annual consumption, whilst the same index equals to 20-30% in Europe. [5] Gradually, the diversification of gas providers, and enhancing supply security through TANAP project, will certainly have a positive impact on Turkey’s economic growth. Moreover, the project is going to create new trade links with European nations and, undoubtedly, strengthen the voice of two regional powers in energy markets of the globe.

‘Tasty morsel’ for European nations

The Import of natural gas in the EU accounts for 2/3 of the European gas supply, due to decline in gas production in last decade, and the decline is yet to progress. According to the International Energy Agency (IEA), by 2040 European annual production will drop by 100bcm, and in this case, the region will be dependent on huge imports, to reduce the gap between demand and declining supply within EU. [6] General gas supply in Western Europe is quite diversified, whilst in Eastern and South Eastern Europe, including Italy, there is a huge dependence on one source. Nevertheless, the construction of the Southern Gas Corridor is of highest priority for Europe in terms of route diversification and security. Even though the project is an enormous avail from Turkey and Azerbaijan, the initial instigators are not the only one to gain from TANAP. European energy market will certainly achieve long-awaited diversity and security of gas flow. TANAP will be a salve for Southern and South-Eastern Europe that experiences sever gas shortages from Russian Federation, as the latter is involved in political crisis of its transit country – Ukraine. Considering the recent 5% increase in Italy’s gas consumption as well, standing at 70.9 billion cubic metres and the fact that pipeline gas constitutes almost 90% of South-Eastern European import, the diversity that TANAP will bring for Europe is VITAL.[7]  10bcm/annum gas supply to Europe  through TANAP, as of initial agreement, will provide 3-4% of European gas import and almost twice of this amount after future increase of flow to 20 bcm/annum. According to European Commission, if necessary, in long term EU can increase the amount of gas imports via Southern Gas Corridor to 80-100 bcm.[8] Surely, in few years’ time, through TANAP project, Azerbaijan will demonstrate its strategic importance and possibly establish itself as the safest gas provided to whole of South-Eastern Europe.

Conclusion

As mentioned before, TANAP has a capability of becoming the greatest energy project of Azerbaijan republic. On international arena, the pipeline, which is almost 2,000 km long, will change the course of energy politics in Europe, and hence, the decision making in the region, and regional conflicts. Some rhetorical questions arise: Will Azerbaijan be the part of the policy-making process in the region? Can the country set terms to the Russian Federation in the future? Will the project play an essential part in settlement of Nagorno-Karabakh conflict, be a vital step towards restoration of peace and justice and bring the long-awaited prosperity to the region of South-Caucasus? And most importantly, will west change the policy of double-standards and start backing its new regional partner? TANAP have created dozens of discussion points from its early days and only time will show who is going to benefit from the project the most, nonetheless, if things keep developing in this direction, Azerbaijan can achieve all of its goals on regional level.

[1] SOCAR – http://www.socar.az/socar/en/economics-and-statistics/economics-and-statistics/oil-production

[2] TANAP – http://www.tanap.com/corporate/about-us/

[3] COMBINED PROJECT INFORMATION DOCUMENTS / INTEGRATED SAFEGUARDS DATA SHEET (PID/ISDS) CONCEPT STAGE- 11 January 2016, http://documents.worldbank.org/curated/en/975071468102266266/pdf/PIDISDS-CON-Print-P157416-02-26-2016-1456494884810.pdf

[4] Asian Infrastructure Investment Bank, Republic  of Azerbaijan: Trans Anatolian Natural Gas Pipeline (TANAP) Project, 07 December 2016<https://www.aiib.org/en/projects/approved/2016/_download/trans-anatolian/document/tanap-project-document.pdf

[5] Ibid., p. 6

[6] Ibid., p. 5

[7] Interfax Global Energy, Italian Gas Consumption up 5% in 2016, 14 June 2017 <http://interfaxenergy.com/gasdaily/article/26363/italian-gas-consumption-up-5-in-2016

[8] Ibid., p. 6