By Dmitry Migunov
The Turkmen authorities declared their readiness to participate in the project of gas supplies to Europe via the Trans-Caspian pipeline, bypassing Russia. This proposal (already not the first this year) did not cause much excitement in the EU. About how the first project to supply the EU with Central Asian gas was created and collapsed, and why the current one, most likely, will face the same fate.
The ghost of Nabucco
The idea to build a gas pipeline bypassing Russia, filled with gas from the Caspian Sea basin, is very old . It was first talked about back in 2002, long before the Europeans began to discuss the reliability of Russia as a supplier, even before the first serious Russian-Ukrainian gas conflict. In 2003, the European Commission approved a grant for 50% of the cost of research work to establish the profitability of the project. And in June 2005, an agreement was signed on a joint venture between the gas companies of five countries: Turkey, Bulgaria, Romania, Hungary and Austria, which was subsequently joined by the German RWE.
Negotiations under the auspices of the leaders of the European Union (in particular, the then head of the EC, Jose Manuel Barroso) accelerated at the end of the 2000s, against the backdrop of a growing problem with Ukrainian transit and the Nord Stream gas pipeline under construction. In parallel, the development of the Russian “South Stream” under the Black Sea for the countries of South-Eastern Europe and Italy was going on, and the Nabucco project (in honor of the opera of the same name by Giuseppe Verdi) became a vital alternative for Brussels . Even the US Congress was involved as support. By 2009, all participants have ratified all the necessary documents.
There was only one problem: among these participants there was not a single country that, in fact, produced enough gas and could pump it into the pipeline. Nabucco officials have long courted three candidates who could provide the supplies: Iraq, Azerbaijan and Turkmenistan.The option with Iraq looked the most interesting at first. However, firstly, political difficulties arose: gas was supposed to be purchased from the Kurdish regional government, where the Akkas field was located. Officially Baghdad categorically disagreed with this, which demanded that all export issues be resolved through itself, which the Kurds did not like. In addition to political problems, there were also technical difficulties: reserves for gas injection at the level of 30 billion cubic meters per year would be enough for only a few years. All this together ruled out the possibility of successful cooperation with Iraq.
With Turkmenistan, the situation was more complicated.President Gurbanguly Berdimuhamedov showed great interest in the project from the very beginning. The opportunities were also present - the Central Asian country in terms of gas production then and now is in 11th place in the world. For anti-Russian European structures, Turkmenistan was a win-win option. But it didn't work out. First of all, because China was the first to succeed: in December 2009, according to Berdimuhamedov, the “gas pipeline of the century” was launched, which pumped up to 40 billion cubic meters annually through Central Asia. What was left was clearly not enough for Nabucco at that time. But no less important was the fact that in order to launch a gas pipeline along the bottom of the Caspian Sea, the consent of all countries whose shores it washes was necessary, and problems could definitely arise with this, given Russia's hostility towards the pipeline project.
So there only remained Azerbaijan and its Shah Deniz field, which was simply too small to fill Nabucco to its full capacity. Azerbaijani gas eventually went to Europe through the Trans-Adriatic pipeline built in the 2010s on a much smaller scale. Its throughput capacity was 16 billion cubic meters per year, of which only 11 billion reached the EU countries directly. This is where the story of the attempt to build a gas pipeline from Central Asia to Southern Europe ended.
East instead of West
But, as it turned out, "sometimes they come back." Last week, the Turkmen Foreign Ministry announced that there were no economic, political or financial obstacles to the construction of the Trans-Caspian Gas Pipeline, which could become the first stage in the supply chain of Central Asian gas to the West. The topic was thrown into the public space for the first time in the last 10 years and to everyone's surprise
The time for activating talks about the gas pipeline, however, was chosen quite well. Since last year, the EU has been actively looking for alternative gas suppliers due to the rejection of most pipeline imports from Russia. Most of it comes from liquefied fuels from the US and Qatar, prices for which are very volatile. The EU would also like to receive gas through a pipeline under long-term contracts, the benefits of which, starting from 2021, have been estimated by almost all market participants. There are not many options here, and Turkmenistan looks the most realistic of all.
What has changed in a decade? The main thing is that the international legal difficulties associated with the status of the Caspian Sea have disappeared. In 2018, the five basin powers of this body of water resolved legal issues by signing the relevant Convention . It,in particular, recognized the Caspian as a sea (and not a lake, which it is from the point of view of physical geography). And this means that the consent of all five countries is no longer required for laying the pipeline - it is enough for those through whose territorial waters it passes. However, there is a nuance: construction must be carried out in compliance with environmental standards, and the interpretation of these can be quite broad.
With economic and financial issues, everything is somewhat more complicated. At the moment, there is not a single structure that would work on projects for the construction of a gas pipeline across Europe. It is not possible to load the current capacities, that is, everything will have to be created practically from scratch. And this is not only money, but also time - we will talk about at least a few years, given the well-known difficulties of the EU with the bureaucracy.
Secondly, the EU will have to fork out for a pipeline directly under the Caspian Sea, since the chances that Ashgabat will build it with its own money seem negligible - the country has neither the extra financial resources in such a volume, nor the necessary expertise for this. In 2006, the cost of the project was estimated at $6 billion.But that was a preliminary estimate: with a direct “approach to the projectile”, the estimate most often grows one and a half, or even two times for such projects. In addition, one should take into account inflation and the rise in price of such services in addition to the usual depreciation of the dollar. In general, most likely, we will talk about the amount of $12-15 billion, and this is the lowest possible estimate. It is difficult for the EU countries to pull such an amount, but there are doubts that they will be ready to spend money on an object that will not work until the next decade.
Finally, despite all the statements, in reality, Turkmenistan is actively increasing its gas supplies in all directions, except for the western one. In June, it was reported that Ashgabat and Tehran were close to concluding a deal on the supply of about 3.65 billion cubic meters of gas per year. This is an interesting case, since Iran itself has colossal gas reserves, much more than the Turkmen have. However, almost all of them are located in the south of the country, while the northern (no less densely populated) fenced by high mountain ranges is a fuel-deficient region. In the absence of natural geographic barriers, importing from Turkmenistan becomes the best option.
But this is a trifle in the total volume of exports. Much more important is the Chinese direction. In 2022, gas supplies from Turkmenistan to China amounted to 35 billion cubic meters. In October last year, it became known that the two countries agreed to jointly develop the second stage of the large Galkynysh gas field, as well as to almost double supplies to China - up to 65 billion cubic meters per year through the construction of another gas pipeline, already the fourth on the list.
In such circumstances, it is extremely doubtful that Turkmenistan will have any additional extraction capacity, the production of which can be sent to the West. There will be no choice at all between the EU and China, since in the second case there is a buyer who is ready to quickly build a gas pipeline at its own expense along a well-established route. In general, it is not surprising that Europe in 2023 is not particularly interested in signals from Ashgabat, despite all its needs for blue fuel.
This article originally appeared in Russian at iz.ru