When the Trans-Anatolian Pipeline (TANAP) was announced last year, European natural gas consumers breathed a collective sigh of relief.
After more than a decade of fruitless wrangling over transit and investment terms for Southern Gas Corridor projects such as Nabucco and Interconnector Turkey-Greece-Italy (ITGI), it seemed that the holder of the gas, Azerbaijan, and the most important transit country, Turkey, had circumvented European fecklessness to get the job done themselves. But now it seems that agreement is in serious doubt, with the State Oil Company of the Azerbaijan Republic (SOCAR) and Turkey’s Petroleum Pipeline Corporation (BOTAŞ) and the Turkish Petroleum Corporation (TPAO) bickering over the pipeline’s ownership structure. If the Turkic brothers cannot reach an agreement soon, TANAP risks getting stuck in a stalemate, repeating the mistakes of previous pipeline proposals.
It is difficult to underestimate the impact of the TANAP announcement on the region’s “pipeline politics.” The operatically ambitious and unwieldy Nabucco pipeline proposal, which was to have brought Azerbaijani and possibly Turkmen and Iraqi gas from eastern Turkey to Austria, was halved to its European portion. ITGI was scrapped by the Shah Deniz Consortium, the holders of the Azerbaijani gas, as uncompetitive. BP suggested its own pipeline in Europe to link to TANAP’s route in the Caucasus and Turkey. A fifth pipeline proposal, the Trans Adriatic Pipeline, which would link TANAP to Southeast European markets, was elevated by Shah Deniz as a highly compatible project.
All of these projects shifted their strategies to accommodate TANAP. But now that it is stalled, there is talk amongst energy analysts of reviving grandiose projects like Nabucco, or just moving forward with limited projects similar to ITGI, which would not require a major pipeline addition in Anatolia.
The original TANAP agreement included an 80 percent stake for SOCAR, which would provide much of the project’s financing, with 10 percent stakes for BOTAS and TPAO. SOCAR spokesmen have said that their stake would be split, with parts provided to other Shah Deniz shareholders, such as BP or Norway’s Statoil. The Turkish companies, however, have challenged the uneven percentages and are now apparently demanding a 50 percent stake to split between the two of them.
The final percentages are less important than the need to reach an agreement. This impasse smacks of a similar disagreement on transit terms between Ankara and Baku, which stalled negotiations on the Southern Corridor for almost two years. The bickering over TANAP revives essentially the same disagreement in a different guise. It is not only unfortunate that we have to watch a replay of the same arguments. It is also strategically unwise.
At the moment, European consumers, especially in undiversified Central and Southeastern Europe, desperately need new sources of natural gas to reduce dependence on Russian resources. The promised shale gas revolution, so transformative in North America, has yet to materialize in Europe due to a combination of political, environmental and regulatory factors. Renewable and low-carbon resources have yet to make a dent in the continent’s energy picture, despite lofty goals set by the European Union. From the downstream point of view, this is the moment when the Southern Gas Corridor to the Caspian must be realized. Tireless efforts by EU diplomats and the US special envoy for Eurasian energy attest to that.
Azerbaijan and Turkey may feel that European consumers’ unenviable situation means they have time to spare in settling their differences. There may have been time to spare 10 years ago, but this disagreement comes after countless delays and false starts on the Southern Gas Corridor. If TANAP does not go forward soon, the consumers with more options will boost shale and renewables efforts. Consumers with fewer options will resign themselves to giving into Russian pressure. No one has the patience to wait for Caspian gas anymore.
*Alexandros Petersen is advisor with the European Energy Security Initiative (EESI) at the Woodrow Wilson International Center for Scholars in Washington, D.C. His latest book is “The World Island: Eurasian Geopolitics and the Fate of the West.”