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AGHAYEV: The many winners of the ‘Great Pipeline Race’

Azerbaijani gas is set to warm Europeans

- - Tuesday, July 9, 2013

As any American following the Keystone XL pipeline saga knows, finding new energy reserves sometimes is the easy part, while getting the stuff to the folks who want it can be like the fifth labor of Hercules.

For Europe, the seemingly Herculean task of attaining a diversified energy supply came late last week when the consortium operating the Shah Deniz gas field of Azerbaijan, stewards of what is thought to be the largest natural-gas discovery in a generation, selected the Trans-Adriatic Pipeline to funnel product from Azerbaijan into Europe. Linked to the Trans-Anatolian Pipeline being built in Turkey, the Trans-Adriatic Pipeline will bring an initial 10 billion cubic meters of Azerbaijani gas a year across Albania and Greece, and into Italy. An additional 6 billion cubic meters will flow to Turkey along the way. The first gas is expected in 2019.

Thus ended what has been referred to in the industry as "the Great Pipeline Race,'' in which industry chiefs, geostrategists and world politicians debated the best route to move energy wealth from Azerbaijan to Europe.

The European Commission had been agnostic regarding the pipeline proposals, saying it did not prefer either project over the other. Rather, Europe simply wanted a solution to what increasingly was looking like a perennial natural-gas supply bottleneck. A lack of supply has shackled Europe in the past decade, first in 2006 and again in 2009, when price disputes between Russia and Ukraine disrupted supplies and left Europeans shivering. Last winter, end-of-the-pipe supply shortages crimped industrial production in Italy.

When the pipeline decision came, European Commission President Jose Manuel Barroso described it as a "shared success for Europe and a milestone in strengthening the energy security of our Union."

The Trans-Adriatic Pipeline was chosen over the Nabucco West pipeline, which would have run into Central Europe. Nabucco had been in the planning stage for many years, and its long determination to bring Caspian gas to Europe had been critical in building interest in Azerbaijan's resources. However, Azerbaijan and the other members of the Shah Deniz consortium are faced with the new realities of the global energy market. The outcomes of the global financial crisis, the U.S. shale revolution, the rise of liquefied natural gas and other developments have made the bottom line more important than ever. As Azerbaijani Energy and Industry Minister Natig Aliyev said recently: "The main factor for partners is the commercial factor in the short term." The Trans-Adriatic Pipeline, the shortest and most cost-effective project, won the day on this score.

The 500-mile project should spread a wide swath of energy stability. It will bring reliable supplies of gas not only to Greece and Italy, but also to greater Europe, including the energy-starved Balkan region. Turkey, a big consumer of natural gas, also will benefit mightily. Then there are the spin-off benefits, including a nearly $2 billion economic benefit and 12,000 new jobs for Greece, as its government said, and an estimated 3,000 construction jobs for Albania.

What is good for Turkey and Europe is good for America as well. The United States has been a firm supporter of diversifying European and Turkish energy supplies as a strategic priority, and has welcomed Azerbaijan's commitment to its allies in Brussels and Ankara.

Indeed, for 20 years, Azerbaijan has committed itself to an independent energy policy. It was the first country in the region to invite Western energy companies to jointly develop its energy resources, and has been a gateway for investments in the wider Caspian region. Despite pressure from some quarters, Azerbaijan has proved itself to be a reliable supplier of oil and gas to the West.

This started with the Baku-Tbilisi-Ceyhan oil pipeline, which opened in 2006 and now brings almost a million barrels of crude oil a day from the Caspian to global markets, and has taken another leap forward with the choice of pipeline.

Though Shah Deniz is a massive natural-gas find, it is far from the only prospect in Azerbaijan. In the next 10 years, huge new gas fields, developed independently by Azerbaijan as well as in collaboration with its international partners, will come on-stream, leading to new export routes and new opportunities to strengthen Azerbaijan's contribution to global energy security.

It would appear that the Trans-Adriatic Pipeline is not the end of the story, but rather the beginning.

Nasimi Aghayev is consul general of Azerbaijan to the western United States.