The presidents of Azerbaijan, Kazakhstan, Russia, and Turkmenistan ended their meeting in Kazakhstan's resort city of Kenderly last weekend with its purpose and consequences as clear as distant figures in an early autumn mist. Two elements did emerge more clearly than others - Turkmenistan's determination to diversify its energy export routes and to make future price talks with Russia tough going, and Iran's displeasure at not being invited to the party.
There was no published agenda for the quadrilateral meeting in Kenderly, against which the Iranian foreign minister issued a public protest at the exclusion of his country, the fifth Caspian Sea littoral state. The foreign ministry of Kazakhstan, the host country, had stated earlier that pan-Caspian issues such as division of rights to subsea resources would not be discussed; but with no official communique or even anonymous press leaks it is difficult to know for certain.
The site of the meeting, near the Caspian Sea port of Aqtau, may have carried its own message - Aqtau, by coincidence, or not, is becoming an important link in the west-to-east transmission of energy supplies from Asia to Europe.
The Kazakhstan-Caspian Transportation System (KCTS) is projected to run from Eskene, onshore near Tengiz, to the port of Kuryk, near Aqtau. The oil it carries will then enter the Baku-Tbilisi-Ceyhan (BTC) pipeline, turning it into the Aqtau-Baku-Ceyhan (ABC) pipeline, terminating near the Turkish Mediterranean coast. The project is designed to reduce Kazakhstan's dependence on the Moscow-controlled Tengiz to Black Sea pipeline of the Caspian Pipeline Consortium (CPC).
Anything could have been discussed bilaterally or trilaterally outside the formal meetings as well. Technically speaking, the attendees could even discuss cooperation on energy pipeline construction without raising the issue of the Caspian Sea's legal status. The Iranian fear is that even if such things as division of the Caspian Sea were not formally discussed, the meeting nevertheless could have offered Russia an opportunity to seek to solidify a political bloc with the other three countries, which are former Soviet republics.
The presidents of Russia and Kazakhstan arrived together at the summit following a bilateral meeting in Orenberg (the transborder Russian processing plant that takes gas from Kazakhstan's massive Karachaganak deposit in the north of the country), but it seems unlikely that the Iranian fear was realized.
From this obscurity of purpose, Turkmenistan's President Gurbanguly Berdimuhammedow almost stole the show as his country's media published under his name a unilateral statement from Ashgabad as the meeting in Kenderly got under way.
The statement, to commemorate the national celebration of Oil, Gas, Electrical Workers and Geologists Day, notably made no mention of the Caspian Coastal Pipeline, which passes from Turkmenistan to Russia through Kazakhstan and which the three countries agreed two years ago to reconstruct but on which no work has been accomplished. This Soviet-era gas pipeline, in severe disrepair, runs along the Caspian Sea coast in Turkmenistan and southwest Kazakhstan before turning northward into Kazakhstan and finally northeast to join the main trunk of the Central Asia-Center pipeline complex to Russia.
However, Berdimuhammedow's statement did take note of the Turkmenistan-China gas pipeline now under construction through Uzbekistan and Kazakhstan, as well as the Turkmenistan-Afghanistan-Pakistan-India (TAPI) project, which is still on the drawing boards but on which some progress (on the drawing boards) has been made over the past few years.
The message to Moscow could not be clearer: Turkmenistan is seeking to diversify its export routes, and any future bargaining over prices for quantities to be dedicated to Russia will be tough going.
The Turkmenistan president's statement even invoked the prospect of his country's gas feeding the Nabucco pipeline to Europe (the pipeline will transit Turkey, thereby avoiding Russian territory) despite the fact that the Nabucco Pipeline Company announced almost simultaneously, and without explanation, that it was putting the start of construction off from 2009 to 2011, the start of operations from 2012 to 2014, and the finished product from 2014 to 2016.
There are three possible reasons for this delay that are not mutually exclusive. First, the Nabucco pipeline is intended to carry gas from several sources, including Azerbaijan and in particular that country's offshore Shah-Deniz field. In view of Azerbaijan's discussions with Russia about cooperation in the development of gas in Shah-Deniz Two and Russia's stated willingness to pay a good price for the fuel, those involved with Nabucco may be hedging their bets and thinking of relying more in the long run on gas from the Shah-Deniz Three stage.
Second, the delay likely reflects Turkey's on-again, off-again policies towards legal and tariff issues with the European Union that had been resolved bilaterally in May in a remarkable breakthrough but later, after further Russian-Turkish negotiations over the South Stream pipeline, Russia's answer to Nabucco, reappeared to block further progress on the European pipeline.
Third, and perhaps most serious, the delay in Nabucco undoubtedly reflects the re-eruption of the territorial conflict between Turkmenistan and Azerbaijan over delimitation of Caspian Sea subsoil sectors that helped to block the Trans-Caspian Gas Pipeline (TCGP) from being constructed a decade ago. A new TCGP project is part of Nabucco's current plans, and the full Nabucco project cannot be realized without significant gas from Turkmenistan.
One of the variants of the TCGP that has been recently mooted, in the attempt to overcome this difference between Turkmenistan and Azerbaijan, is the construction of a gas pipeline from Kazakhstan under the Caspian Sea to Azerbaijan for product either from Karachaganak offshore or, later, the offshore Kashagan project, where a large amount of associated gas will need to be somehow captured as the underlying crude oil is developed.
A pipeline from Turkmenistan could then join that Kazakhstan-Azerbaijan pipeline in the Kazakh offshore sector, enabling Turkmenistan's gas to enter Nabucco without the need for it to cross directly into the Azerbaijani sector.
This last option, however, is encountering difficulties. Indeed, following the Kazakhstani energy minister's visit to Beijing two weeks ago, Kazakhstan and Azerbaijan decided to explore the possibility of Azerbaijani gas flowing eastward under the Caspian Sea to Kazakhstan and proceeding from there to China. The fuel would be conducted by a second Kazakhstan-China pipeline laid in parallel with the corresponding segment of the Turkmenistan-China pipeline mentioned above, that would itself pass through Kazakhstan.
This amounts to reversing the flow of the projected pipeline that would have been designed to allow Turkmenistan's gas to reach Europe without requiring a resolution of the offshore delimitation conflict with Baku. However, this would not preclude gas from Azerbaijan reaching Europe. The president of the State Oil Company of the Azerbaijan Republic (SOCAR), Rovnag Abdullaev, announced, also just in time for the summit in Kenderly, that the new inventory of Azerbaijan's offshore gas reserves amounts to no less than 5 trillion cubic meters.
Abdullaev emphasized, as Azerbaijani officials have done all along, that decisions on export destinations will be taken on the basis of the definition of markets, volumes, and conditions of transportation. Such a policy demonstrates the common sense of multiple export pipelines, a policy pioneered by Azerbaijan, followed by Kazakhstan, and now adopted by Turkmenistan.
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First published in Asia Times onLine, 18 September 2009.