EU Studying Trans-Caspian Gas Pipeline Options

The EU is studying options for the development of a trans-Caspian gas pipeline, EU Energy Commissioner Andris Piebalgs said on 20 June. Speaking in Brussels at a meeting attended by Kazakh Prime Minister Baktykozha Izmuhambetov, Mr Piebalgs said the European Commission was preparing a new project that would study possible options for developing additional gas interconnections in the Caspian Basin and onwards through the Caucasus to the EU. He pointed out that the proposed Nabucco pipeline project would provide a new supply route for gas from the Caspian region to Central Europe via Turkey, Bulgaria, Romania, Hungary and Austria. Mr Piebalgs said the EU welcomed Kazakhstan’s decision to join the Baku-Tbilisi-Ceyhan (BTC) crude oil pipeline and added that Kazakhstan’s potential for gas exports was expected to reach 50bcm/year by 2010-15. “The EC therefore supports the development of new, alternative export routes for transport of gas resources from the Caspian region to the EU,” Mr Piebalgs said, adding: “This would be of mutual benefit to both – for Kazakhstan in terms of diversification of exports, and for the EU in terms of the security of energy supply.”

Mr Piebalgs was in Kazakhstan in May and discussed the possibility of a trans-Caspian gas pipeline with the Kazakh authorities at that time. The US also urged Kazakhstan to give the proposal serious consideration during a recent visit to Astana by US Vice President Dick Cheney (MEES, 22 May). Washington has also called for the acceleration of Azerbaijan’s Shah Deniz project (MEES, 12 June). The study announced by Mr Piebalgs on 20 June is likely to be a joint EU-US effort with Azerbaijani and Kazakh support. A decision on the 3,300km, $5.5bn Nabucco gas pipeline project is not expected to be made until the end of 2007 (MEES, 16 January). Nabucco would have a design capacity for 30bcm/year and could conceivably carry gas from Iran, Iraq, Egypt, Azerbaijan, Kazakhstan and Turkmenistan. In an interview with MEES in April, Mr Piebalgs said that Iran and Egypt have a key role to play in meeting rising European gas demand, especially as the EU looks to diversify incremental supply away from gas imports from Russia, Norway and Algeria, which together now account for some 75% of European gas supply (MEES, 24 April). “We clearly see the growth in consumption of gas in the EU because of the pressures of climate change and diminishing domestic resources. So we need more gas and for security of supply, we need more suppliers…definitely from the Caspian, gas from Egypt and gas at some stage from Iran and Iraq,” he said.

Meanwhile, work is progressing on a pipeline to connect the Turkish and Greek gas networks through which Greece will begin to receive gas from Azerbaijan later this year. The project was inaugurated in July 2005 and has received financial backing from the European Investment Bank (MEES, 13 February, 11 July 2005). The pipeline is to be extended across northern Greece and the Adriatic to southern Italy for delivery of Shah Deniz gas by around 2011. The pipeline has been deemed a priority Trans-European Networks Energy project by the European Parliament and the European Council.

Other recent developments in the Caspian region include:

  • Turkmenistan on 21 June threatened to halt gas supplies to Russia if it refuses to pay the asking price of $100 per 1,000 cu ms. Turkmen officials met earlier in the week with a delegation from Gazprom, led by Chairman Alexey Miller. Turkmenistan said if Gazprom did not agree to the price increase in the coming weeks it would suspend gas shipments, most of which are transported on to Ukraine. Turkmenistan and Russia signed a 25-year gas sales agreement in 2003 and in 2005 Russia purchased 4bcm for $44 per 1,000 cu ms. During 2006, Russia has paid $65 per 1,000 cu ms.  

  • Russia’s Gazprom and Hungary’s MOL on 21 June signed an agreement proposing the extension of the Blue Stream pipeline, which runs across the Black Sea between Russia and Turkey, into Europe and the creation of an underground 10bcm gas storage center in Hungary. The project, called the South European Pipeline, would cost more than $6bn to build and could be completed within five years.  

  • TransMeridian Exploration on 20 June said oil production at its South Alibek field in northwestern Kazakhstan had reached 2,600 b/d following the start of production at Well SA-11. Well SA-12 is due to come on-stream in July pushing production up to more than 3,000 b/d.  

  • Maintenance work at Kazakhstan’s Tengiz oilfield carried out by TengizChevroil (TCO) will reduce throughput in the Caspian Pipeline Consortium (CPC) pipeline during the month of July. Shipments of Kazakh and Russian crude oil through the pipeline to Novorossysk averaged 680,000 b/d during the month of April (MEES, 8 May).  

  • The National Iranian Oil Terminals Company (NIOTC) on 11 June said Iran’s Caspian Sea terminal at Neka is capable of receiving 300,000 b/d of crude oil from other Caspian littoral states and can store 1.5mn barrels. Abdorrahman Kheilaii, director of operations, said the terminal has received an average of 120,000 b/d since the start of the Iranian new year on 21 March. He said plans call for boosting the terminal’s capacity to swap crude with its Caspian neighbors to 500,000 b/d. About 75% of the crude being delivered for swap at Neka comes from Kazakhstan, while the other 25% comes from Russia and Turkmenistan. NIOTC is building three 330,000 barrel storage tanks at a cost of some $15mn, Mr Kheilaii added (MEES, 20 March).