Azerbaijans essential role in future EU energy security highlighted in the house of lords

Standing room only was available in Committee Room G in the House of Lords on 16 February when energy expert Professor Alan Riley, City University, delivered an inspiring lecture, hosted by Lord Laird, on Post-Nabucco? The Options for the Southern Gas Corridor. The lecture, organised by The European Azerbaijan Society, was delivered before an audience of over 70 guests, including Harold Formstone, Former UK Ambassador to Azerbaijan; Dr Ali Tekin Atalar, Chair, Azerbaijan House; Dr Shirin Akiner, Research Associate, School for Oriental and African Studies (SOAS); Nigar Gahramanova, Performance Manager, Full Field Development of the Shah Deniz Stage 2 Project; Mehmet Öğütçü, Chairman, Global Resources Corporation; Craig Oliphant, Senior Advisor, Europe and Central Asia, SaferWorld; and Angus Miller, Senior Energy Advisor, Foreign and Commonwealth Office.

Professor Riley outlined current and future Azerbaijani gas production, which will supply an additional 16bn m3 (bcm) per annum when the Shah Deniz 2 field comes on stream in 2017, much of which will be supplied to European customers. He commented: “This will be significant to European energy security, away from over-reliance on Russian Gazprom. Azerbaijan also has the potential to become a major gas transit hub, supplying to the EU from resources across the Caspian region, particularly Turkmenistan.” He went on to outline the changing dynamics of world gas supply and Russia’s realisation that the game has dramatically changed regarding the relationship between Europe and the Caspian and Central Asia region.

He continued: “Gas will increasingly become the energy of choice for the EU. The cost of renewable energy generation remains very high, and coal has a significant environmental impact and is no longer favoured by governments. Azerbaijani gas will play an essential role in the future. The Panama Canal is currently being widened in order that liquefied natural gas (LNG) may be transported. The EU needs to find other resources from more diverse suppliers. Although extraction remains expensive, shale gas could be used widely in the future.

“However, it is unlikely that the Nabucco pipeline, in its originally proposed form, will be constructed, despite gaining considerable political support across the EU. A major issue is the astronomic cost of €14–20bn (£11.6–16.6bn), and the other is that Azerbaijan could only fill one-third of its 31bcm capacity. In addition, the proposed Nabucco project was of concern to Gazprom, which derives two-thirds of its revenue from EU customers.”

Professor Riley then went on to outline the issues impacting other competing pipeline projects, including the Interconnector Turkey–Greece–Italy (ITGI), which has been cast into doubt by the Greek and Italian financial meltdown. However, he acknowledged that the Trans-Anatolian Pipeline (TAP), which is viable in the wake of the recent transit agreements signed by Turkey and Azerbaijan, costing a relatively modest €4bn (£3.3bn), is possible, as is the South-East European Pipeline, costing around the same. These would use many of the permits and agreements agreed for Nabucco.

In conclusion, Professor Riley commented: “There needs to be a significant Azerbaijani gas supply to Europe, and that will enhance European energy security and position Azerbaijan as a major player in the international arena.” He said it would be better if Gazprom accepted the competition, rather than opposing it, as doing so could lead to a negative reaction from customers.

Professor Riley’s lecture was followed by a series of questions and a lively networking session.

Source: TEAS