Azerbaijan on cusp of gas greatness

Country's gas reserves set to add diversity to the European energy sector.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |  June 29, 2016 at 6:12 AM
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WASHINGTON, June 29 (UPI) -- Though some geopolitical conflicts may impede the progress, Azerbaijan is positioned to become one of the region's key players in natural gas, analysis finds.

A review from the U.S. Energy Information Administration finds Azerbaijan has been a legacy oil producer, with some fields in production since the early 1950s. Natural gas reserves, meanwhile, exceed 30 trillion cubic feet and most of that is in the Shah Deniz field, tapped to feed the European market.

"Although historically an oil producer, Azerbaijan's importance as a natural gas producer and exporter is growing," EIA's analysis said.

A series of pipelines dubbed the Southern Corridor are planned for delivery of natural gas from the Shah Deniz reserve basin in the Azeri waters of the Caspian Sea. More than 500 billion cubic feet of natural gas per year is slated for exports from Shah Deniz to the European market through a network of 2,100 miles of pipelines in a few years.

Azerbaijan became a net gas exporter in 2007. The emergence of Shah Deniz is expected to provide a net stimulus to the nation's economy. According to the International Monetary Fund, economic growth is turning negative, but on the road to recovery.

"Growth is expected to rise to about 2.5 to 2.75 percent over the medium-term as gas production and exports rise and reforms start to take effect," a June 1 statement from the IMF read.

Claims to maritime territory have been a source of contention between the states sharing a border with the Caspian Sea. Iran's position since 1991 has been that all five Caspian states receive a 20 percent share of the Caspian's waters and seabed, while Russia has maintained that each state should receive territory proportional to the length of its coastline.

Europe relies heavily on Russia for natural gas and most of that runs through Soviet-era pipelines in Ukraine, which exposes the market to risk from the adversarial relationship between those two countries.

BP's regional subsidiary has already awarded billions of dollars in contracts to help move Azeri natural gas through pipelines headed toward the European market.

The Trans-Adriatic pipeline will start delivering gas from the Shah Deniz gas project to European consumers in 2019. TAP would connect to the Trans-Anatolian natural gas project running through Turkey to the Greek border.

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