Several recent developments seem to indicate that progress could be made on the implementation of the Southern Gas Corridor (SGC), with a concrete involvement of Turkmenistan as gas supplier in order to enhance the capacity of this energy route, through the realization of the Trans Caspian Pipeline (TCP), the “missing link” along the Caspian Sea between Turkmenistan and Azerbaijan.

If trilateral negotiations among EU, Turkmenistan and Azerbaijan have paved the way to improve reciprocal relations, trying to address unsolved issues between Baku and Ashgabat (i.e the ownership of disputed offshore oil and gas fields in the Caspian Basin), the recent trilateral dialogue involving Turkey with the two Caspian countries have revitalized the Trans Caspian project, producing interesting results. As a matter of fact, in November 2014 Turkmenistan signed a framework agreement with Turkey to supply the Trans Anatolian Natural Gas Pipeline project (TANAP), a section of the Southern Gas Corridor project, aimed to deliver 16 billion cubic meters (bcm) of gas a year from Azerbaijan’s Shah Deniz II field in the Caspian Sea to Europe via Turkey.2

Turkmenistan’s participation will enhance the capacity of this energy route – which is expected to reach 31 bcm in 2026 and 60 bcm in 2030 – also considering that this Central Asian republic holds the fourth world largest natural gas reserves.3 In January 2015, during a trilateral meeting held in Ashgabat, these three countries decided to further enhance their cooperation in energy field and the ministers of Turkey and Azerbaijan invited Turkmenistan to join TANAP project.4

In addition to these positive developments in the regional energy cooperation, also a convergence of strategic interests among EU, Turkmenistan and Azerbaijan has contributed to revive the project.

A western corridor of gas exports would allow Turkmenistan to diversify its energy routes, lessening the strong dependence on a single customer, China, which currently purchases over 60 percent of Turkmen gas exports, and offsetting Russian decision to cut its gas imports from Turkmenistan by nearly two-thirds. Moreover, the slow implementation of the TAPI (Turkmenistan-Afghanistan-Pakistan-India) gas pipeline has temporarily frozen Turkmen project of diversification eastward, pushing Ashgabat to find alternative export routes.5

By the end of 2015 Turkmenistan will be able to complete the East-West Pipeline – connecting large gas deposits in the southeast of the country to the Caspian Sea coast – designed to supply the TCP or generally the western corridor, with an expected capacity of 40 bcm of natural gas per year (thanks to additional gas volumes from Caspian deposits).

Azerbaijan represents a reliable energy partner for the EU, given its decisive contribution to the launch of the SGC following the forthcoming realization of the Trans Adriatic Pipeline (TAP), exclusively fueled with Azeri gas.6 However, this special energy status could be seriously threatened by Putin’s decision to replace South Stream with a new pipeline project crossing Turkey, called Turkish Stream, which will undermine Baku’s exclusive role as EU alternative supplier along a southern route bypassing Ukraine.

Furthermore, SGC’s expected capacity will reach approximately 30 bcm/year – without the contribution of Turkmen gas – representing less than half of the Turkish Stream potential capacity. Consequently, Azerbaijan could strategically support Turkmenistan’s participation in the SGC in order to increase the capacity of this pipeline and its geopolitical relevance for the EU energy security, also enhancing the role of Caspian suppliers.

For the EU, the worsening relations with Russia have further highlighted the vulnerability of its energy security and the need to coherently undertake a diversification strategy of import routes, aimed to lessen the “unbalanced” reliance on Russian gas imports crossing Ukraine.

Consequently, the SGC implementation appears an urgent and strategic goal to achieve, involving both Azerbaijan and Turkmenistan in a new trilateral round of talks regarding the TCP, with the intention to sign a new Memorandum of Understanding (MOU) on energy cooperation by the end of this year.

The EU’s diplomatic engagement has produced significant concrete steps: in February 2015, Maros Sefcovic, the European Commission’s Vice President in charge of the Energy Union, declared that the EU intends to find a technical and legal basis for the Turkmen gas supply via Azerbaijan, mainly because the EC has considered the TCP as a project of common interest”.7

On May 1, during a meeting of energy ministers of Azerbaijan, Turkey, Turkmenistan and the EU representatives in Ashgabat, the parties signed the Ashgabat Declaration, focused on the development of cooperation in the energy field.8

Turkmenistan has reaffirmed its commitment to engage in the SGC, even if Russian opposition to TCP remains unchanged. According to Sefcovic, there are two potential routes to export Turkmen gas to EU market: transiting through Iran, and building an underwater Trans Caspian pipeline.9

In spite of the enthusiasm about these progresses, several key issues remain unsolved, especially the concrete implementation of the two potential export routes for Turkmen gas.

The lack of a legal definition of the Caspian Sea currently hinders the realization of TCP, even if Turkmenistan and Azerbaijan share a common position concerning the possibility to build an underwater Caspian pipeline, considered as their sovereign right since the pipeline will run through their territorial waters. However, Russia and Iran oppose at this solution, privileging consensus among five littoral states because TCP affects interests of all of them.10

Russian traditional influence in the Caspian geopolitical scenario could delay any EU attempt to realize the “missing link”. At the last Caspian summit held in Astrakhan in September 2014, Russia obtained to postpone the discussion about the definition of the Caspian legal status to the next summit in 2016: before this, Azerbaijan and Turkmenistan will remain cautious, avoiding to take significant decisions which could antagonize Moscow.11

The financial issue is another key point to solve: technical support and economic investments of international energy companies will be required to build a 300 km undersea pipeline between Turkmenbashi and Baku port, estimated to cost US$ 5 billion.

Given that Azerbaijani companies are already engaged to finance TANAP’s realization and Turkmenistan usually finances the realization of export pipelines up to national borders, the EU should take over the financial support to build the infrastructure.

Following the recent positive development of the EU-Iranian relations, the possibility of an overland pipeline delivering Turkmen gas through Iranian territory to Turkey could be an interesting alternative option, in order to reach the EU market. In January 2015, the Iranian government has announced construction plans for four pipelines at a cost of $12 billion. Three of them will increase natural gas exports while the fourth is designed to reduce imports from Turkmenistan. The main aim for the Iranian government would be to finance and realize domestic energy infrastructures in order to connect them with the Turkish border, delivering additional volumes of natural gas which will boost TANAP capacity.12

However, this option is also strictly dependent on several preconditions: as a matter of fact, Iran must increase gas production and develop domestic interconnections in order to meet a rising domestic demand, even if the future evolution of the relations with the West is the geopolitical key that will influence the feasibility of this project.

Given the existent scenario, Sefcovic’s statement that natural gas could start being exported to Europe through a pipeline under the Caspian Sea by 2019 appears optimistic, in spite of positive diplomatic steps.

Furthermore, bilateral relations with Turkmenistan have been traditionally complicated. Energy cooperation with Turkmenistan will enhance the European diversification strategy, but it is also useful to remember that EU and Turkmenistan already signed a MOU on energy cooperation in 2008, aimed to develop energy transport infrastructure of mutual interest, and Ashgabat indicated a willingness to allocate 10 bcm/year to European markets. Unfortunately no progress has been registered. 

Fabio Indeo

Fabio Indeo is Visiting Researcher Associate at the Center for Energy Governance and Security (EGS) Korea and author of several publications on geopolitics, security and energy issues in Central Asia. He holds a PhD in Geopolitics. Energy Policy Group is a National Gas Europe Knowledge Partner.

2 Presidents of Turkmenistan and Turkey Hold Talks in Ashgabat, in "Turkmenistan.ru", November 8, 2014, available online at: http://www.turkmenistan.ru/en/articles/17807.html

3 Trans Anatolian Natural Gas Pipeline project official website, available online at: www.tanap.com

4 T. Rejepova, Foreign Ministers of Turkey, Azerbaijan and Turkmenistan Discuss Energy and Transportation in Ashgabat, in "Central Asia and Caucasus Analyst", March 4, 2015, available online at: http://www.cacianalyst.org/publications/field-reports/item/13147-foreign-ministers-of-turkey-azerbaijan-and- turkmenistan-discuss-energy-and-transportation-in-ashgabat.html

5 F. Indeo, Turkmenistan: security concerns and unfulfilled diversification of export energy routes, in M.T. Torri, N. Mocci (eds), Asia Maior 2014, vol.23, Emil di Odoya, Bologna, 2015 (forthcoming)

6 F. Indeo, Azerbaijan's role in the Euroasiatic energy chessboard: geopolitical and strategic perspective, in G. Nodia, C. Stefes (eds.), “Security, Democracy and Development in the Southern Caucasus and the Black Sea Region”, Peter Lang Editions, 2015, pp. 274, 276-279

7 EU prepares gas agreements with Azerbaijan and Turkmenistan, in “Trend AZ”, February 25, 2015, available online at: http://en.trend.az/business/energy/2367933.html

8European Commission, Ashgabat Declaration, May 1, 2015, available online at: https://ec.europa.eu/commission/2014-2019/sefcovic/announcements/ashgabat-declaration_en

9 Turkmenistan: Natural Gas Could Reach Europe Through Iran, Stratfor, May 1, 2015, available online at: https://www.stratfor.com/situation-report/turkmenistan-natural-gas-could-reach-europe-through-iran

10 J.C.K. Daly, Can Turkmen gas disrupt Gazprom’s EU market?, in "Silk Road Reporters", May 8, 2015, available online at: http://www.silkroadreporters.com/2015/05/08/can-turkmen-gas-disrupt-gazproms-eu-market/ 

11 J.C.K. Daly, Caspian Summit Increases Russia’s Regional Power, in “Eurasia Daily Monitor”, Volume: 11 Issue: 180, October 10, 2014, available online at: http://www.jamestown.org/programs/edm/single/?tx_ttnews%5Btt_news%5D=42952&tx_ttnews%5BbackPid% 5D=756&no_cache=1#.VJO-sV4APA

12 Iran proposes to transit gas from Azerbaijan and Turkmenistan, in "Natural Gas Europe", February 1, 2015, available online at: http://www.naturalgaseurope.com/iran-proposes-to-transit-gas-to-europe; C. Rickleton, Turkmenistan: EU Eyes Trans-Iranian Gas Pipeline, in "Eurasianet/Sifting the Karakum", May 4, 2015, available online at: http://www.eurasianet.org/node/73281