BTE pipeline: More gas for a regained independence

Jul 21, 2006 02:00 AM

by François Gremy

The opening of the gas pipeline Baku-Tbilisi-Erzurum (BTE) scheduled for the end of 2006, could permit Georgia to limit its energy dependence on Russia, as Tbilisi is pressing its Turkish and Azerbaijani partners to obtain more gas at a reduced price via the BTE.
The BTE, linking the gas fields of Shah Deniz in Azerbaijan with the eastern part of Turkey, represents an important issue for the energy independence of Georgia. The country suffers, since the fall of the USSR, from the pricing policy used by the Russian giant Gazprom under the control of the Kremlin. The present pricing policies of Gazprom -- $ 110 per 1,000 cm -- are judged exorbitant by Georgian authorities who are currently trying to find an alternative to the gas supplier. At a cost of $ 900,000 mm, this gas pipeline would compete with Russia and its existing gas pipelines.

The initial agreement between the three BTE partner states foresees the granting, as a right of transit, of 5 % of the volume transported from Azerbaijan to Turkey. The initial, 20-year agreement also stipulates the possibility for Georgia to purchase 500 mm cm of gas per year at a price of $ 55 per 1,000 cm and caps the annual tariff increase at 1.5 % of the price.
Conscious of the formidable geopolitical and economic lever that the BTE represents, Tbilisi is demanding to be able to purchase in the future 1.5 bn cm of gas per year at a price of $ 55 per 1,000 cm. This Azerbaijani gas, drawn from the gas field of Shah Deniz and two times less expensive than that of Russian origin, will cover almost half the needs of the country.

A trans-Caspian pipe
To win their demands in the course of its negotiations with Ankara and Baku, Georgian authorities are banking on the strong potential of the BTE. Besides the 8 bn cm of gas that will pass through each year, the capacity of the gas pipeline should reach 20 bn cm starting in 2012.
And the recent declarations of the Kazakh Prime Minister, Daniyal Akhmetov, can only confirm an exponential development of this pipeline. Kazakhstan appears to be in favour of connecting itself to the BTE. The connection would consist of an underwater gas pipeline that would link Kazakhstan to Azerbaijan, under the Caspian Sea. Iran also is taking this project under consideration and already speaks of an eventual Iranian-Kazakh cooperation concerning the construction of this underwater Trans-Caspian gas pipeline.

The Russian strategy of rendering the South Caucasian republics completely dependent comes, apparently, from running aground Azerbaijani ports. After having conquered significant interests in the Armenian and Georgian energy sectors, the Kremlin has shown itself less efficient in this country rich in oil and that knew in part to resist the influence of Russian companies such as Gazprom and EES.
This Azerbaijani “resistance” could be beneficial to Georgia in stimulating the energy sector. Tbilisi, moreover, has recently proposed a new project, the construction of a 700-km gas pipeline, traversing the Black Sea, to connect Georgia to the Ukraine --and therefore Europe -- in bypassing Russian territory. No doubt that this gas pipeline, already baptized Georgia-Ukraine-European Union (GUEU), will interest the member states of the European Union in a quest for alternatives to the Russian supply.

Source: Caucaz.com
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