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Turkey and the Southern Corridor after TAP’s Selection as the Main Export Route for Caspian Gas

Turkey and the Southern Corridor after TAP’s Selection as the Main Export Route for Caspian Gas

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This policy brief examines the future of natural gas pipelines in the Caspian Basin.
This policy brief examines the future of natural gas pipelines in the Caspian Basin.

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Categories:Types, Research
Published by: German Marshall Fund of the United States on Jul 18, 2013
Copyright:Attribution Non-commercial


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In late June,the consortium developing Azerbaijan’s offshore ShahDeniz natural gas reserves in theCaspian Sea chose the Trans-Adriatic Pipeline project (TAP)to transport Azerbaijani gasto European markets from theTurkish border onwards. With thisdecision, TAP’s rival, Nabucco-West, which was for a long timeconsidered the crown-jewel of the EU’s Southern Corridor,might come to an effective end.Having advocated Nabucco asa strategic priority since theproject’s introduction in theearly-2000s, and participated init as an equal stakeholder, Turkeyis adjusting its policies to thedramatically transformed realityon the ground.
 Turkey and the Southern Corridor after TAP’s Selection as theMain Export Route for Caspian Gas
by Şaban Kardaş
July 18, 2013
Washington, DC • Berlin • ParisBrussels • Belgrade •
AnkaraBucharest • Warsaw •
I late Je, the coortm devel-opg Azerbaja’ ohore ShahDez atral ga reerve  theCapa Sea choe the ra-AdratcPpele project (AP) to traportAzerbaja ga to Eropea marketrom the rkh border oward.Led by Statol, AP wll r throghGreece, Albaa, ad Italy ad delver10 bllo cbc meter per am(bcm/a) o ga tally, bt wll havethe capacty to be pgraded to 20bcm/a. Wth th deco, AP’ rval,Nabcco-Wet, whch wa or a logtme codered the crow-jewel o theEU’ Sother Corrdor, mght cometo a eectve ed. Havg advocatedNabcco a a trategc prorty cethe project’ trodcto  the early-2000, ad partcpated  t a aeqal takeholder, rkey  adjtgt polce to the dramatcally tra-ormed realty o the grod.
Structural Transformation ofEuropean Gas Markets
o dertad the latet decoad t mpact o rkey, t wold behelpl to revt the traormato the Eropea atral ga marketover the lat decade. Te eller’market codto o the 1990 led tomay major project, cldg thedea o Sother Corrdor. Projec-to were ch that the atcpatedgrowth  Eropea demad, hard tomeet wth declg dometc reerve,wold create eed or a orth corrdorrom the Capa Ba. Alo, evro-metal coderato, a well a the“EU-zato” o eergy market, werethoght to bolter the drve towarddvercato o atral ga pple,whch wa eetal to Eropeaeergy ecrty. A a relt, the 3,900km-log Nabcco, wth a capacty o 31 bllo bcm/a tretchg romrkey’ border wth Georga all theway to Atra, wa propoed moretha a decade ago a the trategcproject to ll that vacm ad ejoyedthe backg o the Eropea Comm-o. rkey wa a ardet pportero Nabcco becae t beleved thatby acltatg Eropea acce to theCapa Ba reerve, t wold gamajor trategc leverage or t EUmemberhp bd. Ra oered tow coter propoal, Soth Stream,creatg a compettve evromet.Both project were groded  the old
Turkey has been involved in theevolution of TAP since the verybeginning.
trategc thkg whereby ga wold be traported wthmlt-bllo-dollar mega ppele project, wth a prcemecham baed o a dex ted to ol prce, ad tradedwth log-term cotract.Meawhle, the Eropea ga market were dergog amajor traormato de to everal parallel tred. O oehad, the developmet  hale ga ad lqd atral ga(LNG) pt prere to the old ytem o the pply de.O the other, creaed e o reewable ad the ececy ga acheved throgh techologcal ovato or bettertercoectvty (throgh developmet  Eropeamarket) have exerted dowward prere o the demad,whch wa alo crbed by the cotracto o Eropeaecoome aer the global cr. Te eect o thee devel-opmet were already elt, or tace, a Gazprom had torelax t prce term to t Eropea ctomer. A mcha the problem pertag to the Nabcco coortm,ch a the lack o trategc backg ad ablty to reolvethe pply commtmet ad vetmet captal, t wathat trctral traormato that led to the deme o theorgal project by 2011.Te delay were ot good ew or Azerbaja ad theShah Dez coortm, whch were eager to proceed wththe developmet pla o the ga eld hdered by theproblem o the traportato de. rkey, too, had take the reolto o the cotrovery over trat altera-tve, or t valed Capa-orgated ppele a a way tobolter t ow pply ecrty ad t role a a trat hb.Te rkh-Azerbaja project ra-Aatola Ppele(ANAP), a well a the accompayg revamped Nabcco-Wet, were attempt to adjt to the trctral traorma-to. Tey were baed o the prcple o calablty, adwere expected to tart wth eable volme bt expad capacty a eed aroe.For t part, ANAP wold be kck-tarted wth Shah DezII ad erve the mmedate eed o Azerbaja, bt t coldalo be pgraded to accommodate addtoal volmerom that cotry or rkmeta. rkey alo wold by btatal volme o Shah Dez-II ga, eablg t taleablty. Togh t evetal am wa to create a majoralteratve corrdor wth btatal volme, Nabccowa alo caled dow, o that t wold be horter — rrom rkey’ Weter border — ad tart wth mallercapacty to be ppled by Shah Dez, ad expad parallelto the developmet o Capa reerve ad/or partcpatoo ew ppler. At th jctre, the 900 km-log APalo emerged a a trog compettor or the Azerbajaga, whch oered a fexble commercal alteratve. It waot deemed trategc, becae t wold operate at lmted volme ad wa ot gog to dvery Eat Eropeamarket domated by Gazprom. Noethele, a t rkey repreetatve Cek Pala oted, rkey ha bee volved the evolto o AP ce the very begg.For the lat three year, the Shah Dez coortm habee evalatg alteratve, wth a al deco cod-ered more tha a year overde. I ay cae, Nabcco-Wetproved to be t or the ew evromet, or cold tbacker take decve tep to mprove t chace. Schegatve actor, copled wth hgher atcpated cot o the ppele, de ot oly to the larger volme ad logerdtace compared to AP bt alo pward revo o orgal cot etmate, tlted the Shah Dez coortmdeco away rom the Nabcco-Wet.
TAP’s Selection: Strategic Blindness?
By optg or the AP, the Shah Dez coortm appar-etly avoded drect corotato wth Gazprom’ market Eater Erope, whch t erve throgh the extgetwork ad pobly throgh Soth Stream  the tre.Nabcco wa preeted a the “trategc” choce, whchwold have trodced creaed competto agatRa ga at the Bamgarte hb ear Vea ad elc-ted the progre o pot-market baed prcg  Erope.Nabcco’ pporter have objected to AP’ electo,argg that the trodcto o Capa ga ow wll otalter the domace ad operatoal practce o Gazprom Eater Erope.o coter ch argmet, AP alo wet throgh omerevo. Drawg o the progre o tercoectorytem, AP propoed brachg ot to other Soth-
Azerbaijan and the Shah Denizconsortium apparently believe big pipeline projects are still feasible.
eat Eropea ctomer, ch a Blgara. Stll, t majordetato wll be Sother Erope, epecally Italy, whch beleved to be relatvely more dvered ad have acceto LNG aclte. Eve the “overppled” Itala market arged to preet a major lablty to the etre project.Noethele, dco are already derway to tateoth-orth coecto throgh ew partcpato  theAP coortm by major eergy compae, o that Azer-baja ga cold be reroted rom Italy to orthweterEropea market, cldg Swtzerlad, Germay, orFrace. At ome pot, wap operato mght alo bepoble, ad Italy mght tr to a trat ad tradg hbrather tha the al detato.Grated, ome objecto tll rema regardg the vablty o AP. Te demad or addtoal ga wll be cotgeto the peed o ecoomc recovery, bt gve the certatrajectory o the ero cr, the ga market  WeterErope rema dclt to predct. Alo, gve other lkely dcovere  the Black Sea, Eater Medterraea, NorthArca o oe had, ad the rg propect o LNG adhale ga o the other, there are argmet that Eropeamarket ca be overppled. Some, or tace, ggetthat thogh  o way comparable to the Capa reerve ze, maller ohore dcovere o Romaa’ cot-etal hel  the Black Sea may meet regoal cotre’demad ad ope a det  larger project. Te reltgbyer’ market codto mght argably create a rky evromet or large project.Azerbaja ad the Shah Dez coortm apparetly beleve bg ppele project are tll eable, ad they are ow creagly playg a trategc game  the raceor ppele rom the Capa Ba. Te ablty o theEropea actor to develop Nabcco a a realtc altera-tve wa the ma reao behd Azerbaja gradal etry to th game. rkey, too, ha o everal occao der-led t dappotmet wth the lack o trategc thkg Erope a regard Nabcco, ad th jot vo pavedthe way or cloer cooperato betwee Akara ad Bak.For Azerbaja ad the Shah Dez coortm to tart thedevelopmet o the ecod phae, clarty mt be achevedregardg the byer ad traportato mea. Sce delay traportato tralate to delay  the developmeto the eld, ad thereore lot revee, they are atrally takg all eceary tep to olve the trat e.For th reao, Azerbaja ad the Shah Dez coortmwat to expad fece  dowtream market throghgreater volvemet  traportato etwork ad theeergy market o trat ad comer cotre. Parter-hp wth rkey ha bee a key compoet o th polcy.ANAP wa the major tep  th regard, a t wet had had wth the State Ol Compay o the AzerbajaRepblc’ (SOCAR) growg vblty  rkh eergmarket throgh t prchae o Petrochemcal Compay (PEKIM) ad beqet vetmet. Meawhle, thecro-ertlzato betwee the AP ad the Shah Dezparter acltated the electo o the ormer by the latter.Statol, oe o the two prcpal takeholder  the APproject, alo cotrol majorty hare  the Shah Dezalog wth the BP.o rther deepe t dowtream fece, a ew daybeore the AP deco, SOCAR acqred the majorty hare o Greece’ DESFA, a operator o ga tramoad dtrbto etwork. Te recet ew that SOCAR ad BP mght acqre p to 50 percet o AP provde oerther armato o th drve toward mltple coplgto ehace the project’ eablty. A a matter o act, aagreemet rom 2012 allow or th poblty, a a meato ace AP’ cotrcto cot. I the traportatoad marketg e cold be reolved, the Shah Dezcoortm wll be  a better poto to go ahead wth theal deco o developg the ecod tage  the comgmoth.
What does the Development Imply for Turkey?
rkey ha welcomed th developmet, thogh the demeo Nabcco mght appear to be troblg at rt ght.Refectg a degree o pragmatm, rkey ha developedome eqdtace rom rval project  the SotherCorrdor, cldg thoe advocated by Ra. Wththe ANAP deco, rkey already took a major teptoward creag t propect  the ppele geopoltc,coplg t trategy wth that o Azerbaja. Te electoo AP, thereore,  o rpre to rkey, or t wa already 

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