TANAP’s Launch Increases the Role of the South Caucasus Energy Corridor

Op-Ed

On November 30, Turkish, Georgian, Azerbaijani leaders and several Balkan and east European politicians inaugurated a link between the Turkish and Greek gas grids, which marks the completion of the Trans-Anatolian Pipeline (TANAP). Though it has continued to be viewed by many as insufficient for Europe’s growing energy needs, TANAP has always had modest aims and is set to play an important role in Turkey’s energy sector and help increase Azerbaijan’s geopolitical weight as an alternative and reliable energy source.

Azerbaijani gas is an alternative source of gas to the Russian source for the European market. Though for the next decade Azerbaijani gas supply levels will be marginal compared to Europe’s overall consumption, which will be mostly covered by Russia, the project will boost Azerbaijan’s geopolitical importance as well as influence Turkey’s energy dependence on Russia.

TANAP is one of the most important (and actually the longest) sections of the $40 billion Southern Gas Corridor. The latter is a series of pipelines which transport the gas from the Shah Deniz II (Azerbaijan) field to Europe. TANAP is owned by Azerbaijan’s state energy company SOCAR (51%). Other shareholders are Turkish pipeline operator BOTAS, BP and SOCAR Turkey. Politically and financially, the Southern Gas Corridor is supported by the European Commission and World Bank, European Bank for Reconstruction and Development (EBRD), and Asian Infrastructure Investment Bank (AIIB). TANAP goes through the center of Turkey and has the potential to carry up to 16 billion cubic meters (bcm) of gas each year from Azerbaijan to the European mainland. Europe will be allocated 10 bcm, while 6 bcm is earmarked for the Turkish market. The transportation capacity could be increased to 31 bcm with additional investment.

Nevertheless, the potential supply volumes are limited. TANAP has an overall capacity of 16 bcm per year, of which 6 bcm will be taken by Turkey. For the EU as a whole, 10 bcm is unlikely to have a definitive impact on the supply structure of the continent. For example, in 2018, Russia’s Gazprom delivered 176.81 bcm to European markets, including the Western Balkans. Moreover, TANAP’s overall capacity is much lower than Moscow’s two large pipeline projects – Nordstream 2 (55 bcm) and TurkStream (31.5 bcm).

Still, dismissing the TANAP project would be a mistake. Gas from Azerbaijan can shore up Ankara’s bargaining position in its growing energy dependence on Moscow. Agreed, for Turkey, the amount it will be receiving as a part of TANAP is only about 25% of the gas it gets from Gazprom, yet the Russian state-owned company’s market share is gradually shrinking as Ankara switches to cheaper liquefied natural gas (LNG).

At a time when the Turkish Lira is experiencing troubles and both households and businesses are faced with rising energy bills, Turkey needs diversification of its energy supplies. TANAP will play this role in Turkey’s geopolitical calculus. With TANAP, Turkey will be left with no energy supply problem, and it is highly likely that Turkey will move forward with more gas investments on its path to becoming a regional energy hub.

TANAP will also benefit Greece and Bulgaria. Bulgargaz and Greece’s DEPA have each signed a contract for 1 bcm with the Shah Deniz consortium. In Bulgaria’s case, that accounts for roughly one-third of its annual intake.

There is also a purely geopolitical dimension to the TANAP project. After completion, Azerbaijan’s gas will be transmitted directly from the Caspian Basin to the European market for the first time in history. “Thus, in addition to being Europe’s new gas supplier, we aim to become Turkey’s second-largest gas supplier,” said SOCAR President and TANAP Chairman of the Board, Rovnag Abdullayev.

In many ways, completion of the project constitutes a geopolitical development, as it strengthens east-west energy links opposed to Moscow-sponsored north-south energy projects. Though TANAP is not an energy game-changer for Europe, the project is nevertheless a part of a potentially larger energy corridor emanating from the Central Asia region, namely Turkmenistan. This gas-rich state would welcome any opportunity to diversify its export options, and there are frequent positive noises from the EU.

However, the necessary link, the Trans-Caspian Gas Pipeline, will remain a long way off as Russia and Iran are likely to prevent such an important gas supply alternative from reaching the European market.

The country which benefits most from the project is Azerbaijan, as TANAP increases its strategic role as a source of energy resources in the Caspian Sea.

By Emil Avdaliani