Clingendael International Energy Programme | CIEP Paper 2014 | 01
Christof Van Agt
INTRODUCTION
Achievements¹: With the decision to export Caspian gas to the EU via the Trans-Anatolian and Trans-Adriatic Pipelines, the era of investment in strategic oil and gas infrastructure, launched in the nineties, is drawing to a close. Caspian oil exports are flowing to world markets and natural gas resources are coming on-stream, forging new trade links and fulfilling producer and consumer diversity goals. Only Trans-Caspian ambitions for oil and gas remain constrained, due to competing interests in the region, despite ambitious EU mediation efforts and corporate interest in enlarging markets. Caspian resources will be further unlocked by the recent final investment decision on the second development phase of the giant Shah Deniz gas field off the shore of Azerbaijan and the first oil production that finally surfaced from the giant offshore Kashagan field of Kazakhstan this year. Caspian crude, gas and Products flow predominantly to Russian and Turkish market outlets. Oil and gas flows to adjacent markets and ports in Central, South-eastern and North-western Europe will expand over time as regional export capacity in the Southern Corridor reaches critical mass widening access to resources as well as transport and trade opportunities. Global markets will draw on Caspian resources in response to market signals and have moved beyond strategic considerations alone. Chinese demand will weigh more heavily on coal and minerals in Mongolia, as well as on the gas resources of Türkmenistan and of the Eastern Caspian, where it became a partner in the Kashagan project. India, in turn, has gained minority shares in the Azeri-Chirag-Guneshli offshore project and the Baku-Tbilisi-Ceyhan pipeline, exporting oil through the Southern Caucasus to the Turkish port of Ceyhan on the Eastern Mediterranean. Meanvvhile, Afghanistan seeks to reintegrate with the wider region, while Kyrgyzstan and Tajikistan aim to harness their hydro-electricity potential. These developments, along with growing gas exports from Türkmenistan to China and through Afghanistan to Pakistan and India, are creating more diversity in energy exports, which will not only strengthen energy security but also contribute to stability and cooperation in the wider region. These are significant changes from the situation in 1990, when Caspian oil and gas could only reach markets through Former Soviet Union Networks and trade practices. On the other hand, the gridlock in the Southern Caspian region, in which relations with Iran and legacies of conflicts and disputes figure prominently, remain a sobering constant.
1 These findings draw on the elements for discussion at the roundtable on ‘Caspian Oil & Gas: Past Practices and Future Prospects’, Huys Clingendael, 2nd of July 2012.
2 See also Annex, Figure 1: Overview of key Southern Corridor gas pipeline capacity and Map I: Overview of key Southern Corridor gas pipeline routes.
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