The volume of gas being transited between Turkmenistan, Iran, and Azerbaijan under a groundbreaking three-way swap agreement signed in late 2021 is expected to grow by 70 percent this year according to Majid Chegeni, the head of Iran's national gas company, NIGC.
Chegeni did not mention the volume of gas he expected to be transited to Turkmenistan this year but the original agreement allowed for between 1.5 and 2 billion cubic meters a year, a volume which numerous subsequent reports said would quickly be increased.
In mid-2022 Iranian oil minister Javad Owji announced the three partners had reached an agreement to double the volume of gas swaps.
While it's unclear whether that agreement has been formally adopted, Iran has been pushing ahead with its own plans to expand its gas transit infrastructure with the apparent aim of boosting its capacity to transit gas between its neighbors.
Earlier this year Iranian officials confirmed that work on expanding its Rasht-Chelavand gas pipeline would be completed by the middle of this year, boosting the volume of gas it can transit to Azerbaijan to an annual 5.5 billion cubic meters.
Last month Owji announced Iran was planning to sign a new gas import agreement with Turkmenistan for up to 10 billion cubic meters a year.
It is unclear how much of that gas would be transited to Azerbaijan but what is certain is that Azerbaijan needs extra volumes of gas both to meet its own growing domestic demand and to meet its export commitments to Georgia, Turkey and Europe.
In July last year Baku signed a memorandum of understanding with the EU to double the volume of gas it sends to Europe through the Southern Gas Corridor to an annual 20 billion cubic meters by 2027, to help compensate for the loss of Russian gas.
The first stage of that agreement will see Azerbaijani gas exports reach 11.5 billion cubic meters this year, up from an annual 10 billion cubic meters prior to Moscow's invasion of Ukraine.
Work is ongoing to increase production from Azerbaijan's giant Shah Deniz Caspian gas field though field operator BP has indicated that this field alone cannot supply all the gas required.
Azerbaijan does have other gas reserves. In January, BP announced it had started exploratory drilling into "deep" gas reservoirs believed to lie below the Shah Deniz gas field and Azerbaijan's main oil field, Azeri-Chirag-Guneshli (ACG).
However, even if the drilling confirms commercially extractable reserves it is unlikely that production could begin before 2027.
Earlier this month France's Total Energies announced that it would start gas production from its Absheron field by the end of this year. However initial production will be only an annual 1.5 billion cubic meters, which has already been earmarked for Azerbaijan's growing domestic gas market, where demand grew by 18 percent between 2018 and 2021.
A second phase of production is planned but again the extra gas is likely to go to Azerbaijan's domestic market, meaning Baku will still have to look to its swap deal with Iran and Turkmenistan to meet all its commitments.
Pipe dreams
Increasing the gas swaps would help boost the volume of Azerbaijani gas available for export to Europe, and would in a way realize the 25-year-old dream of bringing gas from Turkmenistan to Europe, albeit by proxy.
Since the late 1990s a series of projects have tried and failed to develop pipelines to bring Turkmen gas to Europe.
Unsurprisingly Russia's invasion of Ukraine last year has rekindled interest in Turkmenistan as a source of gas.
Boasting the fourth or fifth largest gas reserves on the planet, between 9.8 and 19 billion cubic meters according to various estimates, on paper at least Turkmenistan is more than able to replace the annual 174 billion cubic meters of gas that Russia was exporting annually to Europe prior to the Ukraine war.
Or at least it could if a pipeline was developed to transport that gas from the landlocked Central Asian republic, across the Caspian Sea, and through Azerbaijan, Georgia, and Turkey to Europe.
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However, increasing the volume of gas reaching Azerbaijan through the swap agreement and enabling Baku to meet its commitments will likely serve to make such a pipeline harder to realize.
Azerbaijani officials have pointed out repeatedly that the existing Southern Gas Corridor pipelines only have the capacity for an annual 20 billion cubic meters of gas, which Baku intends to supply itself.
Speaking at a conference in early May Azerbaijani President Ilham Aliyev confirmed that Azerbaijan would support the development of a pipeline to carry Turkmen gas to Europe.
"We can provide technical assistance, we can provide our pipe-laying barges and we can provide access to our Sangachal terminal," he said, adding that what Baku would not do was provide financing for any new pipelines.
"We cannot initiate this project, and we cannot finance it. We can only be a transit country and will definitely be a very fair transit partner," he promised, pointing out the need for the owners of the Turkmen gas and the market players to the west to put together a consortium to raise the necessary money.
By David O’Byrne via Eurasianet.org
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