Once parts of the same country driven by communist agenda, Ukraine and Azerbaijan could make a good couple for a full-scale gas relationship. Gas-rich Azerbaijan seems to be an attractive blue fuel partner for gas-hungry Ukraine.
Azeri gas may heat up Ukrainian households and drive local industry at earliest in 2025, admits Ilham Shaban, head of Baku-based Center for Oil Research.
There are two technical routes to transport Azeri gas to Ukraine – through Russia or Turkey, Bulgaria and Romania, says Shaban. As Russia shows disrespect for Ukraine’s territorial integrity, the second option seems to be the only one.
Azerbaijan bets on constructing the Trans-Anatolian and Trans-Adriatic pipelines for transporting gas to the European Union through Turkey and Albania. First flows are expected to pass in 2019 at a rate of 10 billion cubic meters a year and will double by 2022.
Nabucco pipeline, that would have Austria as its final destination, is another potential scheme of delivering Azeri key exporting product to the EU.
Ukraine is seeking for suppliers to substitute 30-some billion cubic meters of gas that it used to get from Russia each year. Azerbaijan exports as much as 7.3 billion cubic meters annually and the figure is most likely to grow. Azeri gas supplies for the global market could reach 20 billion cubic meters by 2022, thinks Shaban. As of now, Azerbaijan’s state-run energy monopoly Socar and local unit of Great Britain’s BP are the leading exporters.
Country’s last year gas production stood at 29.5 billion cubic meters.
Neighboring Georgia and Russia are 9 million nation’s key gas purchasers. Tbilisi-headquartered unit of Socar imports gas at a heavily discounted price of $140 per thousand cubic meters, while Russia buys Azeri gas for approximately $200. This comes as a part of long-term regional partnership seen as of strategic importance by the three governments.
Meanwhile, Russia’s Gazprom, owned by the Kremlin government and American pension funds, charges its Ukrainian counterpart Naftogaz around $480 per thousand cubic meters of gas.
“We don’t feel any pressure from Gazprom regarding the prices and destination of our gas exports,” emphasizes Shaban. “However, it’s difficult to do business when you’re surrounded by the gas giants – like Russia, Iran and Turkmenistan.”
U.S. Energy Information Administration estimates Azerbaijan’s proven gas reserves at 1 trillion cubic meters. With the startup of Shah Deniz natural gas and condensate field, one of the biggest in the world, in late 2006 country has become a net gas exporter.
Apsheron, Umid and Babek fields are next on the development agenda with a potential to provide as much as 550 billion cubic meters of what countries like Russia see as a foreign policy weapon. Leading gas drilling technology comes to Azerbaijan from BP, a global energy giant, which is especially useful for extracting gas on great depths – and Baku-led country has 100 billion cubic meters in the deeper layers.
Kyiv Post associate business editor Ivan Verstyuk can be reached at [email protected].
