Energy research and business intelligence company Rystad Energy analysed how the proximity of the Nagorno-Karabakh to key Azeri oil and gas infrastructure could jeopardise key export pipelines.
According to Rystad Energy, potential disruptions could benefit Russian gas exports while weakening both Turkey’s cheap gas imports and its role as a vital oil transport hub.
The Baku-Tbilisi-Ceyhan (BTC) oil pipeline and the South Caucasus Pipeline (SCP) gas conduit both run through Azerbaijan, with some sections very close from renewed fighting in Nagorno-Karabakh.
Any attack on or seizure of pipeline territory could have serious ramifications for upstream operations in Azerbaijan and particularly impactful would be any disruption to the giant Azeri-Chirag-Gunashli (ACG) project in the Caspian Sea. These fields, operated by BP, produce about 485,000 barrels per day (bpd) of light oil, representing approximately 75 per cent of Azeri crude production.
On the other hand, the South Caucasus Pipeline carries gas from the Shah Deniz field in the Azeri sector of the Caspian Sea to the Turkish border, where it links with the Trans-Anatolian gas pipeline (TANAP) that runs through Turkey, thus enabling Azeri gas exports to flow to southeastern Europe.
“The pipelines are laid two meters underground, so there is protection there from material damage,” said Rystad Energy’s upstream analyst Swapnil Babele. “However, while it is still too early to forecast possible production disruptions at the offshore ACG and Shah Deniz fields, any scenario where Armenian forces manage to take over territory traversed by export pipelines represents a potential threat to oil and gas exports in the region.”
However, experts believe current geopolitical tensions won’t affect the security of supply, as the energy infrastructures are not only Azerbaijan’s but it is also a European concern.
“Additionally, the US was backing this project politically since the beginning, so I hope that if there is a kind of threat, also Brussels and Washington will react accordingly,” Gulmira Rzayeva, founder and managing director of the London-based Eurasia Analytics consulting company told CEENERGYNEWS.
For Rystad Energy both oil and gas flow are at stake. Azerbaijan currently exports more than 80 per cent of domestic oil production through the BTC pipeline, with output from the ACG fields representing the lion’s share. When it comes to gas, the country has become an important exporter for the region, making use of three main arteries in the southern gas corridor.
Moreover, any damage to the SCP pipeline could delay the launch of the TAP pipeline while also disrupting gas deliveries to Turkey. Countries that currently rely on Azeri gas may have to look to Russian gas and new LNG imports, going against the main reason why the TAP pipeline was built: Europe’s diversification of supply.