Wednesday, December 13, 2006


#7: Iranian and Russian Gas Supply to Georgia: Coincidence or Trial Run of a Cartel?

It is interesting to watch the current developments in the gas supply of countries of South Caucasus and Turkey. Essentially, Georgia decided to ignore the Russian offer and instead purchase the gas from other suppliers. However, unless Iran will be playing ball, there would be preciously little supply left.

I am not an expert, but it seems that even optimistic estimates of Azerbaijan gas production in 2007 will barely cover internal needs. What is left is plainly insufficient to supply either Georgia or Turkey (please let me know if my arithmetic is incorrect).

The following events, however, are unfolding in a rapid succession:
These events might be simply coincidental. Or they may be caused by a temporary or permanent supply problems inside Russia and Iran. It is also possible that Russia and Iran are checking their cartel pricing power, using Georgia as a test case.

The question therefore is,

Are the recent natural gas supply disruptions simply coincidental or a sign of deep cooperation between Russia and Iran?

The best way to obtain an answer seems to be a discussion with someone knowledgeable inside the Azerbaijanian or Turkish governments. The answer will also become clear either this or next winter.

Pre-Christmas update. I now have an even more basic question:

What are the technical problems on Shah-Deniz gas field in Azerbaijan?

The news about problems got out on Thursday 12/21/2006, but no information on their nature had surfaced even now, three days later.

Post-Christmas update. Finally some news on Shah-Deniz problems: the abnormally high pressure caused gas leakage at the depth of 800 m. Is it high pressure as in "kick" and gas leakage as in "underground blowout"? (where are all the Azeri journalists and bloggers when we need them? - any person around the platform should know the details). If it is the underground blowout, then the production from TPG 500 will stop for quite some time (half a year sounds reasonable).

Well, the latter question seems to have been resolved. Today (1/5/2007) BP has announced that the Shah Deniz production has been shut off "indefinitely". So this was a blowout.

Also, some useful numbers:

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