Wednesday, December 13, 2006
#7: Iranian and Russian Gas Supply to Georgia: Coincidence or Trial Run of a Cartel?
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:
- Russia is winning a price dispute with Georgia
- Russia decided to reduce supply to Azerbaijan from 4.5 bcm per year to 1 (or 0?), effectively wiping 50% of the new gas field production in Azerbaijan
- Iran dropped the gas supply to Turkey by about 50% which will force it to rely more on the gas from Azerbaijan
- Iran refuses to even consider gas prices below $220-230 per 100 cm
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:
- 1 ton of oil is approximately thermally equivalent to 1,000 cubic meters of natural gas
- Every billion cubic meters of gas thus is equivalent to 1 million tons of oil
- Since Shah Deniz is taken off-stream - and unless Azerbaijan will buy either Russian or Iranian gas - it has to compensate with 5 million tons of oil, which is about twice what is currently exported through Russia, or about a third of the Azeri exports for 2006