Dostlug field's development to potentially connect Turkmenistan to Azerbaijan-Europe gas pipelines

25 January 2021 17:50 (UTC+04:00)

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The new oil era in the Caspian Sea began with the signing of the ‘Contract of the Century’ on September 20, 1994, in which the world's leading oil companies took part for the first time. Following this, a number of agreements were signed on the development of new oil and gas fields in the Azerbaijani sector of the Caspian Sea.

Immediately after the signing of the ‘Contract of the Century’, the issue of regulating the legal status of the Caspian Sea became acute on the agenda, since in general, all 5 countries of the Caspian Sea basin had a different approach to division issues.

The beginning of the development of fields and the unsettled status of the Caspian Sea gave rise to several disputes about the ownership of certain fields. To avoid the emergence of a new hotbed of conflict, at the suggestion of Azerbaijan and with the support of other countries (Russia, Kazakhstan, Iran, Turkmenistan), long complicated negotiations began to resolve the legal status of the Caspian Sea, which finally ended with the signing of Convention on the Legal Status of the Caspian Sea by the heads of state on August 12, 2018, in Aktau. Thus, almost all disputes over the division of the sea were ended.

One of the very important and sensitive outstanding issues to be resolved between Azerbaijan and Turkmenistan was on a field, which was called ‘Kapaz’ in Azerbaijan and ‘Serdar’ in Turkmenistan, discovered in 1986 and located in the middle of the Caspian Sea.

The signing in 1996 by Azerbaijan with several foreign companies of an agreement on the development of this field caused a negative reaction from the leadership of Turkmenistan, which served to cool relations between the countries and even led to the temporary closure of the Embassy of Turkmenistan in Azerbaijan in 2001.

Azerbaijan, which has always been a supporter of peaceful resolution of all conflicts, offered several different options for resolving the dispute over the above field.

After the coming of President Gurbanguly Berdimuhamedov to power, a new stage began in the Azerbaijan-Turkmen relations. Along with the warming of bilateral relations between the countries, good personal relations were established between the heads of state, which led to the expansion of cooperation between the countries in all areas.

Azerbaijani President Ilham Aliyev came up with an initiative to jointly use this field, which was positively accepted by the Turkmen side. After several years of intensive negotiations, as well as resolving the legal status of the Caspian Sea, the Azerbaijani-Turkmen negotiations ended with the signing in Ashgabat on January 21, 2021, of the Intergovernmental Memorandum of Intent on Joint Exploration and Development of the Dostlug Hydrocarbon Field.

It’s very symbolic that both sides not only agreed to work together and end a long-standing dispute but also found a name for the field, which in both languages means the same thing - Friendship.

The significance of the signed memorandum is enormous. For the first time in history, an important step has been taken towards the joint development of a large oil and gas field and the possible joining of Turkmenistan to strategically important oil and gas pipelines.

It is no secret that Turkmenistan, which possesses one of the largest oil and gas reserves in the Caspian Sea region, for a long time remained on the sidelines of projects to transport oil and gas to Europe from Azerbaijan through Georgia to Turkey and further to Europe.

The presence of the controversial field didn’t contribute to the accession of Turkmenistan to the Southern Gas Corridor project, which ensured the diversification of gas supplies to Europe.

The completion of the construction in 2019-2020 of the TAP / TANAP projects, thanks to which direct supplies of Azerbaijani gas to Europe through Georgia and Turkey began, led to a change in the situation on the European gas market, where, along with Russian gas from Siberia, Azerbaijani gas from the Caspian appeared.

If the joint development of the Dostlug field is successful, it is possible that the gas produced can also be exported via a new gas pipeline to Europe.

After analyzing the possibilities of exporting Turkmen gas, it can be concluded that if Turkmenistan joins the existing gas pipelines from Azerbaijan to Europe, Turkmenistan can receive significant funds from the sale of gas, which is important in the context of the global economic crisis.

To connect Turkmenistan to the Azerbaijani gas pipelines does not require significant funds, everything can be done in a short time and with minimal costs by building bridges from the Turkmen fields in the Caspian Sea to the Azerbaijani platforms, which are separated by a small distance.

The political significance of the agreement reached is not only a peaceful settlement of the dispute but also the fact that Azerbaijan and Turkmenistan have entered a new stage of cooperation.

If earlier it was about a partnership on transport corridors towards China and Afghanistan and, accordingly, from there to Europe, then the beginning of close cooperation in the oil and gas sector can serve to change the situation in the European energy market, leading to an increase in its security, diversification of energy supplies to the European market.

Accordingly, the emergence of new energy suppliers will affect the development of relations in various fields with the EU countries. The need to ensure the security and stability of energy supplies to the European market should be based on the principles of territorial integrity and inviolability of borders, both in the supplying and transit countries.

The beginning of cooperation between Azerbaijan and Turkmenistan in the oil and gas sector in the foreseeable future will not only bring benefits to both countries but may also serve as an example for other gas and oil-producing countries in the region to join joint projects for the extraction and transportation of energy resources in the future.