Azernews.Az

The recent discovery by French energy giant Total of a major gas field in Azerbaijan's sector of the Caspian Sea may soon allow the Nabucco natural gas pipeline, previously "relegated to the sphere of necromancy", to become a reality, oil market news website Oil Price reported.

The Absheron structure, announced by Total last Friday, holds projected reserves of 350 billion cubic meters of gas and 45 million tons of associated condensates, bringing the country’s proven gas reserves to 2.55 trillion cubic meters, according to the state energy firm Socar.

Oil Price reported that in 1994 Azerbaijani President Heydar Aliyev signed a $7.4 billion "Contract of the Century" with 11 Western oil companies to develop Chirag and the offshore sections of the Gunashli oil fields. The agreement to tap the fields, which produce oil exported via the Baku-Tbilisi-Ceyhan (BTC) main export pipeline to the Mediterranean coast of Turkey, was bitterly objected to by Russia, but Aliyev showed his political skills when he agreed to use Russia's Transneft pipeline network to ship Azerbaijani "early crude" to Russia's Novorossisk port on the Black Sea, mollifying the Kremlin with transit revenues, Oil Price said.

From the outset Azerbaijan has been a firm supporter of the 56-inch, 2,050-mile Nabucco pipeline, first proposed in 2002. At a cost initially estimated at $11.4 billion and rising, Nabucco will be the most expensive pipeline ever built, more than three times the cost of the BTC oil pipeline, according to the report.

The Nabucco pipeline will carry up to 31 billion cubic meters a year of gas from the Caspian region and the Middle East across Azerbaijan, Georgia and Turkey into southeast Europe and onwards to an Austrian trading hub, bypassing Russia. Construction of the pipeline is due to start in 2013, with its commissioning expected in 2017.

Nabucco participants are the Austrian OMV, Hungarian MOL, Bulgarian Bulgargaz, Romanian Transgaz, Turkish Botas and German RWE, each with an equal share of 16.67 percent.

Oil Price also said Nabucco’s major stumbling block up to now has been not financing, but where its throughput would come from.

"Up to now, the only source of Nabucco's proposed 31 billion cubic meters (bcm) annual throughput was Azerbaijan's future offshore Caspian Shahdaniz production, estimated at 8 bcm. Chances of adding to the volume from Iran, given sanctions, were slim to none, while the Chinese have essentially stitched up future Turkmen production, leaving Nabucco an underused energy highway."

Oil Price said this was the case "until possibly now", prior to last week’s announcement by Total of its gas find in Azerbaijan.

Total’s senior vice president for exploration Marc Blaizot modestly said, "This discovery could be very significant in terms of resources."

The Absheron block, less than 20 miles from Shahdaniz, is thought to have large pockets of gas spread over a 100 square mile field, and the company is hopeful to find several trillion cubic feet of gas and associated condensates.

If Total can exploit the find, then Nabucco could be a possibility on the basis of Azerbaijan’s Caspian natural gas alone, Oil Price predicts.

"One should not write off Total’s capacities, as Total holds a 10 percent interest in South Caucasus Pipeline Company, the firm that owns the South Caucasus Pipeline, which transports natural gas from Shahdaniz to the Turkish and Georgian markets. Total also retains five percent of BTC Co., the owner of the BTC pipeline."

Oil Price also noted that Azerbaijani President Ilham Aliyev had said the Total natural gas find was a "major event" that underscored Azerbaijan’s long-term prospects as a global energy supplier, adding, "This will allow us to press ahead more confidently with our gas strategy and strengthen the position of our country as a world gas exporter."

Resource, financing, a friendly host government – Nabucco may have finally found something to ship, instead of remaining a Western energy company "pipe dream", according to Oil Price.

The contract on the Absheron block was signed in February 2009 by Socar and Total. The project’s participating interests are: Socar and Total with 40 percent each, and Gaz De France Suez with 20 percent.

Oil Price also noted that since 1991, Azerbaijan has been "the great Western success story" in unlocking the energy riches of the former USSR.

"Western energy companies have had no greater friend in the post-Soviet space, as epitomized by the BTC pipeline, which began operations in May 2005 and now supplies a million barrels per day to thirsty Western consumers," it said.