AUTONOMOUS REFORMS

TURKISH ALTERNATIVE TO IRANIAN SWAP

Azerbaijan saw a series of milestone political and economical events unfolding this September. The day of signing the Contract of the Century, September 20, 1994, is written with golden letters in the history of Azerbaijan and its oil and gas industry. Twenty years later, on September 20, 2014, the ground-breaking ceremony of the Southern Gas Corridor took place. The pipeline will start a new chapter in the development of the gas sector of a small southern country located on the Caspian Sea coast.

This September the presidents of Azerbaijan and Türkiye Ilham Aliyev and Recep Tayyip Erdogan laid the foundation of the Igdir-Nakhchivan gas pipeline during their visit to the Nakhchivan Autonomous Republic (NAR) on September 26. The objective is to diversify gas supplies to the autonomy and reduce its dependence on a single supplier. A pleasant bonus was the signing of three documents, including an MoU on the supply of green electricity produced in Azerbaijan to the brotherly country. Thus, these events open a new page of energy co-operation between the two strategic partners—in the field of renewable energy sources.

Second line

The gas supply to Nakhchivan, which has no common border with the mainland Azerbaijan, has always been important for Azerbaijan. Currently, it is provided through the swap operations between Azerbaijan and Iran in accordance with the agreement signed back in 2005.    

Yet, Azerbaijani authorities decided to launch a bilateral gas supply to Nakhchivan from Iran and Türkiye to ensure the energy security of republic. This will reduce dependence on a single supplier and eliminate the transportation risks. So the successful implementation of the Baku-Tbilisi-Ceyhan oil pipeline project, followed by the Baku-Tbilisi-Erzurum and TANAP gas pipelines inspired the parties to realise a new mutually beneficial project—a new gas pipeline from Igdir to Nakhchivan. It was formalised in Ankara on December 15, 2020 thanks to the Memorandum of Understanding on the supply of natural gas to Nakhchivan Autonomous Republic.

At the groundbreaking ceremony held on September 26 at the parliament of the Nakhchivan Autonomous Republic, presidents Ilham Aliyev and Recep Erdogan connected via video link to the construction location of the Igdir-Nakhchivan gas pipeline, pressed buttons together, thus laying the foundation of the new structure.

President Aliyev said that the pipeline would boost the Azerbaijani-Turkish relations and create conditions for supplying natural gas to Nakhchivan through the second line.

"The construction of the Igdir-Nakhchivan gas pipeline will secure the energy security of Nakhchivan, which is an important step in the history of our brotherly relations," Aliyev said.

"Today Nakhchivan has huge economical, transportation and energy potentials. With the construction of regional transport lines, we will have an opportunity to fully realise this potential... The Igdir-Nakhchivan gas pipeline project will deepen our partnership with Azerbaijan in the energy sector and will also contribute to the energy security of Europe," the Turkish president said.

The length of the 16-inch pipeline from Türkiye's Igdir to Sadarak in Nakhchivan is 97.5 kilometres—17.5 kilometres in Azerbaijan and 80 kilometres in Türkiye.

The pipeline will be designed to transport 2 million cubic metres (mcm) of gas daily, or 730mcm annually. With its completion, Nakhchivan will satisfy all of its annual demand for the natural gas through Türkiye (500mcm). At the same time, the throughput capacity of the pipeline can be more than doubled in the future, given the further development of the autonomous republic, its industry and population growth.

In Türkiye, the pipeline will be an extension to the main gas pipeline from Eastern Anatolia to Igdir. It is also planned to install additional gas metering station in Diluzu, Türkiye, as part of the project.

SOCAR Midstream Operations LLC (a subsidiary of SOCAR) and Türkiye's BOTAS agreed to carry out the relevant works. Necessary funding for the project has been allocated from the state budget based on the respective order of the President of Azerbaijan dated February 10, 2022. The construction of the Igdir-Nakhchivan gas pipeline is among the priority projects of the State Programme of Socio-Economic Development of the Nakhchivan Autonomous Republic for 2023-2027 adopted on June 5, 2023.

According to official data, the construction of the Azerbaijani section of the pipeline started in July 2023. As of today, design and engineering works have been completed, materials and equipment have been delivered, fertile soil  has been stripped off the 98% of the pipeline route, the pipeline trench is 55% complete, 92% of welded pipes have been laid, 82% of welding and installation works are over. It is also planned to carry out a set of civil engineering operations, including horizontal drilling under the Araz River.

The construction of the Azerbaijani and Turkish sections of the pipeline is scheduled to be completed in May and December 2024, respectively.

In fact, this will be the first gas pipeline connecting Azerbaijan with Türkiye via the Nakhchivan Autonomous Republic. At the same time, it will become the necessary infrastructure for expanding regional gas cooperation for additional gas supplies (left after meeting domestic demand, R+) to neighbouring countries. For example, to Armenia. But this may be possible only in case of full normalisation of Yerevan's relations with Baku and Ankara. It is also possible to use the pipeline in the reverse direction in the future. Why not?! For deliveries from the mainland Azerbaijan to Nakhchivan and further to Türkiye through Armenia. But this is again only if our western neighbour demonstrates good manners. That's what the statement of the Turkish president on the new gas pipeline's contribution to the energy security of Europe also mean. Although he did not specify how this might be possible.

Green cooperation

Meanwhile, Baku and Ankara plan to strengthen cooperation in all areas, especially in energy, defence and transport.

Turkish president believes that one of the steps in this direction is the two-fold expansion of TANAP's capacity (up to 31-32bcm) and the increase of natural gas supplies from the Caspian Sea to Türkiye and Europe. "This will serve the interests of both countries and contribute to the energy security of Europe," the Turkish leader believes.

In addition, during the presidents' visit to Nakhchivan, they signed a memorandum of understanding on the supply of electricity produced in Azerbaijan from renewable energy sources to Türkiye. This marks the beginning of cooperation in the green energy production.

The choice of Nakhchivan as a supply source is not accidental. The republic has a good potential for producing the RES power and  direct access to the Turkish market. This eliminates unnecessary costs for the creation of transmission infrastructure and any intermediation and transit.

The government of Azerbaijan is planning to implement a number of projects in Nakhchivan to create new RES energy facilities with a total capacity of 1,500MW.

"Nakhchivan has neither gas, nor oil. But it has sunshine, and we have big plans on the construction of solar power plants in the republic. If these plans come true, Nakhchivan may turn into a green energy zone, as there is a great potential for the construction of solar, wind and hydroelectric power plants. In future it will be possible to export at least 1,000MW of green energy from Nakhchivan to Türkiye," President Aliyev explained.

In addition, the organisation of green energy exports from Nakhchivan to Türkiye can be the first step towards the creation of the Zangezur energy corridor. Such a project has good prospects due to the rich energy potential of the Karabakh region, which the Azerbaijani authorities have already declared a green energy zone.

There are also plans to build a 330kV transmission line from Aghjabedi to Nakhchivan via the Zangezur corridor and export electricity to Türkiye to the European market.

Again, everything depends on the Armenian position and its relations with Baku and Ankara. Armenian leadership, according to Prime Minister Nikol Pashinian, is allegedly not against oil and gas pipelines and power lines running through Armenia and is interested in these programmes. The main thing is that this time his words should match the deeds, as there have been many such examples. Maybe Yerevan will finally realise that regional cooperation is much more beneficial for the economy than a long-standing feud. This will require efforts, but will ultimately contribute to prosperity, social stability and regional security.