"Southern Gas Corridor: The Geopolitical and Geo-Economic Implications of An Energy Mega-Project" by Lee Morrison

THE JOURNAL OF ENERGY
AND DEVELOPMENT
Lee Morrison,
“Southern Gas Corridor:
The Geopolitical and Geo-Economic
Implications of an Energy Mega-Project,”
Volume 43, Number 2
Copyright 2018
SOUTHERN GAS CORRIDOR: THE GEOPOLITICAL
AND GEO-ECONOMIC IMPLICATIONS OF AN
ENERGY MEGA-PROJECT
Lee Morrison*
Introduction
T he Southern Gas Corridor (SGC) ranks among the world’s most significant
energy-related mega-projects of a generation. With 20 years of planning,
design, and site work, more than U.S. $42 billion has been committed to its
completion,1 making it 50 percent more costly than China’s Three Gorges Dam. It
physically transits six nations, yet more than 50 countries have direct involvement
or an indirect or adjacency interest. Many of these countries are working for the
success of the project and an equal number hope for its failure. The deeply
complex spheres of influence surrounding the SGC assure one main outcome. It
will upend the established political order of Eurasia.
This paper will explore the geopolitical tendrils of the SGC, identifying all the
state actors and their connections. The liberal interpretation of geopolitical re-
lationships herein casts a wide net. However, the intricacies and long reach of this
project necessitate a comprehensive perspective. A nation’s size, wealth, physical
distance, and direct project involvement have apparent correlations but are not
necessarily reliable predictors of influence.
There are numerous environmental and social concerns regarding the SGC.
Land use, the displacement of people, and sites of cultural significance have
*Lee Morrison is an energy infrastructure analyst based in Denver, Colorado. His areas of
research focus on the convergence of geopolitics, geo-economics, and energy. He holds degrees from
Baylor University, the University of North Texas, and the University of Colorado at Denver. He may
be reached at Lee.Morrison@EagleEnergyAdvisors.com.
The Journal of Energy and Development, Vol. 43, Nos. 1 and 2

Copyright Ó 2018 by the International Research Center for Energy and Economic Development
(ICEED). All rights reserved.
251
252 THE JOURNAL OF ENERGY AND DEVELOPMENT
attracted much discussion. Azerbaijan’s history of political oppression and its

recent withdrawal from the Extractive Industries Transparency Initiative cast
a dark and troubling shadow. And, an investment of this magnitude in a natural gas
project could be both a help and a hindrance to the European Union’s (EU)
commitment to the Paris Accord. While these topics all have significant geo-
political implications, they are beyond the scope of this examination.
About the Southern Gas Corridor
The Southern Gas Corridor (SGC) is an ambitious international project

designed to pipe natural gas from Central Asia to Europe. It was one of six energy-
related priority infrastructure proposals to come from the Second Strategic Energy
Review of the European Commission (EC) in 2008.2
A southern gas corridor must be developed for the supply of gas from Caspian and Middle
Eastern sources, which could potentially supply a significant part of the EU’s future needs.
This is one of the EU’s highest energy security priorities. The Commission and Member
States need to work with the countries concerned, notably with partners such as Azerbaijan
and Turkmenistan, Iraq and Mashreq countries, amongst others, with the joint objective of
rapidly securing firm commitments for the supply of gas and the construction of the pipelines
necessary for all stages of its development. In the longer term, when political conditions
permit, supplies from other countries in the region, such as Uzbekistan and Iran, should
3
represent a further significant supply source for the EU.
As originally conceived, it would extend from Azerbaijan to Italy, with po-

tential later extensions further into Asia. A Trans-Caspian pipeline was envisioned
through Turkmenistan and into Uzbekistan. Another was discussed through Iraq
and into the gas fields of Southern Iran.
The EC envisioned a grand but simple goal: “Ensuring secure and affordable
supplies of energy to Europeans by diversifying supply routes that decrease the
dependence of EU countries on a single supplier of natural gas and other energy
resources.”4 Europe’s quest for energy security was driven in part by the Paris
Accord and the path to cleaner energy and in part by a recognition of the growing
gap between European demand and the depletion of North Sea gas fields. But the
single most significant factor was concern surrounding the hostility between
Russia and Ukraine and the resulting erratic natural gas supply. Russia is the
largest supplier of natural gas to Europe; as much as 80 percent of Russia-Europe
gas trade at that time passed through Ukraine.5 Due to increasing post-Soviet
enmity between the two nations, gas shipments transiting Ukraine were repeatedly
curtailed or completely cut off. The hostilities culminated in the Russian military
occupation of much of eastern Ukraine and the subsequent annexation by Russia
of Crimea. These events exposed Europe’s supply vulnerability and set it on
a course correction.
IMPLICATIONS OF THE SOUTHERN GAS CORRIDOR 253
Route and Specifications
The SGC is comprised of three primary pipeline segments totaling 3,375 ki-
lometers (km) and crossing five countries: Azerbaijan, Georgia, Turkey, Greece,
and Italy (figure 1). The project also includes the expansion of Azerbaijan’s
Sangachal gas terminal to accommodate anticipated throughput growth and the
development of the Shah Deniz II gas fields to provide the necessary additional
production. Although the Shah Deniz produces a significant volume of natural gas
liquids (NGLs), the SGC will only transport dry gas (methane). NGLs will remain
in the existing pipeline network to the Turkish port of Ceyhan.6
The total project will create more than 1,800 permanent jobs across its length
after the completion of construction.7 It will generate billions of dollars of transit
fees annually paid to transit nations along its route; it will directly provide gas to
more than 158 million people,8 and indirectly to several hundred million more. To
describe the overall project, it is perhaps most useful to start at its termination and
work backward to its source of supply.
Trans-Adriatic Pipeline (TAP): The final segment, the 878-km Trans-
Adriatic Pipeline (TAP), is about 26 percent of the total length of the SGC. With
an estimated cost of U.S. $5 billion, it represents the largest foreign investment in
Albania9 and the largest single capital investment in Greek history.10 Upon its
commission, it will link Turkey to Italy with a total capacity of 10 billion cubic
meters annually (bcm/y).11
This pipeline lands in San Foca, Italy, in the region of Puglia along the Adriatic
coast.12 There it connects to the transmission and distribution grids of Snam Rete,
the Italian gas utility. Italy shares the EU’s concerns about the reliability of
Russian gas and is also concerned about instability in Algeria, its largest gas
source.13 For this reason, Italy is promoting Puglia as a new natural gas trading hub
for southern Europe. The EastMed Pipeline discussed later in this paper will also
make landfall here.
The pipeline crosses the Adriatic Sea at the Strait of Otranto and lands near
Fier, Albania. From the bottom of the sea to the top of the Albanian mountains, the
TAP has a total vertical rise of 2,620 meters.14 It crosses the east Albanian border,
travels across northern Greece, and terminates at the connection to the Trans-
Anatolian Pipeline at the Turkish border.
Along its route, the TAP will have four compressor stations to maintain
pressure and flow rates, three offtake stations to feed local distribution grids or
other anticipated transmission lines, and more than 30 block valves to isolate
segments for maintenance and spill mitigation.15 Expandability has also been
designed into the initial pipeline. With two more compressor stations, its capacity
may be doubled to 20 bcm/y.16 It is also being constructed with reversible flow
capabilities and could someday be used to supply gas to Turkey.17
Figure 1
a
254
SOUTHERN GAS CORRIDOR ROUTE
a
TAP = Trans-Adriatic Pipeline and TANAP = Trans-Anatolian Pipeline. Indicative map - not to scale.
Source: Paul Sampson, “SOCAR Grapples with Southern Gas Corridor Link-Up,” Interfax Global Energy, October 18, 2016.
THE JOURNAL OF ENERGY AND DEVELOPMENT
Table 1
OWNERSHIP OF THE TRANS-ADRIATIC PIPELINE (TAP)
Annual
Description of Public or Revenue
Owner HQ Country Operations Share Private (in U.S. $ billions)
Integrated
international oil and
BP United Kingdom gas company 20% Investor Owned $186.0
The state oil company State Owned
of the Azerbaijan National Oil
SOCAR Azerbaijan Republic 20% Company $40.0
Natural gas grid
Snam operator; formerly
S.p.A. Italy a subsidiary of Eni 20% Investor Owned $3.0
Natural gas grid and
import facility Hybrid Public-
Fluxys Belgium operator 19% Private $0.6
Natural gas grid and
import facility
Enagas Spain operator 16% Investor Owned $1.5
Diversified energy
Axpo Switzerland producer and trader 5% Investor Owned $5.3
Trans-Adriatic Pipeline AG is a joint venture specifically formed to build and

operate the TAP. Its shares are held by a variety of energy-related enterprises
(table 1). The TAP broke ground in 2016. Approximately 5,000 temporary con-
struction jobs have been created: 3,000 in Greece, 1,700 in Albania, and the re-
mainder in Italy.18 Today, its engineering, procurement, and construction are more
than two-thirds complete19 and it is expected to begin flowing gas to Italy in 2020.
Trans-Anatolian Pipeline (TANAP): The 1,850-km TANAP lies entirely
within the territory of Turkey and comprises approximately 54 percent of the total
length of the SGC. It terminates at the western border with Greece where it
connects to the TAP and originates at the eastern border with Georgia where it
connects to the Southern Caucasus Pipeline Expansion (SCPX).20 It has a total
vertical drop of approximately 2,800 meters from its highest elevation in Western
Turkey to its lowest across the Dardanelles Strait, south of the Sea of Marmara.21
Groundbreaking took place in 2015; more than 15,000 workers were employed
during construction;22 and, the pipeline is now 99 percent complete.23 The pipe-
line’s first stage from the Georgian border to the offtake station in the Turkish city
of Eskisehir was celebrated with a “launch” ceremony on June 12, 2018.24 In
Table 2
OWNERSHIP OF THE TRANS-ANATOLIAN PIPELINE (TANAP)
Annual
Revenue
Description of Public or (in U.S. $
Owner HQ Country Operations Share Private billions)
The Southern Gas

Corridor Closed
Joint Stock
a b
SGCCJSC Azerbaijan Corporation 51% State Owned $0.12
Natural gas grid
c
BOTAS Turkey operator of Turkey 30% State Owned $13.00
Integrated
international oil and
BP United Kingdom gas company 12% Investor Owned $186.00
The state oil company State Owned
of the Azerbaijan National Oil
SOCAR Azerbaijan Republic 7% Company $40.00
Sources and Notes: a = Southern Gas Corridor Closed Joint-Stock Company (SGCCJSC),
Consolidated Financial Statements (Audited) (Baku, Azerbaijan: SGCCJSC, December 31, 2017);
b = The TANAP was not operational at the time of SGCCJSC’s fiscal year-end financial statement;
and c = Daily Sabah, “Turkish Energy Giant BOTASx Tops Fortune 500 Turkey List,” June 30, 2016.
attendance were the presidents of Turkey and Azerbaijan, but also, intriguingly,
those of Ukraine and Serbia. First commercial gas deliveries are expected late June
2018.
The total current estimated cost of the TANAP is U.S. $9.2 billion.25 Ap-
proximately U.S. $3.2 billion has been provided by international lending agencies,
and the remainder has been provided by SOCAR (the State Oil Company of
Azerbaijan Republic), BP, BOTAS (BOTAS Petroleum Pipeline Corporation),
and other private companies.26 SOCAR will operate the pipeline on behalf of an
ownership group which is less diverse that that of the TAP (see table 2).27
The initial capacity, 16 bcm/y, is fully booked.28 6 bcm/y has been sold to the
Turkish Petroleum Corporation (TPAO), Turkey’s national utility. The remaining
10 bcm/y will be transmitted through the TAP; 8 bcm/y will go to Italy, and 1 bcm/y
each to Bulgaria and Albania.29 Interestingly, Greece has not contracted any of the
gas from the TAP despite being a transit county. Greece currently buys most of its
gas from Russia, and a smaller amount comes from grid connections with Turkey.
Expandability has also been pre-designed and will be phased in over several
years. The addition of parallel loop lines and compressor stations will increase
capacity to 23 bcm/y by 2023, 31 bcm/y by 20131, and 60 bcm/y by 2060.30 The
Figure 2
THE SOUTHERN CAUCASUS PIPELINE EXPANSION (SCPX) BUSY PIPELINE CORRIDOR
Sources: Thomas Blomberg, Creative Commons Attribution-Share Alike 3.0., available at https://commons.wikimedia.org/w/index.php?curid=
4536714.
IMPLICATIONS OF THE SOUTHERN GAS CORRIDOR
257
TANAP will be initially constructed with seven compressor stations and two
offtake stations to supply gas to the demand centers of eastern Turkey.31
Southern Caucasus Pipeline Expansion (SCPX): The existing 980-km
Southern Caucasus Pipeline (SCP), also commonly called the Baku-Tbilisi-
Erzurum (BTE), carries dry gas to Turkey through a very busy corridor (fig-
ure 2).32 From Baku, Azerbaijan to Erzurum, Turkey, it parallels the 1,768-km
Baku-Tbilisi-Ceyhan (BTC) pipeline, which carries oil and natural gas liquids to
the export facility on the Turkish Mediterranean coast.33 Also sharing the corridor is
the Western Route Export Pipeline (WREP), an 833-km oil pipeline connected to
the Supsa Terminal on the Black Sea coast of Georgia. All three of these significant
transmission lines originate at the Sangachal Terminal, which is also the origin of
the 1,330-km Baku-Novorossiysk oil pipeline to the Black Sea coast of Russia.
The 690-km SCPX has been laid adjacent to the SCP34 from Azerbaijan’s
Sangachal gas terminal, across Georgia, and terminating at the Turkish border
where it connects to the TANAP. The SCPX is the shortest of the three pipelines in
the SGC and makes up about 20 percent of the total length. Cost estimates total
U.S. $11.7 billion,35 and the ownership group represents a broad range of global
energy firms (see table 3).
The current Southern Caucasus Pipeline carries 7.3 bcm/y, which is approxi-
mately 90 percent of Azerbaijan’s total gas exports.36 The total initial capacity of
the SCPX is 25 bcm/y, an increase of more than 340 percent. It will include two
compressor stations37 and a single offtake station at the Georgia-Azerbaijan
border to feed the Georgian gas grid.38 The SCPX commenced operations in
late May 2018, and first gas will reach Turkey later this year.39 It has created
more the 6,000 temporary construction jobs in Georgia and another 10,000 in
Azerbaijan.40
Sangachal Terminal Expansion: The Sangachal Terminal is the primary
processing station for all oil and gas production from the Shah Deniz offshore
fields of the Southern Caspian Sea. It is among the world’s largest of such ter-
minals and is also the home to the main control rooms and first pump stations for
several major international transit pipelines.
The BP-operated facility is directly connected to Azerigas and supplies the
national grid of Azerbaijan. It has historically processed up to 10 bcm/y of Shah
Deniz gas, and about 7 bcm/y of gas from other fields.41 Azerbaijan consumes
10 bcm/y, and the remainder of gas is exported to Georgia, Iran, Russia, and
Turkey through this facility.42
As a part of the SGC, throughput capacity of the Sangachal Terminal for gas
arriving from Shah Deniz has been expanded by 16 bcm/y,43 all of which is an-
ticipated export volume. The plant’s footprint has expanded by 50 hectares, and
a new access road and flood protection berms were added.44 The expanded facility
is now complete and ready for its first commercial gas deliveries.45
Table 3
OWNERSHIP OF THE SOUTHERN CAUCASUS PIPELINE EXPANSION (SCPX)
Annual
Revenue
Integrated
international oil
BP United Kingdom and gas company 28% Investor Owned $186.00
Equity held through
subsidiaries State Owned
AzSCP & SGC National Oil
SOCAR Azerbaijan Midstream 16% Company $40.00
Integrated energy State Owned
production & National Oil
TPAO Turkey trading 19% Company $20.00
Integrated
upstream,
midstream, State Owned
downstream, and National Oil
Petronas Malaysia trading company. 15% Company $46.00
Upstream,
petrochemicals,
power
generation, retail
Lukoil Russia gas stations 10% Investor Owned $84.00
Trading & general
contracting
subsidiary of
National Iranian State Owned
Oil Company National Oil
NICO Iran (NIOC) 10% Company $22.00
Shah Deniz 2 Field and Sangachal Terminal Expansion: The Shah Deniz 2
is the expansion of the existing Shah Deniz gas fields in the southern Caspian Sea.
It is the largest component of the SGC by a significant margin with an estimated
cost of U.S. $28 billion, including the upgrades to the Sangachal Terminal.46 BP is
the operating partner leading an international consortium (see table 4).
The expansion includes two new bridge-linked offshore platforms collectively
called Shah Deniz Bravo.47 The living quarters and power and heat generation are
on one of the platforms. Separators, compressors, the flare, and the export pipeline
connections are located on the considerably larger second platform. This platform
Table 4
OWNERSHIP OF SHAH DENIZ AND SHAH DENIZ 2
Annual
Revenue
Integrated
international oil and Investor
BP United Kingdom gas company 28.80% Owned $186.00
Integrated energy State Owned
production & National Oil
TPAO Turkey trading 19.00% Company $20.00
State Owned
Integrated petroleum National Oil
Petronas Malaysia company 15.50% Company $46.00
The Azeri NOC and its State Owned
subsidiary SGC National Oil
SOCAR Azerbaijan Midstream 16.70% Company $40.00
Integrated petroleum Investor
Lukoil Russia company 10.00% Owned $84.00
Trading & general
contracting
subsidiary of State Owned
National Iranian Oil National Oil
NICO Iran Company (NIOC) 10.00% Company $22.00
is also attached to the subsea risers which pipe the produced fluids from the wells
up to the production facilities for separation and initial processing.48
In addition to the platforms, 10 manifolds connected to as many as 26 wells will
be located on the sea floor.49 The wells, manifolds, platforms, and Sangachal
Terminal onshore will all be connected via a 500-km subsea gathering system
which was completed in late 2017.50 As of January 2018, 16 of the planned 26
wells were drilled, and six are ready for commissioning.51
Worthy of note in the Shah Deniz expansion is the ongoing border dispute
within the Caspian Sea (figure 3).52
Russia, Kazakhstan, Azerbaijan, and Turkmenistan have all recognized it as
a sea under maritime law. This provides generally equidistant borders between all
five littoral states based on their percentage of shoreline. However, Iran recognizes
the body of water as a lake in which all littoral nations have an equal share.53 The
three northern nations of Russia, Azerbaijan, and Kazakhstan have signed bi-
lateral agreements setting their borders. Iran and Turkmenistan have not followed,
Figure 3
CASPIAN BORDER DISPUTE
Source: U.S. EIA, “Oil and Natural Gas Production is Growing in Caspian Sea Region,”
September 11, 2013, available at https://www.eia.gov/todayinenergy/detail.php?id=12911.
and the dispute remains a source of friction in further Caspian gas field and
pipeline developments.
Expansion Proposals—Supply Side: The SGC has a low total capacity rel-
ative to other pipeline projects, some with substantially lower capital requirements.
The initial planned 16 bcm/y is fully contracted, with only 10 bcm/y making it beyond
Turkey. Europe’s gas import capacity, excluding pipelines to Turkey as well as those
proposed or under construction but not yet in operation, is currently 545 bcm/y
through pipes and 185 bcm/y through liquefied natural gas (LNG) regas termi-
nals (see appendix for European natural gas import capacity). With a capacity of
between 10 bcm/y and a possible 30 bcm/y after expansion, the SGC will add
only 1 percent to 4 percent to Europe’s total import capabilities. This is far too
low to make any lasting and meaningful difference to the gas markets. Perhaps in
recognition of this, there have been numerous proposals to expand the pipeline to
improve its supply capabilities. Several counties were specified in the initial EC
project announcement. From these, two supply line extensions were implied: one
into Turkmenistan and Uzbekistan and the other through Iraq and into Iran.54 In
addition, there are recurring discussions about possible Russian and Romanian
supply connections.
Trans-Caspian Pipeline: Turkmenistan and Uzbekistan: The original EC
proposal for the SGC envisioned a subsea pipeline extending across the Caspian
Sea into Turkmenistan reaching as far as Uzbekistan. Turkmenistan has the
world’s fourth largest proved gas reserves, more than 17.5 trillion cubic meters
(tcm),55 and can provide the volume over the longer term needed to insure the goal
of diversifying Europe’s gas suppliers. The governments of Azerbaijan and
Turkmenistan are currently negotiating this 300-km, 30 bcm/y Trans-Caspian
Pipeline connecting Turkmenbashi to Baku.56
Azerbaijan already benefits from Turkmen gas, albeit in smaller quantities and
in an unorthodox manner. Azerbaijan now receives 2 bcm/y of gas from Turk-
menistan through tri-lateral gas swap agreements with Iran. Turkmenistan pipes
gas to the population centers of northeast Iran, and, in turn, Iran pipes an equal
volume of gas from its grid near Tabriz to Azerbaijan. Azerbaijan is currently
negotiating with National Iranian Gas Company to add another 5 bcm/y57 to this
arrangement; however, current infrastructure renders swap agreements incapable
of approximating the volume of the proposed Trans-Caspian pipeline. And, tri-
lateral gas swaps can be politically perilous and unreliable over the longer term.
Difficulties with a Trans-Caspian Pipeline: Despite the allure of the Trans-
Caspian Pipeline, there remain several considerable obstacles to its realization.
Opposition and strategic cooperation from Russia and Iran have delayed its de-
velopment. Turkmenistan’s emerging gas exports to China may overwhelm pro-
duction leaving little gas for export to Europe. There is a long-standing territorial
dispute between the Caspian littoral states which has significantly delayed de-
velopment in the Caspian Sea. And, Turkmenistan may not have either sufficient
production capabilities or financial resources to continue pursuing all the pipeline
opportunities now available.
First, Russia and Gazprom have historically followed the aggressive strategy of
blocking, competing with, or buying into development of all potentially com-
petitive infrastructure, a logical business practice to protect market share in
a mature industry. The realistic possibility of an extension to Turkmenistan has
elevated the competitive significance of the SGC and has positioned it as a larger
threat to the Russian market share. Russia and Gazprom have thus engaged in all
three competitive tactics against the SGC. After attempts at blocking the de-
velopment of the pipeline, Russia then proposed and fast-tracked the South Stream
and Turk Stream pipelines to preclude its need. And most recently, Lukoil, a pri-
vately-owned Russian company, purchased a share of the SGC, and Russia floated
the idea of joining the SGC as a producer state. By adding volume to the pipeline,
Russia can absorb spare capacity, making it impossible for Azerbaijan or other
potential producing states to flow additional gas.58
Second, Iran has an eye toward a European supply route. The original EC
proposal for the SGC called for a possible Iranian connection, and there are current
proposals for an extension as far as the South Pars field in the Persian/Arabian
Gulf. Any additional gas supplied through Turkmenistan will reduce the economic
benefit of this Iranian connection and could affect Iran’s ability to attract capital. It is
therefore in Iran’s national interest to prevent or delay the Trans-Caspian Pipeline.
Third, China has a strong interest in preventing the development of the Trans-
Caspian Pipeline. Unlike the resistance from Russia and Iran, which is based in
part on market share competition, China competes solely for gas supplies. The
1,833-km Central Asia–China Gas Pipeline (CACGP) from Turkmenistan,
Uzbekistan, and Kazakhstan to China, opened in 2010, is now being expanded
from 55 bcm/y59 to a total capacity to 70 bcm/y.60 The Central Asian Republics
have few opportunities for gas export due to difficult relations with Russia to their
north and competition from Iran to their south. The pipeline to China offers po-
tential prosperity and national income and it positions China with potential mo-
nopsony power. A Trans-Caspian Pipeline will be viewed by China as competition
for limited gas supplies. The potential new consumer markets and Turkmenistan’s
expected lag in production as demand surges will result in tightened supplies and
upward pressure on gas prices for China.
Fourth, the ambiguity of borders between the five Caspian littoral states also
remains a significant obstacle for the Trans-Caspian Pipeline. After a series of
incidents in the 1990s, Ashgabat and Baku agreed to cease development activity in
the Kapaz/Serdar oil and gas fields until the border could be determined.61
Nonetheless, negotiations for the transportation corridor have proceeded. Azer-
baijan is eager to add transit fee income to its federal budget, and Turkmenistan is
eager to gain access to a significant new export market. As both Iran and Russia
view the Trans-Caspian Pipeline as detrimental to their economic interests, both
have used the border dispute to block the project.62 However, this obstacle may now
have been mitigated. A 2017 joint announcement by all five Caspian littoral nations
stated that the border dispute had been settled and a pact would be signed at the Fifth
Summit of the Caspian Littoral States to be held in the second half of 2018.63
And last, Turkmenistan may have insufficient resources for all its current
pipeline opportunities. In addition to the Trans-Caspian Pipeline to Europe and the
CACGP to China, the country is also promoting the Turkmenistan-Afghanistan-
Pakistan-India pipeline (TAPI). Construction on this 1,814-km, 33-bcm/y pipeline
is already under way in Turkmenistan and Afghanistan, and the Taliban has vowed
to protect this project in recognition of its regional importance.64
In addition, the 90-bcm/y Central Asia-Center (CAC) pipeline to Russia is
currently unused but could be returned to service should the political headwinds
subside. And last, two pipelines with a total capacity of 20 bcm/y ship gas to
Iran. In total, these projects account for more than 240 bcm/y of export ca-
pacity; they include four of the five largest global gas consumers of Europe,
Russia, China, and Iran; and they include two of the most rapidly emerging gas
markets, India and Pakistan. This level of growth will severely tax Turkme-
nistan’s financial resources as well as its reservoir and production capabilities
in the near term.
The Mashreq, Iraq, and Iran: The original EC proposal for the SGC called for
a possible extension in the Mashreq, Iraq, and Iran. The Mashreq is presumably
named because an Iranian pipeline may need to cross the Kurdistan Autonomous
Region whose inclusion in the state of Iraq is tenuous. With more than 33.5 tcm,
Iran has the second largest proved gas reserves in the world,65 and Iraq, including
the reserves of Kurdistan, will add another 3.1 tcm to this total. Both Iran and the
EU recognize the benefits and favor this extension and it could add the volume of
gas needed to make the SGC meaningful to Europe’s gas markets.
A pipeline through Kurdistan, however, is highly improbable and any exten-
sion into Iran is virtually impossible under current conditions. Hostility between
Turkey and the Kurdish armed forces of Syria has resulted in periodic military
operations while animosity is spreading into the Kurdistan Autonomous Region as
refugees and fighters flee. In addition, Turkey’s history with the Kurdish people of
Iraq has been unpredictable and largely based on convenience, which makes
a joint pipeline politically challenging.
Iran has a much steeper slope to climb to realize an extension of the SGC. The
reintroduction of sanctions on Iran by the United States will make procurement of
materials and international gas sales agreements difficult, if not impossible. In
addition, Iran lacks north-south infrastructure linking to the South Pars fields
where most Iranian gas is produced. Any proposal to join the SGC will be
burdened with an 800- to 1,000-km high-capacity pipeline from South Pars. And
Iran, like Turkmenistan, is faced with potentially better opportunities. It is cur-
rently building a high-volume line to Pakistan with a potential connection to
another pipeline into southern China. Iran needs infrastructure investment and
customers beyond the reach of U.S. sanctions; China has ready capital and sig-
nificant long-term demand. More importantly, China never fully embraced the
trade sanctions against Iran. And with the current exchange of trade threats be-
tween Beijing and Washington, it is unlikely to do so in the near term.
Saudi Arabia and the United Arab Emirates (U.A.E.) will also oppose any
Iranian pipeline extension. First, a pipeline connecting Iran to Europe will fun-
damentally alter the flow of currency into this region, mostly benefiting Iran.66
This could expedite a shift in market power from oil to gas, thereby reducing the
regional influence of Saudi Arabia and the U.A.E. Second, Iran’s newfound in-
come could be diverted to the strengthening of its military operations in the region,
a prospect to which other Gulf states are vehemently opposed.
A Russian Supply Connection: A third possible and controversial expansion is
a connection to Russia’s Turk Stream. Gazprom is already building this pipeline
which will terminate in Turkey’s Eastern Thrace within 1 kilometer of the TAP-
TANAP junction.67 It consists of twin 15.5 bcm/y lines, for a total capacity of
31 bcm/y.68 TAP has a capacity of 20 bcm/y, of which 10 bcm/y is booked by
SOCAR. The remaining 10 bcm/y is available with Gazprom a likely buyer.
Flowing Russian gas through the TAP will improve the economics of the Turk
Stream by eliminating the need to build duplicate onshore transmission lines, and
there are no other producers with a ready gas supply nearby.69
Turkey currently receives significant volumes of Russian gas through the
Trans-Balkan pipeline which connects upstream to the Soyuz Pipeline in Ukraine.
Turkey has already contracted 15 bcm/y through the new Turk Stream, which will
leave Trans-Balkan pipeline mostly redundant and unused. The additional 15 bcm/y
available when the second string of the Turk Stream opens could flow, in part,
through the TAP to Italy, with the remainder through the Trans-Balkan Pipeline
after a flow reversal to Bulgaria, Romania, and the Balkan States. This scenario,
incidentally, meets one of Russia’s strategic objectives by reducing or eliminating
Ukraine as a transit state. But it simultaneously exposes Gazprom to expensive ship-
or-pay transit tariffs for gas formerly shipped through Slovakia, and it may not be
immediately allowed under current contract obligations.70
A Romanian Supply Connection: Romania is the fourth largest producer of
natural gas in Europe after Norway, the Netherlands, and the United Kingdom.71
However, recent Black Sea offshore discoveries have significantly boosted
Romania’s reserves at a time when those of northern Europe are in decline.
Technical and economic assessments are preliminary; however, the Romanian
National Agency for Mineral Resources announced plans to export as much as
20 bcm/y by 2025.72 This will help solidify the gas independence of the country
and the region, and it will elevate Romania’s gas exports to rival those of the
United Kingdom.
In addition to these new offshore gas supplies, more Azeri gas is expected to
flow through the Black Sea. Romania and Georgia are currently building LNG
liquefaction and regas facilities on opposite shores73 to accommodate the in-
creased production in Azerbaijan. SOCAR and a consortium of other owners are
also planning the Azerbaijan-Georgia-Romania Interconnector (AGRI) gas pipe-
line across the Black Sea. Both projects originate at Georgia’s Supsa gas terminal,
which is connected by pipeline to the Sangachal Terminal in Azerbaijan.
To accommodate the anticipated arrival of Azeri gas in Romania, the 4.4-bcm/y
Bulgaria-Romania-Hungary-Austria (BRUA) transmission line is being con-
structed74 to bring Black Sea gas to Austria’s Central European Gas Hub. Re-
versible flow connectors to Ukraine and Bulgaria and connections to a southbound
Trans-Balkan pipeline will add supply flexibility to the entire region. And, it will
facilitate the potential export of Romanian gas via the TAP into Italy, the planning
for which is already under way.75 Of course, this scenario conflicts with the Russian
idea of flowing gas north in the Trans-Balkan Pipeline from the Turk Stream.
Expansion Proposals—Demand Side: A cursory analysis of the SGC reveals

very strong natural gas demand in the EU and, indeed, across all of Europe.
However, technical and economic obstacles to the infrastructure render much of
this demand inaccessible to this project. Therefore, numerous proposals have been
suggested since the early design and conceptions of the SGC to expand its reach to
additional markets. Of course, expansion of the market size assumes expansion of
supply as well. For the purposes hereafter, however, expansion of supply will be
considered in isolation.
Turkey Gas Consumption: Before examining the expansion of the SGC into
additional markets, it is useful to understand the potential growth of the Turkish
market, which could feasibly preclude any further expansion of Azerzi gas flowing
to Europe. Turkish gas consumption is projected to grow from 53.5 bcm/y in
201776 to approximately 70 bcm/y by 2030.77 Current spare pipeline capacity is
insufficient to meet these projections, and it is unlikely additional LNG facilities
can be planned, permitted, and built within the necessary time frame. Without
capacity expansions to the SGC, Turkey alone could absorb its total volume.
Ionian-Adriatic Pipeline (IAP): The Ionian-Adriatic Pipeline (IAP) is under
development connecting the TAP to Balkan states along the Adriatic Sea. From
Fier, Albania, it will travel through Montenegro, Bosnia-Herzegovina, and termi-
nate in Split, Croatia. Its total length will be 516 km and it will carry approximately
5 bcm/y. This capacity has already been fully allocated: 2.5 bcm/y for Croatia, 0.5
bcm/y for Montenegro, and 1 bcm/y each to Bosnia-Herzegovina and Albania.78
Ownership of the IAP has not yet been established. However, it will likely be
comprised of SOCAR, the state gas utilities of each consumer nation, and other
potential investors. SOCAR has taken a leading role in its promotion and technical
advising and has already signed a memorandum of understanding for a TAP
connection. The total estimated cost of the IAP is U.S. $720 million.79
Greece-Bulgaria Interconnect (IGB): Like the IAP, the Greece-Bulgaria In-

terconnect (IGB) is in early preparation for construction. Its front-end engineering
and design began in 2009, environmental assessments were completed in 2013,
and the final investment decisions were approved in 2015.80 The total cost of this
extension is estimated at U.S. $245 million.
This pipeline connects to the TAP at Komotini, Greece, and will carry 3 bcm/y
182 km to the Bulgarian distribution grid in Stara Zagora (state), Bulgaria, where it
may connect to the Trans-Balkan Pipeline. It will also have a reversible flow and
has been designed to be expandable to 5 bcm/y with an additional compressor
station.81 It is owned 50 percent by the Bulgaria Ministry of Energy, 25 percent by
DEPA, the gas grid operator of Greece, and 25 percent by Edison S.p.A., an Italian
electricity and petroleum production and distribution company.82
Pipeline Flow Reversals to Switzerland, France, Germany, and Austria: Cross-
border, grid-to-grid exchanges of natural gas are not new to northern Italy.
However, newly installed flow reversal capabilities on the Trans-Europa Natural
Gas Pipeline (TENP) will facilitate higher volumes of gas from Italy to Swit-
zerland and on to the major markets of Germany.83 In similar flow reversals in the
Trans-Austria Gas (TAG) pipeline, Italy will export gas to the Central European
Gas Hub at Baumgarten, where it can be redistributed to several nations. Grid
operators Snam Rete Gas and Fluxys, also part owners of the SGC, have agreed to
develop physical reverse flow capabilities across Europe which will allow Caspian
gas to reach as far north as the United Kingdom.84
East Mediterranean: Emerging Wild Card and Geopolitical Hotspot: Noble
Energy’s significant discoveries off the coasts of Israel and Cyprus have prompted
cooperation between the countries for development. Total production should reach
40 bcm/y when the fields are fully developed.85 In addition, Eni’s newly discov-
ered Calypso field in Cyprus will drive the economics and alter the politics of the
region even more dramatically. Its technical and economic reserves have not yet
been estimated, nor has its potential annual production. However, it is thought to
hold 6 to 8 tcm of total gas reserves.86 If combined with production from Egypt’s
super-giant87 Zohr field and its newly discovered and potentially mega-giant Noor
field, the Eastern Mediterranean will take a position among the world’s most
important gas production centers.
Gas from the East Mediterranean region throughout the development of the
SGC was always presumed to flow through Turkey and eventually to Europe via
the TANAP and TAP. However, ongoing tensions between Turkey and Israel and
increasingly hostile territorial disputes between Turkey and Cyprus have scuttled
these plans.
The EU recently agreed to fund the technical studies and maritime surveys for
this project88 designed to carry 10 bcm/y from Israel to Greece, with connec-
tions to the gas fields of Cyprus and an offtake terminal and compressor in
Crete. The pipeline will land at Ortranto, Italy near the landing site of the TAP
which will help Italy in its promotion of this region as a southern European
energy hub.
Additional opportunities exist for gas exports from Egypt. Its offshore Zohr gas
field is larger than the current fields of both Cyprus and Israel combined.
However, its production has been fully dedicated to satisfying Egyptian demand.
This balance will change in 2018 as Egypt becomes yet another gas-independent
state and shifts from importer to exporter.89 Due to the proximity of the fields,
Egypt may join the EastMed pipeline or it may construct an independent line to
Europe.
Geopolitics
As vast as the SGC investment and engineering has been, its geopolitical reach
goes even further; more than 50 nations are involved (see figure 4). Of course,
geopolitics and geo-economics is multi-faceted and deeply nuanced. But to fa-
cilitate an introduction to the influences at work in the SGC, the nations with an
interest have been grouped into seven very general categories. The three tradi-
tional categories of influence in pipeline politics will be examined: Producer
States, Transit States, and Consumer States. But, these alone are inadequate.
Therefore, three additional categories of influence are included: Owner-Operators,
Financiers, and Competitors. A seventh category, Attendant States, was added to
include nations with no direct connection to the project but for which its de-
velopment may have a critical impact.
There is significant overlap, and several nations appear across multiple categories.
The nations within each of the first six categories have been evaluated and ranked by
the significance of several factors and, in each case, a category leader is identified.
Owner-Operators: The interplay between business entities and governments
is among the most important geopolitical influencers, especially in this era of
increasing populism and nationalism. Business entities include wholly state-
owned corporations such as Petronas or SOCAR, wholly privately-owned cor-
porations such as BP, and hybrid corporations such as Gazprom, Fluxys, and
Enagas where a significant equity position is held by the state or its sovereign
wealth fund.
Figure 4
INVOLVEMENT IN THE SOUTHERN GAS CORRIDOR (SGC)
IMPLICATIONS OF THE SOUTHERN GAS CORRIDOR
269
For the purposes of this examination, no distinction is made between the

businesses and their countries of domicile. This requires a modest suspension of
reality due to their diverse and often international ownership. However, geo-
politics is more art than science. Companies are typically governed under the laws
of their home countries; their revenues, payrolls, and taxes benefit their home
countries; a preponderance of their executives and employees reside in their
home countries; they provide significant philanthropy and lend prestige to their
home counties; each will pursue policies and practices that are generally in the
interests of their home countries; and each will lobby and be lobbied by their home
governments.
The clear category leader here is Azerbaijan. Through SOCAR, SGCCJSC,
SOCAR Midstream, and AzSCP, Azerbaijan possesses a substantial equity posi-
tion in all segments of the greater SGC project, and it has taken the lead in several
of the proposed supply and demand expansions as well. Although it is not the
operating partner, it does have a significant equity stake in the Shah Deniz fields,
the Sangachal Terminal, and the SCPX. Azerbaijan will be represented as the
operating partner and controlling interest owner of the TANAP and it also equally
shares a controlling interest with Italy and the United Kingdom in the TAP. In
total, Azerbaijan will have a significant stake in the infrastructure from the time
the gas leaves the geologic formation beneath the Caspian Sea until it enters the
Italian grid in San Foca.
After Azerbaijan, there are three countries with what could be characterized
as a statistically significant interest through their business entities: Turkey, the
United Kingdom, and Italy. These are generally nations whose companies have
a substantial interest in the entire project, a majority interest in any single segment,
or are named operating partners rather than junior, non-operating partners.
Turkey, through TPAO and BOTAS, has a substantial equity interest in the
TANAP, SCPX, Sangachal Terminal, and Shah Deniz II expansion. It also con-
trols the regulatory process across the TANAP, more than 50 percent of the length
of the entire project.
The United Kingdom is represented through BP with a three-way equal share of
a majority equity interest in the TAP, a position it shares with Azerbaijan and Italy.
It is a majority owner and the operating partner of the SCPX, Sangachal Terminal,
and Shah Deniz gas fields, and it has a minority ownership interest in the TANAP.
The only ownership interest of Italy is Snam’s equal share of the majority
equity of the TAP. However, Snam’s ownership of the Italian grid elevates the
country’s influence over this project. Although the project officially terminates at
the Italian coast, gas is expected to flow north through Europe, thus making the
Italian transmission system integral to project’s ultimate success.
Although only in power a few months, Italy’s new government, a mix of
conservative populists which places a higher value on Italy’s interests over those
of Europe, is already exercising its political influence over the TAP. Contrary to
Italy’s goals regarding energy security and supply diversity, the new governing
coalition has labeled the SGC pointless and has initiated its full review,90 though it
appears its opinion is already cast.
Other nations whose interests are represented through various business entities
include Belgium and France through the gas grid operator Fluxys; Iran through
NICO, a subsidiary of its national oil company NIOC; Malaysia through its na-
tional oil company Petronas; Russia through its privately held corporation Lukoil;
and, Spain and Switzerland through Enagas and Axpo, respectively. All these
nations have an interest in the direction of the SGC through the minority non-
operating partnership interests of their companies.
Two issues become immediately apparent with this list. First, this ownership
group could be highly problematic. Many aspects of banking, materials pro-
curement, and the comingling of funds for business operations are or may become
illegal in the United States due to the evolving sanctions regimes against Russia
and Iran. In addition, Vagit Yusufovich Alekperov, the President of Lukoil, is
among the Russians identified by the United States Treasury as having close ties
with the Kremlin.91 Although there are no pending regulatory actions against him,
this list has caused increased scrutiny of his financial affairs.
The second apparent issue with this list is the noticeable absence of the United
States, a strong supporter of this project. With policies designed to drive Europe’s
energy diversification away from Russia and with the global strength of the U.S.
petroleum sector, it is natural to assume an American company would have an
equity interest in such a significant and market-making undertaking.
Financiers and Capitalists: The next group of geopolitical influencers are

those that have provided the capital funding. Their influence is derived from their
ability to earmark or completely withhold funds in conditions of adversity or to
default on obligations in times of financial distress. Again, this is a cursory ex-
amination of the capital requirements of this project, and it associates corporate
entities with their home countries.
There are two leaders of this group. Both Azerbaijan and the United Kingdom
will contribute or have contributed approximately 25 percent, or U.S. $13 billion,
of the capital for the SGC through their corporate partnership interests. This is
especially significant for Azerbaijan whose gross domestic product measured at
purchasing power parity is approximately 5.7 percent of that of the United
Kingdom.92
Other countries with statistically significant interests in the finances of the SGC
duplicate those of the Owner-Operators, with one addition. Germany is contrib-
uting nearly U.S. $1.4 billion of direct investment through its Ministry of Fi-
nance.93 Excluding Russia, Germany has the largest population, economy, and gas
demand in Europe. Its investment now also gives it a larger presence in the affairs
of the SGC.
The Financiers also include a unique group that is difficult to quantify: Indirect
Financiers. These, for purposes herein, are defined as nations belonging to mul-
tilateral development banks or very large international finance institutions typi-
cally owned by national governments. Because membership in these organization
can be exhaustive, only those nations with a statistically significant capital con-
tribution were included in this examination. Members of these organizations
whose contributed capital was below the threshold used herein were not included.
They may retain a modest level of political influence but less than the larger
donors.
A total of U.S. $8.2 billion in loans and loan guarantees has been committed to
the SGC by five multilateral development banks:94
– European Investment Bank (EIB)
– European Bank for Reconstruction and Development (EBRD)
– World Bank and the Multilateral Investment Guarantee Agency (MIGA)
– Asian Infrastructure Investment Bank (AIIB)
– Asian Development Bank (ADB)
France, Germany, and the United Kingdom are the leaders of these indirect
financiers, each with significant interests in all but the AIIB. The United States
and Japan are significant donors to three of these organizations; Italy, Russia,
and Canada are each major donors to two; and Spain, China, India, Australia, and
South Korea are each important contributors to one (see table 5). The extension
of loans to the SGC essentially collateralizes the contributed capital of these
organizations, thereby extending a degree of geopolitical influence to their
members.
Producers: The political power of a producer-supplier state can be simulta-

neously fragile and overwhelming. Inadequate market diversification is common
to international pipelines, and it tilts power precariously between monopoly and
monopsony. Gas supplies have historically been very attractive and effective tools
of coercion. Producers may curtail production or transit to punish, extort specific
behaviors, or drive up prices. They may also flood markets with excess production
to drive down prices and discourage capital flow to potential competitors. How-
ever, this supply manipulation is tempered by market prices, the need for a stable
and long-term revenue stream, and the desire to maintain good standing in the
global financial community.
Again, the clear category leader is Azerbaijan, the only nation directly con-
tributing gas to the SGC. As sole supplier, it enjoys a higher level of influence over
the pipeline’s operations. Also included among producers to a lesser extent are the
home nations of the companies with an ownership interest in the production at
Shah Deniz. As described in table 4, this expands the group to include Turkey,
Malaysia, Russia, and Iran. Any of these nations may exercise a degree of
Table 5
SIGNIFICANT CONTRIBUTED CAPITAL IN MULTILATERAL DEVELOPMENT BANKS
European Bank World Bank Asian

for Multilateral Infrastructure
Member Nation Reconstruction Investment and Asian
with Significant European and Guarantee Investment Development
Contributed Investment Development Agency Bank Bank
Capital Bank (EIB) (EBRD) (MIGA) (AIIB) (ADB)
Australia ✔
Canada ✔ ✔
China ✔
France ✔ ✔ ✔ ✔
Germany ✔ ✔ ✔ ✔
India ✔
Italy ✔ ✔
Japan ✔ ✔ ✔
Russia ✔ ✔
South Korea ✔
Spain ✔
United Kingdom ✔ ✔ ✔ ✔
United States ✔ ✔ ✔
influence of the production capabilities of the gas field and, hence, the flow of gas
into the pipeline.
Also included among Producers are the potential producing nations that jockey
for position in any potential expansion of supply. It has been a goal of Turkme-
nistan, Iran, Iraq, Romania, and Russia to build or strengthen supply lines to
Europe for decades. Each will act in its own best interest to promote its most
beneficial project while also attempting to block or delay competing pipelines and
LNG projects to discourage investment. This creates a climate of unpredictable
and frequently shifting alliances.
Transit States: Transit states, those nations receiving revenue from the op-
erations of the pipeline through gas transit tariffs, also have a noteworthy role in
geopolitics. They can curtail gas flows through physical, financial, and regulatory
constraints. Transit and producer states must work to balance an often dichotomic
relationship: the common good versus competing interests. Past misbehavior by
both producer and transit states led Dr. Paul Stevens, Distinguished Fellow at
London’s Royal Institute of International Affairs, to develop factors that can be
predictors of a good or bad producer-transit state relationship (table 6).95
All five transit states along the SGC generally possess the characteristics of
good transit states, some more so than others. Italy is the clear leader with the
lowest political risk. Transit fees will be a negligible portion of the Italian budget,
and the state is highly unlikely to jeopardize long-term foreign direct investment
by attempting to extort unfair transit fees. Because Italy is a primary beneficiary of
this transit gas, any actions it takes that might result in a constrained supply will
impact its own population. The nation is not a producer of gas within its territorial
boundaries and is not competing for downstream market share. And, prior to its
arrival in Italy, there are logistical alternatives to move the gas into Europe. Even
if all these factors were reversed, Italy has not engaged in overt, rent-seeking
Table 6
PREDICTORS OF GOOD AND BAD TRANSIT RELATIONSHIPS
Good Transit Countries Bad Transit Countries

The country rejects or is not able to attract
The country has the desire and ability to foreign investment. Misbehavior
attract foreign direct investment. jeopardizes little capital investment.
Transit fees are important for foreign
Transit fees comprise a relatively small exchange and for the national budget.
portion of the national budget or access There is strong incentive to extract an
to foreign exchange. unfair advantage.
Offtakes: The country depends on gas Few or no offtakes: The country does not
deliveries to its grid. Interruptions to the rely on transit gas to supply its grid.
supply may adversely impact the local
population.
Competition: There are several logistical The country is the only possible or feasible
alternatives readily available such as export route or can collude with transit
LNG or other pipelines, and there is little competitors sharing a common interest.
opportunity for collusion between transit
competitors.
The transit country is not also a producer The country competes for the same markets
country competing for the same market being served by the transit pipeline.
share.
Relative market equilibrium. Little Unbalanced markets. Incentive for rent-
opportunity for rent-seeking. seeking behavior.
Source: Based upon P. Stevens, Transit Troubles: Pipelines as a Source of Conflict (London:
Chatham House, 2009).
behavior historically, and there are regulatory provisions addressing these unfair
practices through the EU.
Greece will also likely be a good transit state; however, it carries the greatest
political risk using Stevens’ guidelines. Its recent economic instability and fiscal
austerity have made investors cautious, its government needs additional revenue
streams, and the transit fees could be significant to the annual budget. Most sig-
nificant is the lack of offtakes in Greece. If gas flows are constrained or inter-
rupted, it will have very little effect on the local population because they do not
depend on a steady supply from this source. On the positive side, Greece is not
a gas-producing state, will not be competing for market share, and, thus, has re-
duced incentive to interrupt the pipeline. Also, there are logistical alternatives
should the pipeline become constrained in Greece and, like Italy, EU regulations
should prevent transit misbehavior.
Turkey also has the characteristics of a good transit state. Its economy is
substantial, making transit fees fiscally insignificant. It will also be a major
consumer of the Azeri gas flowing through the pipeline and is a partner in its
operation. The country has adopted many of the provisions of Europe’s Third
Energy Package, and its desire for some form of recognition by and association
with the EU should discourage unfair practices.
Georgia and Albania scored similarly as potentially good transit states. Both
need to attract foreign investment, both depend on steady supplies of gas through
the SGC to feed their grids, and neither are substantial producers of natural gas.
But there are factors in both countries that incentivize misbehavior. Transit fees
will be a significant part of both countries’ revenues, and Georgia has a major
logistical advantage. There are no viable alternative transit routes available to
Azerbaijan.
There will also be new transit states created under any proposed expansion of
the SGC. A Mashreq expansion could establish Iraq as a transit state. The IGB and
the IAP will make Bulgaria, Montenegro, and Bosnia-Herzegovina into transit
states. And the Trans-Caspian Pipeline will establish Azerbaijan as a transit state.
Each expansion poses new transit risks, but the relationship between Azerbaijan
and Turkmenistan could be particularly problematic in the case of the Trans-
Caspian expansion. Azerbaijan has difficulty attracting foreign investment, is
a major gas producer competing for the same market share, does not depend on
Turkmen gas supplies, and is the only viable transit route to Europe for Turk-
menistan. Azerbaijan possesses several of the characteristics that typically
result in transit state misbehavior. Investors in the Trans-Caspian should move
cautiously.
Consumers States: The next group of influential states is the consumers. In

general, an overwhelmingly dominant consumer market may exercise monopsony
power over its dependent suppliers, that is, it will have the ability to dictate terms
and pricing on gas contracts. Azerbaijan has few options for the sale of its natural
gas, which could shift significant market power to the EU and Turkey. Monopsony
power, however, is unlikely under current circumstances where each consumer
nation will exercise an independent voice and attempt to promote activities in its
own best interest. If the much-discussed European Energy Union is realized, and
should Turkey also join this union, a very strong monopsony relationship will be
established with the consumer nations acting as a bloc to assert power over a de-
pendent supplier nation.
In the absence of an energy union, it is most useful to examine consumer states
as direct and indirect consumers. Direct consumers include nations with offtake
connections with the SGC: Italy, Azerbaijan, Turkey, Albania, and Georgia. In-
direct consumers include the states further downstream that will benefit through
demand shifting and pipeline reversals. The primary nations of this group are
Germany, France, Switzerland, Austria, Hungary, and Bulgaria (table 7).
Table 7
NATURAL GAS (NG) CONSUMPTION AND RUSSIAN IMPORTS
(in billion cubic meters annually)
Current NG Expected
2017 NG Imports from Imports from
a b c
Nation Consumption Russia SGC
Albania 0.2 0.0 1.0

Austria 9.0 8.6
Azerbaijan 10.6 0.0
Bulgaria 3.3 3.3 1.0
France 44.7 11.5
Germany 90.2 48.5
Georgia 2.1 0.0
Greece 4.8 2.7
Hungary 9.9 8.2
Italy 72.1 22.3 8.0
Switzerland 3.1 0.3
Turkey 51.7 27.6 6.0
a
Albania and Georgia estimated 2015 natural gas consumption statistics are from the U.S.
Central Intelligence Agency (CIA), The World Fact Book (Washington, D.C.: CIA, 2018). All other
nation’s statistics are 2017 data from BP, 2018 Statistical Review of World Energy (London: BP,
June 2018).
b
Albania’s Russian gas import statistics are from the International Energy Agency (IEA), “IAE
Gas Flow Trades,” 2017. Switzerland’s and Bulgaria’s statistics are from Gazprom Delivery
Statistics. All other Russian gas import data are from BP, 2018 Statistical Review of World Energy
(London: BP, June 2018).
c
SGC = Southern Gas Corridor; statistics represent a compilation of data cited within this paper.
Consumer nations can be seen from different perspectives. First, there is

a group that has the highest dependency on Russian gas. Bulgaria, Austria, and
Hungary have the greatest need for supply diversification, each with as much as
100 percent dependence. Germany, Greece, and Turkey each depend on Russia for
more than 50 percent of their gas, which still concentrates too much market power
on a single supplier.
Interestingly, Greece is currently not contracted to receive any SGC gas other
than grid-to-grid redistributions across its Turkish border. And, of this group, only
Turkey will receive direct shipments of Azeri gas upon its opening. Bulgaria will
receive a contracted allotment only if the IGB is realized.
Second, gas supplied by the SGC as a ratio of total gas consumption is in-
dicative of the importance of this project to each consumer nation. Albania cur-
rently generates 100 percent of its power from river-based hydro plants.96 But it is
scheduled to receive 500 percent of its current annual gas consumption through the
SGC, which will provide ample room for economic growth as well as a national
transition to natural gas power plants. Bulgaria will receive 30 percent of its an-
nual consumption of gas through the SGC. Again, this will facilitate a moderni-
zation of power generation and industrial use.
Italy, the last direct recipient of SGC gas, already has a relatively diversified
supply with 30 percent coming from Russia. The remainder comes from Algeria via
subsea pipelines and from the North Sea and Russia via pipelines crossing the Swiss
and Austrian borders. Azeri gas will represent 11 percent of Italy’s annual con-
sumption, which brings further diversification and facilitates pipeline flow reversals
of inter-European pipelines allowing excess gas farther into northern Europe.
Competitors: Pipelines, as large, long-cycle, fixed-asset projects, do not
strictly adhere to intuitive economic principles. In the case of the SGC, supply is
not following demand. Its development has been driven by supranational regu-
latory proclamations rather than by growth of demand and scarcity of capacity.
Nevertheless, there is an application of basic supply and demand fundamentals
that is useful for an understanding of this project. Supply Competitors, for pur-
poses herein, includes gas-producing states with the desire and ability to serve the
same market as the pipeline. Demand Competitors includes those states with
a significant need for gas as well as the ability to feasibly fund its infrastructure
and purchase.
Supply Competitors: The leading supply competitor to the SGC is Russia. It
supplied 44 percent of the EU’s piped gas in 201797 and, although Russia was
unnamed, the EC’s intent in its original 2008 SGC proposal was clear. The EC
would prioritize projects to diversify gas supplies and reduce dependencies on any
single nation. Reducing dependencies on Norway, the other primary supplier, is
obviously unlikely and would be viewed as counterproductive to the overall
welfare of Europe. The EC’s target was clearly Russia.
Other significant suppliers competing for European market share are Norway,
Algeria, and the Netherlands, which supplied 29 percent, 12 percent, and 10
percent of the EU’s piped gas in 2017, respectively.98 Norway has a capacity of
approximately 142 bcm/y through seven pipelines99 but shipped only 109 bcm in
2017.100 Algeria’s Maghreb, TransMed, and Medgaz pipelines have a combined
total capacity to Europe of 57 bcm/y.101 However, Algeria exported only 33 bcm to
Europe in 2017.102 And, the Netherlands has a capacity to the EU from its North
Sea fields of 127 bcm/y103 but shipped just 43 bcm in 2017.104
No pipeline can run at 100 percent capacity in perpetuity. However, Norway’s
76 percent utilization rate allows room for modest growth in exports. And the
Netherlands’ 33 percent and Algeria’s 58 percent utilization rates create a signif-
icant market share appetite for both. The SGC will be in direct competition with
these three nations and could further erode their capacity utilization, thus pro-
viding them a motive to obstruct its development.
LNG suppliers also have the motive to align against the SGC. Qatar, Algeria, and
Nigeria are currently the largest suppliers of LNG to the EU. Together they delivered
50 bcm in 2017105 to the EU through 25 significant regas facilities106 with Italy and the
United Kingdom receiving most of gas from these nations.107 European regas facilities
have comparatively low capacity utilization rates108 largely resulting from difficult
regulatory frameworks that constrict availability of spare capacity. With reforms,
throughput volume has ample room for growth. In addition, global liquefaction and
export capacities are rapidly expanding. LNG exports from Qatar, Algeria, Nigeria,
and others have significant growth potential with comparatively little capital in-
vestment. These LNG exporters will be significant competitors to the SGC.
The greater global evolution of LNG trade is another factor driving competition
for the SGC. Australia and the United States have emerged alongside Qatar as the
new world leaders in LNG export capacity. This abundance of LNG has driven
world gas markets closer to relative parity, thus making logistics a primary driver
of sales contracts. Shipping lanes give Australia a distinct advantage serving East
Asia. This forces Qatar, a historically important East Asia supplier, to seek ad-
ditional markets in Europe and elsewhere.109 Simultaneously, massive capital
expenditures in the United States have brought significant export capacity online.
Again, shipping lane advantages make the United States competitive serving
Europe. With its spare LNG import capacity and its stated objective of di-
versifying its supply, Europe has encouraged LNG imports. This creates additional
competition for the SGC, and it introduces additional nations with a degree of
interest in its development.
Demand Competitors: Demand competition is perhaps the most significant

challenge to the SGC. Europe’s demand for additional gas is highly debatable even
under a high-growth scenario while, simultaneously, there is real demand building
in India and Pakistan and a continued surge in demand in China.
China is clearly the leader here. Its consumption of gas is expected to grow
nearly 300 percent over the next 20 years, eventually hitting 589 bcm/y and
ranking it as the world’s second largest market.110 In 2017, China produced 149
bcm of natural gas, and it imported 39 bcm through pipelines and another 52
bcm through LNG terminals.111 China is investing heavily in additional pro-
duction and infrastructure; however, it must grow supplies by at least 245
percent to meet its consumption forecasts. In the last few years, China has
extended pipelines deep into the gas fields of Central and Southwest Asia and is
now turning to Russia as a future pipeline supplier. It has a significant com-
petitive need for Azeri gas and would not be displeased with development
difficulties in the SGC.
Competition for Azeri gas is also coming from India, Pakistan, and Iran. The
three nations are each statistically significant in both population and gross do-
mestic product at purchasing power parity. Combined, they consume more than
300 bcm/y, and consumption in each nation is growing at nearly 7 percent per
year.112 Iran has substantial natural gas resources. However, the gas needs of the
Iran-Pakistan-India corridor could outstrip Iran’s resource base and its production
ability, even without the current economic sanctions on Iran. This is driving the
three nations to develop pipelines into Central Asia competing for the same
Caspian gas that is scheduled to enter the SGC.
Attendant States: This category includes client states as well as those best
characterized as gallery spectators or fans. Most client states of the larger geo-
political powers, both in favor and opposed, are already involved in the SGC due
to its scope. However, there remain a few states reduced to a role of spectator
cheering for one side or another due to their lack of direct influence.
Current transit states for Russian gas with no further interest in the SGC have
a strong motive to be involved in its development. Russia is pursuing an expressed
policy of eliminating transit states where possible to prevent the transit difficulties
such as curtailment of shipments, sabotage, and illegal gas taps. The EU is pur-
suing similar policies to strengthen its supply reliability. These Russia-to-EU
transit states have already suffered transit fee declines and, in some cases, these
have been a significant portion of their national income.
The most important state in this category is Ukraine. Naftogaz, Ukraine’s gas
grid operator, earned U.S. $3 billion in 2017 from Russian transit fees.113 This
revenue makes up nearly 1 percent of the annual Ukrainian gross domestic product
and its loss would cause serious economic harm to the nation. Albeit slight, the
SGC represents a diminishment of Ukraine’s importance as a transit state to the
EU. Each cubic meter of gas passing through the SGC is a cubic meter that will not
earn Ukraine a transit fee. Although the country has no financial investment, no
territorial interest, and no interest tied to consumption or production, the SGC
remains highly important to Ukraine.
Belarus, Poland, and Slovakia are in similar positions. They will not receive
direct benefits of the additional gas supply coming from Azerbaijan. But they do
stand to lose transit fee income due to the loss of gas sales transiting the Yamal-
Europe and Brotherhood pipelines from Russia. And, if Russia successfully joins
the SGC with a Turk Stream connection, there will be further erosion of an im-
portant income source.
Mozambique and its investor partners are also concerned about developments
in European gas markets. It is currently building production and processing ca-
pacity that will make it the world’s fourth largest LNG exporter.114 Anadarko
Petroleum, Royal Dutch Shell, ExxonMobil, Eni, and others have recently com-
mitted tens of billions of dollars to the development of offshore gas fields, floating
and onshore processing and liquefaction terminals, and other energy-intensive,
energy-related heavy industries.115 The country possesses nearly 3 tcm proved
reserves,116 and has an export potential of as much as 54 bcm/y within the up-
coming years.117 Europe, as a trading bloc, is the second largest LNG consumer
next to China.118 A reshuffling of global gas markets, brought about in part by the
SGC, will affect sales contracts, financing agreements, and investment priorities
for companies. This will impact Mozambique’s development during a critical pre-
final investment decision phase.
Another unique case in this examination is that of Armenia. It lives in a very
busy and hostile neighborhood where every adjacent nation is heavily involved in
the SGC. Although Armenia is not an operator, producer, transit state, consumer,
or financier, it remains deeply concerned. The opening of the pipeline will result in
significant revenues flowing into Azerbaijan, a nation with whom Armenia has
historical animosity and with whom several wars and skirmishes have been fought.
The SGC also ties Azerbaijan more closely with its cultural and historical ally of
Turkey. This is particularly troublesome to Armenia due to its very deep and
mutual enmity with Turkey. New revenues and prosperity derived from the SGC
could be used to strengthen offensive military capabilities both east and west of
Armenia, thus weakening its position in these hostile relationships.
Conclusions
The prolific opportunities for geopolitical influence provided by the SGC are
surprising. Italy, Turkey, and Russia have claimed the most important positions
having the greatest level of involvement in the projects’ ownership, financing,
production, consumption, and transit. Azerbaijan, Iran, and the United Kingdom
also hold statistically significant levels of influence. Interestingly, the EU first
initiated this project and subsequently provided much of its of funding. Yet after
the United Kingdom’s exit, it will only be represented by Italy among nations
with the most significant geopolitical impact. The influence of the EU’s other
trillion-dollar economies—Germany, France, Spain, and the Netherlands—may

be present but will not be in the forefront.
Another surprise revealed in this examination was the breadth of its potential
influence over global relations. While this is a comprehensive view of the SGC, it
is not exhaustive. More than 50 nations have been named, however, there remain
several additional countries that have interests in the SGC. For example, Libya
provides a small volume of piped gas to the EU, and Peru, Trinidad and Tobago,
Angola, and Equatorial Guinea all provide small volumes of LNG. Any of these
nations could be pushed out of the European market with the development of the
SGC.
Still other countries may be affected by downstream demand shifts resulting
from the new supplies flowing to Europe. Oman, Brunei, Indonesia, and Papua
New Guinea are all significant LNG producer-exporters and none supply Europe.
However, the global reordering of supply and demand will still impact these states.
The SGC’s vast geography across six countries ranks it among the largest energy
developments of all time. Its anticipated outcomes may permanently alter global gas
markets and reshuffle the regional political order. Its total cost places it among the
very largest capital projects in human history. But, the number and diversity of the
states involved in the SGC hold the greatest intrigue. Coalitions between nations
with similar interests will form, evolve, and dissolve over time. Rogue states will
attempt to assert their interests rather than cooperate for the greater good. And the
SGC will surely be used for leverage in unrelated international negotiations. The
SGC is a grand social, political, and economic experiment. Through it we will learn
a great deal about global governance versus nationalism.
NOTES
1
$42 billion is a compilation of all cost estimates cited in this paper.
2
Commission of the European Communities, An EU Energy Security and Solidarity Plan
(Brussels: Commission of the European Communities, 2008), available at https://eur-lex.europa.eu/
legal-content/EN/TXT/PDF/?uri=CELEX:52008DC0781&from=EN.
3
Ibid.
4
European Commission, “Gas and Oil Supply Routes,” 2018, available at https://ec.europa.eu/
energy/en/topics/imports-and-secure-supplies/gas-and-oil-supply-routes.
5
U.S. Energy Information Administration (EIA), “16% of Natural Gas Consumed in Europe
Flows through Ukraine,” March 14, 2014, available at https://www.eia.gov/todayinenergy/detail.
php?id=15411.
6
The State Oil Company of the Azerbaijan Republic (SOCAR), “Baku-Tbilisi-Ceyhan (BTC)
Main Export Oil Pipeline,” 2018, available at http://www.socar.az/socar/en/activities/transportation/
baku-tbilisi-ceyhan-btc-main-export-oil-pipeline. Hereafter the State Oil Company of Azerbaijan will
be cited as SOCAR.
7
Trend News Agency, “SGC to Diversify Gas Import Sources of Several ADB Members as
Well,” AzerNews, June 1, 2018, available at https://www.azernews.az/oil_and_gas/132855.
html.
8
The populations of Azerbaijan, Georgia, Turkey, Albania, and Italy. Greece is a transit nation
but currently has no offtakes and will not receive gas from this pipeline.
9
Pwc, Doing Business and Investing in Albania (Tirana: Pwc, 2018), available at https://www.
pwc.com/al/en/publications/Doing-Business-in-Albania-Guide_2017.pdf.
10
European Investment Bank, “The Southern Gas Corridor and the Trans Adriatic Pipeline
(TAP),” February 6, 2018, available at http://www.eib.org/infocentre/press/news/topical_briefs/
2018-february-01/southern-gas-corridor-trans-adriatic-pipeline-tap.htm.
11
Trans Adriatic Pipeline, “TAP at a Glance,” 2018, available at https://www.tap-ag.com/the-pipeline.
12
N. Graux, “TAP: An Increasingly Important Opportunity for Italy and Europe,” Mediter-
ranean Affairs, March 11, 2015, available at http://mediterraneanaffairs.com/tap-transadriatic-
pipeline-gas-energy-security-europe/.
13
Ibid.
14
Trans Adriatic Pipeline, “Trans Adriatic Pipeline Route,” 2018, available at https://www.tap-
ag.com/the-pipeline/route-map.
15
SOCAR Midstream, “Trans Adriatic Pipeline (TAP),” 2018, available at http://www.
socarmidstream.az/site/templates/#cover.
16
Trans Adriatic Pipeline, op. cit.
17
Ibid.
18
European Bank for Reconstruction and Development, “Trans Adriatic Pipeline Project,” 2018,
available at https://www.ebrd.com/work-with-us/projects/psd/trans-adriatic-pipeline-project.html.
19
Trans Adriatic Pipeline, “Trans Adriatic Pipeline is 2/3 Completed,” February 15, 2018,
available at https://www.tap-ag.com/news-and-events/2018/02/15/trans-adriatic-pipeline-is-23-completed.
20
Hydrocarbons-Technology, “Trans Anatolian Natural Gas Pipeline Project (TANAP),” 2018,
available at https://www.hydrocarbons-technology.com/projects/trans-anatolian-natural-gas-pipeline-
project-tanap/.
21
SOCAR Midstream, “Trans Anatolian Natural Gas Pipeline (TANAP),” 2018, available at
http://www.socarmidstream.az/site/templates/#cover.
22
BP, “Three Countries, One Major Gas Project,” July 2, 2018, available at https://www.bp.com/
en/global/corporate/bp-magazine/locations/shah-deniz-2-southern-gas-corridor-in-numbers.html?
utm_source=BP_Global_GroupCommunications_UK_external&utm_medium=email&utm_
campaign=9602538_bpm%20shah%20deniz%202%20graphic&dm_i=1PGC,5PTD6,O6DXQ8,
M9HXM,1.
23
Hurriyet Daily News, “TANAP Project to Enter into Service in June: Turkish Minister,” May
11, 2018, available at http://www.hurriyetdailynews.com/tanap-project-to-enter-into-service-in-
june-turkish-minister-131688.
24
Trend News Agency, “Turkish Presidential Administration: Opening of TANAP - Significant
Event,” June 12, 2018, available at https://www.azernews.az/oil_and_gas/133344.html.
25
I. Ahmadov, “EBRD Approves Loan for TANAP,” Azeri Press Agency (APA), available at
http://en.apa.az/azerbaijan_energy_and_industry/ebrd-approves-loan-for-tanap.html.
26
Asia Infrastructure Investment Bank, “Trans Anatolian Natural Gas Pipeline (TANAP) Pro-
ject,” 2016, available at https://www.aiib.org/en/projects/approved/2016/_download/trans-
anatolian/document/tanap-project-document.pdf.
S. Israfilbayova, “SOCAR, BOTASx to Create New Company for TANAP,” AzerNews, May 1,
27
2018, available at https://www.azernews.az/oil_and_gas/131358.html.

28
TANAP, “The Trans-Anatolian Natural Gas Pipeline,” 2018, available at http://www.tanap.
com/content/file/whytanap_for_web_EN.pdf.
29
U.S. Energy Information Administration (EIA), Azerbaijan: Overview (Washington, D.C.:
EIA, 2018), available at https://www.eia.gov/beta/international/analysis.php?iso=AZE.
30
Oxford Business Group, “Turkey Makes Progress on Trans-Anatolian Pipeline to Transport
Azeri Natural Gas to Europe,” available at https://oxfordbusinessgroup.com/analysis/turkey-makes-
progress-trans-anatolian-pipeline-transport-azeri-natural-gas-europe.
31
TANAP, op. cit.
32
Thomas Blomberg, Creative Commons Attribution-Share Alike 3.0., available at https://
commons.wikimedia.org/w/index.php?curid=4536714.
33
SOCAR Midstream, “Baku Tbilisi Ceyhan (BTC),” available at http://www.socarmidstream.
az/site/templates/#cover.
34
BP, “Appendix C1 Public Consultation and Disclosure Plan,” available at https://www.bp.
com/content/dam/bp-country/en_az/pdf/ESIAs/SCPXESIA/SCPX_ESIA_Appendix_C_PCDP.
pdf.
35
Hydrocarbons-Technology, “Trans Anatolian Natural Gas Pipeline Project (TANAP).”
36
Reuters Staff, “Azerbaijan’s Jan-Apr Gas Exports from Shah Deniz I Fall 6.4 Pct yr/yr,”
Reuters, May 16, 2018, available at https://af.reuters.com/article/commoditiesNews/idAFL5N1SN609.
37
BP, “Southern Caucasus Pipeline,” 2018, available at https://www.bp.com/en_az/caspian/
operationsprojects/pipelines/SCP.html.
38
SOCAR Midstream, “South Caucasus Pipeline (SCP),” 2018, available at http://www.
socarmidstream.az/site/templates/#cover.
39
BP, “Shah Deniz Stage 2,” 2018, available at https://www.bp.com/en_az/caspian/
operationsprojects/Shahdeniz/SDstage2.htm.
40
BP, “Three Countries, One Major Gas Project.”
41
BP, “Sangachal Terminal,” 2018, available at https://www.bp.com/en_az/caspian/operationsprojects/
terminals/sangachalterminal.html.
42
U.S. Energy Information Administration (EIA), Azerbaijan: Overview.
43
BP, “Sangachal Terminal.”
44
Asian Development Bank (ADB), Environmental and Social Compliance Audit: AZE: Shah
Deniz Gas Field Expansion Project (North Beach, Australia: ADB, August 2016), available at
https://www.adb.org/sites/default/files/project-document/198586/49451-002-escar-02_0.pdf.
45
AzerNews, “Sangachal Terminal Ready for First Commercial Deliveries from Shah Deniz 2,”
Azernews, May 19, 2018, available at https://www.azernews.az/oil_and_gas/132246.html.
46
Reuters Staff, “ADB Agrees to Lend $500 Mln to Azeri Gas Project,” Reuters, May 7, 2017,
available at https://www.reuters.com/article/azerbaijan-adb-loans/adb-agrees-to-lend-500-mln-to-
azeri-gas-project-idUSL8N1I90EJ.
47
BP, “Shah Deniz Stage 2.”
48
Tefken Construction, “Azerbaijan - Shah Deniz Stage 2 (SD2) Project Fabrication of Offshore
Facilities and Hook Up and Commissioning Support,” available at http://www.tekfeninsaat.com.tr/
terminal_project_detail.asp?id=16.
49
Asian Development Bank (ADB), Environmental and Social Compliance Audit: AZE: Shah
Deniz Gas Field Expansion Project.
50
Offshore Energy Today, “BP Installs Second Shah Deniz 2 Platform,” September 20, 2017,
available at https://www.offshoreenergytoday.com/bp-installs-second-shah-deniz-2-platform/.
51
S. Israfilbayova, “BP: 16 Wells Drilled in Shah Deniz 2 Field,” Azerinews, January 5, 2018,
available at https://www.azernews.az/oil_and_gas/126090.html.
52
U.S. Energy Information Administration (EIA), “Oil and Natural Gas Production is Growing
in Caspian Sea Region,” September 11, 2013, available at https://www.eia.gov/todayinenergy/
detail.php?id=12911.
53
Bne IntelliNews, “Oil and Gas the Root and Key to Caspian Dispute,” Vestnik Kavkaza,
March 20, 2018, available at http://vestnikkavkaza.net/analysis/Oil-and-gas-the-root-and-key-to-
Caspian-dispute.html.
54
Commission of the European Communities, An EU Energy Security and Solidarity Plan.
55
Q. Mammadov, “Turkmenistan Positions Itself as Eurasian Natural Gas Power,” Oil and Gas
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56
M. Karayianni, “The Trans Caspian Gas Pipeline is Destined to Transport Natural Gas from
Turkmenistan and Kazakhstan to Europe, bypassing Russia and Iran,” New Europe, February 8,
2018, available at https://www.neweurope.eu/article/trans-caspian-gas-pipeline-really-important-
europe/.
57
G. Gotev, “Turkmenistan to Tap into Southern Gas Corridor,” EURACTIV, May 8, 2018,
available at https://www.euractiv.com/section/energy/news/turkmenistan-to-tap-into-southern-gas-
corridor/.
58
I. Gurbanov, “Russian Gas in the Southern Gas Corridor Could Undermine the EU’s Di-
versification Plans,” Central Asia-Caucasus Analyst, March 27, 2017, available at http://
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59
Hydrocarbons-Technology, “Central Asia-China Gas Pipeline, Turkmenistan to China,” 2018,
available at https://www.hydrocarbons-technology.com/projects/centralasiachinagasp/.
60
K. Aliyeva, “Gas Volume Delivered via Central Asia-China Pipeline Exceeds 200 Billion
Cubic Meters,” AzerNews, November 30, 2017, available at https://www.azernews.az/region/
123164.html.
61
J. Murphy, “Turkmenistan’s Floundering Offshore Strategy,” Newsbase, August 7, 2017, available
at https://newsbase.com/commentary/turkmenistan%E2%80%99s-floundering-offshore-strategy.
62
E. Kosolapova, “Russia, Iran Continue Blocking Trans-Caspian Pipeline Construction,” Trend
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63
D. O’Byrne, “Caspian Pact Paves Way for Turkmen Gas Exports to Europe – Eventually,”
Eurasianet, December 13, 2017, available at https://eurasianet.org/s/caspian-pact-paves-way-for-
turkmen-gas-exports-to-europe-eventually.
64
H. Danish Alikozai, “Taliban Vows to Protect TAPI Gas Pipeline Project,” Voice of America,
February 24, 2018, available at https://www.voanews.com/a/taliban-to-protect-tapi-gas-pipeline-
project/4268767.html.
65
U.S. Energy Information Administration (EIA), “Proved Reserves of Natural Gas – 2017,”
2018, available at https://www.eia.gov/beta/international/.
66
J. M. Dorsey, “Natural Gas: The Driver of Saudi Hostility toward Iran and Qatar,” Fair
Observer, March 27, 2018, available at https://www.fairobserver.com/region/middle_east_north_africa/
saudi-arabia-iran-qatar-crisis-gulf-news-khaleej-43098/.
67
M. Temizer, “Gazprom Has 3 Options for TurkStream, Best is Via TAP,” AAEnergy, January
31, 2018, available at https://www.aa.com.tr/en/energy/energy-diplomacy/gazprom-has-3-options-
for-turkstream-best-is-via-tap/17627.
68
Hydrocarbons-Technology, “TurkStream Gas Pipeline,” 2018, available at https://www.
hydrocarbons-technology.com/projects/turkstream-gas-pipeline/.
69
M. Temizer, op. cit.
70
I. Gurbanov, “Perspective for Turkish Stream Project: Possible Scenarios and Challenges,”
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71
R. Visenescu and H. Bartelet, “How Romania Can Become a Key Player in the European Gas
Market,” Energy Post, November 6, 2017, available at http://energypost.eu/romania-key-player-
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72
Reuters Staff, “Romania Says its Natural Gas Output Set to Double by 2025,” Reuters,
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73
Trend, “Romania Offers Azerbaijan New Projects in Energy Sphere,” AzerNews, September
17, 2017, available at https://www.azernews.az/oil_and_gas/119099.html.
74
G. Gheorghe, “Transgaz Starts Monday Construction of BRUA Pipeline,” Business Review,
April 6, 2018, available at http://business-review.eu/investments/news-investments/transgaz-starts-
monday-construction-of-brua-pipeline-171972.
75
S. Favasuli, “Romania and Bulgaria Prepare for BRUA-TAP Link,” Interfax Global Energy,
June 15, 2018, available at http://interfaxenergy.com/gasdaily/article/31319/romania-and-bulgaria-
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76
M. Tiryakioğlu, “Turkey Hits Record Gas Consumption and Imports in 2017,” AA Energy,
February 21, 2018, available at https://www.aa.com.tr/en/energy/turkey/turkey-hits-record-gas-
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77
G. Rzayeva, Natural Gas in the Turkish Domestic Market (Oxford: Oxford Institute for Energy
Studies, 2017), available at https://www.oxfordenergy.org/wpcms/wp-content/uploads/2014/02/
NG-82.pdf.
78
Bne Intellinews, “Albania Asks for EU, US Support for IAP Gas Pipeline,” Intellinews,
September 10, 2017, available at http://www.intellinews.com/albania-asks-for-eu-us-support-for-
iap-gas-pipeline-128628/.
79
Ibid.
80
Hydrocarbons-Technology, “Gas Interconnector Greece-Bulgaria (IGB) Pipeline,” 2018, available
at https://www.hydrocarbons-technology.com/projects/gas-interconnector-greece-bulgaria-igb-pipeline/.
81
Ibid.
82
Reuters Staff, “Greece-Bulgaria Gas Pipeline Expects Binding Bids for Capacity Use by End-
Oct,” Reuters, September 5, 2016, available at https://af.reuters.com/article/idAFL8N1BH2DH.
83
C. Albanese and T. Ebhardt, “Italy Is Latest Nation to Become a Gas Exporter,” Bloomberg,
March 19, 2018, available at https://www.bloomberg.com/news/articles/2018-03-19/italy-exports-
its-first-gas-as-snam-seeks-alternative-to-russia.
84
Trans Adriatic Pipeline, “Southern Gas Corridor,” 2018, available at https://www.tap-ag.com/
the-pipeline/the-big-picture/southern-gas-corridor.
85
Stratfor, “The Eastern Mediterranean’s New Great Game over Natural Gas,” February 22,
2018, available at https://worldview.stratfor.com/article/eastern-mediterraneans-new-great-game-
over-natural-gas.
86
R. Mills, “Cyprus’ Calypso Gasfield Could Resurrect Country’s Energy Sector,” The National,
February 4, 2018, available at https://www.thenational.ae/business/cyprus-calypso-gasfield-could-
resurrect-country-s-energy-sector-1.701572.
87
The American Association of Petroleum Geologists classification of petroleum reservoirs: Giant
= estimated ultimate recovery > 500 million barrels of oil equivalent (boe); Supergiant = estimated
ultimate recovery > 5 billion boe; and Megagiant = estimated ultimate recovery > 10 billion boe.
88
M. Hadjicostis, “Cyprus, Israel, Greece Push for Gas Pipeline to Europe,” US News & World
Report, May 8, 2018, available at https://www.usnews.com/news/business/articles/2018-05-08/
cyprus-israel-greece-push-east-med-gas-pipeline-to-europe.
89
S. El Wardany and T. Alloway, “Eni’s Giant Gas Field Prompts Egypt to End Imports in
2018,” Bloomberg, November 14, 2017, available at https://www.bloomberg.com/news/articles/
2017-11-14/eni-s-giant-gas-field-prompts-egypt-to-end-lng-imports-in-2018.
90
M. Di Giorgio, “Italy’s New Government to Review TAP Gas Pipeline,” Reuters, June 6,
2018, available at https://www.reuters.com/article/us-tap-italy-exclusive/exclusive-italys-new-
government-to-review-tap-gas-pipeline-idUSKCN1J21SI.
91
Reuters Staff, “Russia’s Lukoil Says Banks Stricter with It after U.S. ‘Oligarch List’,” Feb-
ruary 15, 2018, available at https://www.reuters.com/article/us-russia-lukoil-banks-sanctions/
russias-lukoil-says-banks-stricter-with-it-after-u-s-oligarch-list-idUSKCN1FZ19A.
92
U.S. Central Intelligence Agency (CIA), The World Fact Book (Washington, D.C.: CIA,
2018), available at https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html.
93
I. Gurbanov, “Southern Gas Corridor Raises Significant Financing, But Still Faces Provoca-
tions,” Eurasia Daily Monitor, vol. 15, no. 50 (April 3, 2018), available at https://jamestown.org/
program/southern-gas-corridor-raises-significant-financing-but-still-faces-provocations/.
94
Ibid.
95
P. Stevens, Transit Troubles: Pipelines as a Source of Conflict (London: Chatham House,
2009), available at https://www.chathamhouse.org/sites/default/files/public/Research/Energy,%
20Environment%20and%20Development/r0309_pipelines.pdf.
96
International Hydropower Association, “Albania: Country Profiles,” 2016, available at https://
www.hydropower.org/country-profiles/Albania.
97
Gas in Focus, “European Union Natural Gas Main Imports,” 2018, available at https://www.
gasinfocus.com/en/indicator/imports-of-natural-gas-into-the-european-union/.
98
Ibid.
99
Norwegian Petroleum Directorate, “The Oil and Gas Pipeline System,” 2018, available at
https://www.norskpetroleum.no/en/production-and-exports/the-oil-and-gas-pipeline-system/.
100
BP, 2018 Statistical Review of World Energy (London: BP, June 2018), available at https://
www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html.
101
Albania Energy Agency, “Albania an Important Energy Hub for the Southern Gas Corridor,”
February 12, 2008, available at http://aea-al.org/albania-energy-hub-southern-gas-corridor/.
102
BP, 2018 Statistical Review of World Energy.
103
International Energy Agency (IAE), Oil & Gas Security: The Netherlands (Paris: IEA, 2012),
available at https://www.iea.org/publications/freepublications/publication/OilGasSecurityNL2012.pdf.
104
105
Ibid.
106
King and Spaulding, LLP, “LNG in Europe 2016/2017: An Overview of Import Terminals in
Europe,” 2016, available at https://www.jdsupra.com/legalnews/lng-in-europe-2016-2017-an-
overview-of-40845/.
107
108
C. Russell, “Europe Set to Be Natural Gas Kingmaker as LNG Booms,” Reuters, June 29,
2017, available at https://www.reuters.com/article/us-column-russell-lng-idUSKBN19L039.
109
Ibid.
110
U.S. Energy Information Administration (EIA), “China Leads the Growth in Projected Global
Natural Gas Consumption,” October 25, 2017, available at https://www.eia.gov/todayinenergy/
detail.php?id=33472.
111
112
Ibid.
113
A. Walstad, “Ukraine Eyes $3 Bln for Russian Gas Transit in 2017,” Interfax Global Energy,
November 28, 2017, available at http://interfaxenergy.com/gasdaily/article/28581/ukraine-eyes-3-
bln-for-russian-gas-transit-in-2017.
114
M. Hill and B. Nhamire, “Mozambique Approves Anadarko’s $20 Billion Natural-Gas Plan,”
Bloomberg, February 6, 2018, available at https://www.bloomberg.com/news/articles/2018-02-06/
mozambique-approves-anadarko-s-gas-project-development-plan.
115
W. Powell, “Gas Will Transform Mozambique, Says ENH,” Natural Gas World, June 29,
2018, available at https://www.naturalgasworld.com/wgc-gas-will-transform-mozambique-says-
enh-62404?utm_medium=email&utm_campaign=Daily%20Natural%20Gas%20World%20-%
20Latest%20News&utm_content=Daily%20Natural%20Gas%20World%20-%20Latest%20News+
CID_1bb147b9e968031cbb95cb95b72d3032&utm_source=Campaign%20Monitor&utm_term=WGC%
20Gas%20will%20Transform%20Mozambique%20says%20ENH.
116
O. Veras, “Natural Gas Exploration in Mozambique and Tanzania and the Singapore Con-
nection,” Nanyang Technology University-Centre for African Studies, available at https://www.
ntusbfcas.com/african-business-insights/content/natural-gas-exploration-in-mozambique-and-
tanzania-and-the-singapore-connection.
117
W. Powell, op. cit.
118
Appendix
EUROPEAN NATURAL GAS IMPORT CAPACITY

Table 1
a
RUSSIA-TO-EUROPE VALVE CAPACITY
Technical Gross Technical

Capacity Calorific Capacity
b b,c
Valve Station Transit Terminus Feeder Pipeline (GWh/d) Value (bcm/y)
Greifswald Germany Nord Stream 1 1570.3 11.2 51.17

Imatra Finland Gryazovets–Vyborg 249 11.49 7.91
Narva Estonia (Branch of Yamal) 12.6 11.3 0.41
Värska Estonia 35.7 11.3 1.15
Korneti Estonia Latvia Unnamed - Branch 283.5 11.3 9.16
Kotlovka Belarus Lithuania of Yamal 325.43 11.41 10.41
EuroPol (branch
Tietierowka Belarus Poland off Yamal) 7.3 11.27 0.24
Kondratki Belarus Poland 1,024.3 11.08 33.74
Wysokoje Belarus Poland Yamal-Europe 169.1 11.27 5.48
Unnamed - Branch
Drozdovychi Ukraine Poland of Brotherhood 135.6 11.3 4.38
Uzhgorod Ukraine Slovakia 2080 11.16 68.03
Beregovo Ukraine Hungary Brotherhood 605.2 11.614 19.02
Trans-Balkan -
Orlovka Ukraine Romania Branch of Soyuz 766.2 11.4 24.53
Total capacity 7,264.23 235.63
a
All pipelines originate in Russia.
b
GWh/d = gigawatt hours per day and bcm/y = billion cubic meters annually.
c
Using online Interconnector UK converter (Interconnector UK, “Capacity Converter,” 2018,
available at http://www.interconnector.com/units-converter) and gross calorific value provided by
European Network of Transmission System Operators for Gas (ENTSOG).
Source: European Network of Transmission System Operators for Gas (ENTSOG), “The
European Natural Gas Network 2017,” 2018, available at https://www.entsog.eu/public/uploads/
files/publications/Maps/2017/ENTSOG_CAP_2017_A0_1189x841_FULL_064.pdf.
Appendix (continued)
Table 2
a
EUROPEAN LIQUEFIED NATURAL GAS (LNG) IMPORT CAPACITY, 2016
Number Throughput Throughput Gross Throughput Storage

of Capacity Capacity Throughput Capacity Capacity
Country Terminals (MT/y) (bcm/y) 2016 (MT) Utilization (bcm)
Belgium 1 6.6 9 1.79 27% 0.38

France 4 15.5 21 6.72 43% 1.41
Greece 1 3.3 4.5 0.53 16% 0.13
Italy 3 11 15 4.59 42% 0.49
Lithuania 1 3 4 1 33% 0.17
Netherlands 1 8.8 12 1.05 12% 0.54
Poland 1 3.6 4.9 0.82 23% 0.32
Portugal 1 5.8 7.9 1.5 26% 0.39
Spain 6 43.7 59.4 10.3 24% 3.32
United Kingdom 3 35 47.6 7.86 22% 2.1
Total 22 136.3 185.4 36.16 27% 9.25
a
MT/y = metric tons per year; bcm/y = billion cubic meters per year; MT = metric tons; and
bcm = billion cubic meters.
Source: D. Gerstein, J. Blaurock, and S. Segeth, A Glimpse at the Landscape of European LNG
Regasification Infrastructure (Berlin: Team Consult, June 2017).
Table 3
a
EUROPEAN GAS IMPORT PIPELINE CAPACITY
(in billion cubic meters annually—bcm/y)
Existing Planned
From To Capacity Capacity Name
TTL NORWAY
Belgium 58.1 Zeepipe I
b Germany Norpipe, Europipe I & II
Norway
France 35.8 Franpipe
United Kingdom 48.7 Vesterled, Langeled
TTL NORWAY-Total 142.6
TTL ALGERIA
Spain via Morocco 12 Maghreb Europe
Spain 9 Medgaz
Algeria GALSI, Algeria-
Italy via Sardinia 8 Sardinia-Italy
Italy via Tunisia & Sicily 36.3 TransMed
TTL ALGERIA-Total 57.3 8
TTL OTHER
Libya Italy via Sicily 10.9 Green Stream
Israel Greece via Cyprus, Egypt 9 EastMed
Italy via Azerbaijan,
Turkmenistan Georgia, Turkey,
Greece 30 Trans-Caspian
TTL OTHER-Total 10.9 39
TTL AZERBAIJAN
Turkey via Georgia 31 SCPX TANAP
Romania via Georgia &
Azerbaijan Black Sea 7 AGRI
Romania via Georgia &
Black Sea 32 White Stream
TTL AZER.-Total 0 70
TTL IRAN/IRAQ
c
Iraq (Kurdistan) Turkey 30 ITGEP
Turkey 14 Tabriz-Ankara
Iran
Turkey 40 Persian Pipeline
TTL IRAN/IRAQ-Total 14 70
(continued)
Table 3 (continued)
a
EUROPEAN GAS IMPORT PIPELINE CAPACITY
(in billion cubic meters annually—bcm/y)
Existing Planned
From To Capacity Capacity Name
TTL RUSSIA
Germany 58 55 Nord Stream I & II
Northern Lights, Yamal
Poland 84 Europe
Slovakia, Hungary,
d
Romania 32 Soyuz
Russia Slovakia, Hungary, Brotherhood/Bratstvo/
Poland 132 Urengoy-Uzhgorod
Turkey 16 Blue Stream
Finland, Estonia, Latvia, Branch of Yamal-
Lithuania 28.7 Europe
Turkey 63 Turk Stream
TTL RUSSIA-Total 350.7 118
GRAND TOTAL
575.5 305
a
Albania Energy Agency “Albania an Important Energy Hub for the Southern Gas Corridor,”
February 12, 2008, available at http://aea-al.org/albania-energy-hub-southern-gas-corridor/.
b
Norwegian Petroleum Directorate, “The Oil and Gas Pipeline System,” 2018, available at
https://www.norskpetroleum.no/en/production-and-exports/the-oil-and-gas-pipeline-system/.
c
D. Zhdannikov, “Russia’s Rosneft Clinches Gas Pipeline Deal with Iraq’s Kurdistan,” Reuters,
September 18, 2017, available at https://www.reuters.com/article/us-kurdistan-rosneft/russias-
rosneft-clinches-gas-pipeline-deal-with-iraqs-kurdistan-idUSKCN1BT0MQ.
d
“Soyuz Pipeline,” A Barrel Full, available at http://abarrelfull.wikidot.com/soyuz-pipeline.

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"Southern Gas Corridor: The Geopolitical and Geo-Economic Implications of An Energy Mega-Project" by Lee Morrison

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THE JOURNAL OF ENERGY

The Journal of Energy and Development, Vol. 43, Nos. 1 and 2

attracted much discussion. Azerbaijan’s history of political oppression and its

About the Southern Gas Corridor

The Southern Gas Corridor (SGC) is an ambitious international project

As originally conceived, it would extend from Azerbaijan to Italy, with po-

Route and Specifications

SOUTHERN GAS CORRIDOR ROUTE

Trans-Adriatic Pipeline AG is a joint venture specifically formed to build and

The Southern Gas

Expansion Proposals—Demand Side: A cursory analysis of the SGC reveals

Greece-Bulgaria Interconnect (IGB): Like the IAP, the Greece-Bulgaria In-

For the purposes of this examination, no distinction is made between the

Financiers and Capitalists: The next group of geopolitical influencers are

Producers: The political power of a producer-supplier state can be simulta-

European Bank World Bank Asian

Good Transit Countries Bad Transit Countries

Consumers States: The next group of influential states is the consumers. In

Albania 0.2 0.0 1.0

Consumer nations can be seen from different perspectives. First, there is

Demand Competitors: Demand competition is perhaps the most significant

trillion-dollar economies—Germany, France, Spain, and the Netherlands—may

2018, available at https://www.azernews.az/oil_and_gas/131358.html.

EUROPEAN NATURAL GAS IMPORT CAPACITY

Technical Gross Technical

Greifswald Germany Nord Stream 1 1570.3 11.2 51.17

Number Throughput Throughput Gross Throughput Storage

Belgium 1 6.6 9 1.79 27% 0.38

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