DM Monitoring
Baku: As Azerbaijan and Turkmenistan have resolved their decades-long dispute over a Caspian oil and gas field, Ashgabat now has an opportunity to diversify its hydrocarbon export destinations across the Caspian and through Azerbaijan to Europe. We are republishing the following article on the issue, written by Rauf Mammadov:
A 30-year feud over an offshore oil field located between Azerbaijan and Turkmenistan in the Caspian Sea has finally come to an end. In mid-January 2021, Ashgabat and Baku agreed to the joint development of the large field, now renamed Dostlug, which means “Friendship” in both languages (Azadliq.org, January 21, 2021).
The name itself and the pomp that accompanied the announcement of the signed Memorandum of Understanding (MoU) highlighted the ongoing thaw in relations between the two Caspian littoral states. For now, there has been no information available about the details of the joint development deal: no data on profit splits or other arrangements, including logistics.
Nevertheless, news of the bilateral accord raised hopes in some quarters that the long-awaited Trans-Caspian natural gas pipeline (TCP), which could feed into the Southern Gas Corridor (SGC), might finally also be realized. The SGC, spearheaded by Azerbaijan, delivered its first Caspian-basin gas from the offshore Shah Deniz field to Greece and Bulgaria on December 31, 2020 (see EDM, January 19, 2021).
The recently signed MoU is not the only positive step in relations between two countries over the past two months.
In December, Azerbaijan’s SOCAR Trading (a subsidiary of the state-owned oil and gas giant SOCAR) won the bid to procure 30,000–40,000 tons of petroleum per month produced by Eni Turkmenistan from Turkmenistan’s Okarem field. Experts believe these volumes of Turkmenistani oil will be routed via the Baku–Tbilisi–Ceyhan pipeline, and away from transit through Russia’s Makhachkala and Novorossiysk ports (Report.az, December 14, 2020).
Originally called Kepez or Serdar by Azerbaijan and Turkmenistan, respectively, the now-rechristened Dostlug oil field was the primary irritant in bilateral relations since the two countries’ independence from the Soviet Union. The field, which holds an estimated 50 million tons of reserves, was offered by both governments to interested hydrocarbon extraction companies in the mid-1990s, but to no avail (Neftegaz.ru, June 2, 2012). For a time, Russia’s Rosneft and Lukoil tried to work with Azerbaijan to develop the field, while the United States’ Mobile (now Exxon) signed a preliminary agreement with Turkmenistan. Both deals ultimately fell apart, however, as Baku and Ashgabat failed to find middle ground on sharing the undersea reserves.
