Azerbaijan sees little threat to its natural gas export plans from abundant U.S. shale gas because the Azeris have locked in long-term contracts and transport and other costs will drive up the price of the U.S. product.
Azerbaijan is preparing to supply Europe with 10 billion cubic metres (bcm) of gas each year and Turkey with 6 bcm from 2019 from its vast Shah Deniz gasfield in the Caspian Sea, which holds estimated reserves of 1.2 trillion cubic metres.
In the United States, fracking has driven down gas prices, which are about a third of those in the European Union.
But Azeri energy minister Natiq Aliyev said that U.S. exports may not be as cheap once the additional costs of liquefying, transporting and re-gasifying are included.
“I think that shale gas won’t pose any threat for Azeri natural gas to be transported to Europe,” Aliyev told Reuters.
Buyers of Azeri gas from Shah Deniz II include Shell , Bulgargas, Gas Natural Fenosa, Greek DEPA, Germany’s E.ON, France’s GDF Suez, Italian regional utility Hera Trading, Switzerland’s AXPO and Italy’s Enel.
“There will be some limited competition (from the U.S. shale gas), but I’d like to remind you that we signed deals with buyers of our gas (from Shah Deniz II) in Europe for 25 years,” Vitaliy Baylarbayov, deputy vice-president at Azeri state oil company SOCAR, told Reuters.
“So we have already taken our place on the market.”
Baylarbayov added that he saw Asia as a potential market for U.S. shale gas due to bigger demand, higher gas prices in Asia and cheaper transportation options.
Baylarbayov and Aliyev also said preliminary estimates indicated the presence of quite substantial shale gas reserves in Azerbaijan itself.
“We are exploring shale gas production potential, but I don’t think we’ll start its production in Azerbaijan any time soon,” Baylarbayov said.
Shale gas production requires hydraulic fracturing – the process of injecting water and chemicals at high pressure into underground rock formations to push out gas.
Critics say fracking can pollute water supplies and trigger small earthquakes, but advocates say it has a strong safety record.
