Meanwhile, On the Field of (Pipeline) Battle

The Europeans have supplied fresh entertainment for spectators of the ongoing East-West pipeline war. It comes in the form of an announcement by BP and Norway's Statoil that they have double the reserves they initially estimated at a huge offshore Azerbaijan natural gas field. That makes the underdog Western side a more serious contender in the battle for economic influence in Europe.

The Caspian Sea occupies its accustomed key role in the events.

For almost a year, Russia and the West (Europe and the U.S.) have been circling one another. At stake has been dominance over Europe's energy supply. Russia, which already supplies more than 30% of Europe's oil and natural gas, wants to build up that formidable position. The West wants to shrink it. The two goals are incompatible, so a diplomatic and economic battle have ensued.

Russia's Vladimir Putin has taken the lead by getting Turkmenistan and Kazakhstan to sign away their natural gas exports and fire sale prices, and to agree to help build a new pipeline to take the supplies north to Russia, and then on to Europe.

Europe and the U.S. have countered by suggesting that Turkmenistan and Kazakhstan instead ship their natural gas west, and on to Europe, where a pipeline called Nabucco would be built to supply the continent. But they are late to the game, and have suffered valid skepticism about their ability to harness sufficient natural gas to justify Nabucco.

The new announcement by BP and Statoil comes from across the Caspian, in Azerbaijan. The companies say they may be able in the next few years to start exporting the natural gas equivalent of an extra 150,000 barrels a day of oil from an offshore field they control.

That's because the companies discovered a new reservoir of natural gas at the giant Shah Deniz field. They did so by drilling the deepest well ever in the Caspian -- 7,300 meters below the seabed.

The companies had already expected to export a peak volume of the natural gas equivalent of 150,000 barrels a day of oil from Shah Deniz. Now they say the new reservoir seems likely to supply that much or more. So, in all, Shah Deniz will export the natural gas equivalent of more than 300,000 barrels of oil a day.

Some of the new gas will be absorbed locally. But the Russians are no doubt scowling, and the Europeans and Americans smiling, at the prospect that the remainder could go on to Europe through proposed Nabucco.

Photo by: Cadd
Photo rights: Creative Commons