### Trans-Caspian Gas

In June 1998, Amoco, General Electric, and Bechtel announced a plan to build a 1200-km trans-Caspian gas pipeline from Turkmenbashi, Turkmenistan, to Baku, Azerbaijan. The line would run overland along the proposed Baku-Ceyhan oil pipeline route into Turkey, and join the Turkish gas pipeline system. This line, called the TransCaspian Gas Pipeline System, would initially carry gas from eastern Turkmenistan, but would ultimately include exports from Uzbekistan and Kazakhstan. The line would carry an initial 6.25 bcm per year, expandable to 30.6 bcm per year. The estimated cost of a trans-Caspian line to Baku is US $2.4 billion. The economic benefit of a parallel gas pipeline along the Baku-Ceyhan line has been pushed recently to improve the viability of the Baku-Ceyhan line.

Some experts find this route economically troublesome. According to one analysis, Turkmenistan may not be able to offer competitive gas prices in the Turkish and European markets because of the high financial costs of its new pipelines. For the pipeline to be break even, it must generate cash flows of $1.50-$1.75 per mmBtu, according to this analysis. For Turkmenistan to receive $1.50 when it is selling for $2.60, its total costs must be less than or equal to $1.10. Given however, that its production and shipping costs alone are already $0.90, without even factoring in Iranian tariffs, the likelihood of Turkmen parties breaking even, let alone making a profit, on this investment, is slim. The trans-Caspian project also faces the same ethnic and political risks as the Baku-Ceyhan oil pipeline.

Russia and Iran oppose a trans-Caspian gas pipeline, in favor of routes through their own countries, respectively. The US would like to see this route realized because it would help to justify the cost of a trans-Caspian oil pipeline if the two were built in parallel (because of economies of scale). On balance, Turkey appears to favor the trans-Caspian route; but it is badly in need of gas and will support whatever line materializes first.

See also Turkmenistan Gas, Caspian Sea Division dispute.

Trans-Caspian Gas Links