After meeting in August, Turkish President Recep Tayyip Erdogan and Russian President Vladimir Putin hope to remove some barriers preventing the development of a number of joint projects, especially the planned Turkish Stream gas pipeline under the Black Sea.

Yet, while Ankara and Moscow might soon return to pipeline negotiations, the situation of supplying gas to Europe has changed since November 2015. Moscow’s made substantial progress on pushing an alternative option—an expansion of the Nord Stream Pipeline. All of this is background for strategic gas drama unfolding in the Caspian.

Money, equipment and global competitors are still moving in Azerbaijan’s direction, in large part due to the current state of play with Stage II development of the Shah Deniz gas field.

The field, located in the Caspian Sea, is being developed by BP, the State Oil Company of the Azerbaijan Republic (SOCAR), Lukoil and others to produce 16 Bcm per annum (565 Bcf), all for export markets.

Turkey is the host country of the Trans-Anatolian Natural Gas Pipeline (TANAP), which runs from Azerbaijan through Georgia, Turkey, Greece and Albania to Italy. The project is the first realization of the Southern Gas Corridor (SGC). The term Southern Gas Corridor, sometimes called the Southern Corridor, is used to describe infrastructure projects aimed at improving the security and diversity of the EU’s energy supply by bringing natural gas from the Caspian region to Europe.

How big and expensive will all of this become? Consider the World Bank’s effort to integrate different pieces of the puzzle: Their entire project will include four elements: Shah Deniz 2 Field; South Caucasus Pipeline Extension; TANAP; and Trans Adriatic Pipeline (TAP). The loan package’s two borrowers will be BOTAŞ and the Southern Gas Corridor Corp.

FINANCING (IN USD MILLION)

The two borrowers together

$780

World Bank/International Bank for Reconstruction and Development

$1,000

European Commission/European Investment Bank

$1,120

Export Credit agencies of national governments

$5,700

Foreign private commercial sources

$1,200

Total Project Cost

$9,800

Shah Deniz is a HP/HT offshore gas field located 70 km (43 miles) southeast of Baku, under 50 m to 500 m (164 ft to 1,640 ft) of water. It has a reservoir thickness of more than 1,000 m (3,281 ft) and is 22 km long (14 miles long).

The gas field contains nine vertically stacked reservoir units, which are targeted for depletion in two stages. The estimate for initial gas in place for the field is 938 Bcm. Stage I of the gas field has been operational since December 2006.

Shah Deniz is massive, and the project will require constructing two new bridge-linked offshore production platforms, 26 subsea wells drilled with two semisubmersible rigs, 500 km (311 miles) of subsea pipelines, and expansion of the onshore gas processing terminal at Sangachal.

Gas extracted from the field’s Stage II development will be delivered from Azerbaijan to Europe via the separate SGC. SGC consists of three sections: the South Caucasus Pipeline from the Caspian Sea to the Georgia-Turkey border; the TANAP from the Georgia-Turkey border to the Turkey-Greece border; and the TAP from the Turkey-Greece border to Italy.

An advisory council on the SGC held its first meeting in February 2015 in Baku, Azerbaijan’s capital city. Setting up an advisory council is a joint initiative of the European Commission and Azerbaijan. The council’s aim is to steer implementation of the project at political levels to have the SGC operational by 2019-2020.

The council issued a joint statement expressing strong support for the implementation of the SGC. The statement was signed by representatives of Azerbaijan, Albania, Bulgaria, Georgia, Greece, Italy, Turkey, the U.K. and the U.S. as well as the European Commission.

BOTAŞ Petroleum Pipeline Co., Turkey’s state-owned crude oil and natural gas pipeline and trading company, contracted 6 Bcm (211 Bcf) for the Turkish market. Several gas traders have contracted the remaining 10 Bcm (353 Bcf) for the European market, mostly Italy.

With 1,820 km (1,131 miles) of pipe, TANAP accounts for more than half of the 3,500-km (3,175-mile) pipeline system. TANAP will start from the Turkish border with Georgia, beginning in the Turkish village of Türkgözü in the Posof district of Ardahan. It will run through 20 provinces and end at the Greek border in the İpsala district of Edirne. From this point, TAP will connect to convey natural gas to European gas markets.

—Gordon Feller