Security Of Azerbaijan’s Oil-Gas Pipelines Before And After Karabakh War

Orkhan Jalilov Analysis 19 January 2021
Security Of Azerbaijan’s Oil-Gas Pipelines Before And After Karabakh War

Azerbaijan’s economic growth is fuelled by oil and gas revenues. Oil and gas exports play a big role in the country's income, as 75 percent of total exports are crude oil, and if we take into account oil products and gas, then it accounts for 91- 92 percent. 

The country’s rapid economic development created a number of environmental challenges that will be exacerbated by climate change, such as severe air pollution from industrial plants, contamination of the Caspian Sea (water pollution), soil degradation (erosion, desertification), important biodiversity and forest reserve degradation and losses.  

From time to time, concerns have arisen over the security of the pipelines carrying oil-gas to the European markets, as arms and hardware accumulated by Armenia pose a serious threat to them. Azerbaijan and Armenia have been involved in a long-running military standoff over the enclave of Nagorno-Karabakh since the early 1990s.

Azerbaijan has three crude oil export pipelines:

1. About 80% of the country’s oil is exported through the Baku-Tbilisi-Ceyhan (BTC) pipeline, which began operations in 2006 and has a capacity of 1.2 million barrels per day. It transports crude oil produced at the ACG field as well as condensate produced at Shah Deniz from the Sangachal terminal near Baku through Georgia to the Mediterranean port of Ceyhan in Turkey; from there the oil is shipped by tanker to world markets. 

2. The Baku-Novorossiysk pipeline runs from the Sangachal terminal on the Caspian Sea to the Novorossiysk terminal on the Black Sea in Russia.

3. The Baku-Supsa pipeline transports crude oil from offshore oilfields in the Caspian Sea to Supsa, Georgia, on the Black Sea where it continues to European markets via tankers.

Azerbaijan produced 50 million 795 thousand tons of oil in 2010, but this figure decreased to 37 million 500 thousand tons in 2019.

The South Caucasus country became a net exporter of natural gas in 2007 with the start-up of the huge Shah Deniz natural gas and condensate field. Azerbaijan has two main gas export pipelines. The largest is the South Caucasus Pipeline (SCP) that transports gas from the Shah Deniz field through Georgia to Turkey parallel to the BTC crude oil pipeline.

Another export pipeline is the Hajigabul - Mozdok, which transported natural gas from Russia to Azerbaijan until 2007 when an agreement between SOCAR and Gazprom allowed the pipeline’s flow to be reversed, and gas exports to Russia began in 2010. 

The Southern Gas Corridor (SGC), a project that will take Caspian hydrocarbons to the European markets via Azerbaijan. The SGC is an initiative of the European Commission for a natural gas supply route from Caspian and Middle Eastern regions to Europe. The goal of the Southern Gas Corridor is to reduce Europe's dependency on Russian gas and add diverse sources of energy supply. The route from Azerbaijan to Europe consist of the South Caucasus Pipeline, the Trans-Anatolian Pipeline (TANAP), and the Trans-Adriatic Pipeline (TAP). The total investment of this route is estimated US$45 billion. The main supply source would be the Shah Deniz gas field, located in the Caspian Sea. 

Through TANAP, Azerbaijan supplies gas to the Turkish market, and 95 per cent of the planned work at TANAP has been completed. From this perspective, it will allow Azerbaijan to support the energy security of Turkey, as well as Southern Europe and some Eastern European countries.

The TAP pipeline, had begun to offer capacity along the 878 km line which will be able to carry 10 billion cubic metres of gas per year. TAP is the final leg of a $40 billion project named the Southern Gas Corridor, which is a cornerstone of the European Union's energy security policy to wean the bloc off Russian gas. 

Bulgaria will import 1.5 billion cubic meters of gas annually gas from the Southern Gas Corridor. Azerbaijan will supply an additional 7 billion cubic meters of gas to the Turkish market, 10 billion cubic meters to the European market in the first phase, and 20 billion cubic meters in the second phase. The capacity of the Southern Gas Corridor is 31.5 billion cubic meters. At current prices, Azerbaijan will be able to earn more than $100 billion from the implementation of the Southern Gas Corridor project. 

The security of the South Caucasus' strategic energy infrastructure as well as the continued secure transport of oil and gas from Azerbaijan to Europe are of growing importance to the energy security of NATO's European allies. Moreover, an uninterrupted energy supply is also imperative to ensure the Alliance's operational mobility abroad and to reduce its members' strong dependence on any single third-party supplier.

Any attack or security threat to regional energy fields, terminals, pipelines, storage sites and other transportation facilities would undermine the oil and gas flow from Azerbaijan through Georgia and Turkey to European and global markets. On 5 August 2008, a major explosion and fire in Refahiye (eastern Turkey Erzincan Province) closed the pipeline. The Kurdistan Workers Party (PKK) claimed responsibility

Several days later, in the August 2008, during the Russia-Georgia war, when Russian military jets dropped bombs near the BTC and Baku-Supsa oil pipelines, resulting in the temporary suspension of Azerbaijani oil exports through Georgia.

The Nagorno-Karabakh conflict zone lies just 30-40 km from the BTC and SCP pipelines. In early days of a 44-day war between Azerbaijan and Armenia over Nagorno-Karabakh region and seven surrounding districts, an official of the State Oil Company of Azerbaijan (SOCAR), accused Armenia of posing “a serious threat not only to Azerbaijan, but to European Union's energy security”, by targeting Azerbaijan's oil and gas infrastructures. 

The clashes have not affected energy supplies from the region but have put energy markets on edge. Meanwhile, the SOCAR official made the remarks after Armenia fired a cluster missile at BTC oil pipeline in Yevlakh region on October 6. The bomb landed 10 meters away from the pipeline. Over 300 cluster bomblets ejected around as a result of the attack. However, Armenia rejected the accusations.

If the claims were indeed true, neither attack has caused significant damage to either pipeline, meaning production and output saw very little impact. With the recent escalation still be relatively young, both sides are wary of pushing the accepted boundaries of the fighting beyond what already exists by targeting civilian economic assets. However, a prolonged conflict has the potential to change this, and would significantly increase the threat of pipelines being targeted as the economic assets of both sides begin to play a more important role to sustain their respective militaries.

The July 2020 clashes between Azerbaijan and Armenia's around Tovuz region, also put Azerbaijan's oil and gas infrastructure of international importance under direct threat.

Eight regional security divisions were set up to guard export pipelines Baku-Tbilisi-Ceyhan, Baku-Novorossiysk in 2004. 180-km maritime stretch from the oil-producing platform to Sangachal terminal will be guarded by forces of the Ministry of Defense and Frontier Service. 

Established in 2005, the Ministry of Emergency Situations is responsible for emergency response mechanisms in all sectors of the economy. Its mandate includes natural and human-caused disasters and fire, as well as emergency situations involving power system incidents, utility systems, hydropower facilities, oil and gas production and processing facilities and main pipelines. It provides policy measures in the fields of civil defence, rescue and restoration works.

Azerbaijan created a special state security service to protect the the Baku-Tiblisi-Ceyhan (BTC) pipeline, along with the existing Baku-Novorossiisk and Baku-Supsa pipelines and the massive Azeri-Chirag-Guneshli (ACG) offshore oil field. There are also electronic surveillance systems aimed at increasing security of the pipeline and its adjacent areas. Georgia formed a special purpose battalion that would guard the BTC pipeline while the US watched over the area with Unmanned Arial Vehicles (UAVs). 

That risk extends beyond Azerbaijan's hydrocarbon infrastructure and broader economy – which is heavily dependent on oil and gas exports – to its immediate neighbors Georgia and Turkey, which depend heavily on Azerbaijani energy supplies for both urban heating and power generation. They also stand to be hurt by the loss of transit fees for oil and gas passing through on the way to other markets. 

The possible impacts of any pipeline attack are reverberating in the European Union, which is set to open a new pipeline across the Adriatic Sea later this year after decades of planning. Azerbaijani crude, too, is traded into global markets, meaning that any disruption could affect international benchmark prices.

Beyond Azerbaijan, the impact of any cut in oil exports through the BTC and Baku-Supsa lines would be less serious, causing Georgia and Turkey to lose transit revenues but not significantly impacting global markets.

Pipelines are difficult military objectives, however, because they are buried underground and Azerbaijan has advanced air defence systems. However, if Armenia should manage to damage critical infrastructure, then it would not only interrupt the gas and oil supplies to Azerbaijan’s energy partners, affecting their interests as well, but it would also create environmental problems.

It is particularly concerning that these attacks occur just when the first gas from the Caspian Sea region will be supplied to European energy consumers via the Trans-Adriatic Pipeline (TAP).

Israeli-Azerbaijani energy cooperation has likewise become very important for Israel’s energy security. Azerbaijan supplies nearly half of Israel’s oil demand via the BTC pipeline. It follows naturally that Azerbaijan supports regional economic development in the South Caucasus as well as inter-regional projects. 

The recent liberation of occupied territories, will shift the political and military situation, and will have biggest impact on Azerbaijan’s energy security. The Nagorno-Karabakh conflict harmed the future development and security of the region. The conflict was a real challenge not only for the security of the South Caucasus but also for the Caspian basin.

After the occupation of Azerbaijan's Karabakh region by Armenia in 1991-1994, the natural gas pipeline stretching from mainland Azerbaijan to Nakhchivan Autonomous Republic, an exclave of Azerbaijan on the country’s southwest corner, surrounded by Armenia, Iran and Turkey, which has a population of about 500 thousand and annul natural gas consumption of nearly half a billion cubic meters, was dysfunctional.  

Since then, Nakhchivan has been receiving gas through Azerbaijan's southern neighbor Iran. SOCAR transports natural gas to Nakhchivan in a swap operation with Iran which gets gas from Baku and sells it to Nakhchivan

With the construction of the new pipeline, Nakhchivan will get uninterrupted natural gas supply through Turkey. The gas to be transported in the new pipeline will reportedly meet the entire annual demand of the region. The project comes as the fourth energy route connecting Turkey and Azerbaijan after the BTC oil pipeline, Baku-Tbilisi-Erzurum, and the TANAP gas lines. TANAP is the largest segment of the Southern Gas Corridor mega pipeline that supplies gas from Azerbaijan to Turkey and Europe.

Bakhtiyar Aslanbayli, a vice president with the international oil firm BP, has suggested formulating a new concept for NATO that could contribute to the protection of critical trans-border and trans-regional energy infrastructure. This innovation would involve providing security guarantees to Azerbaijan and Georgia in the event of security threats against pipelines or energy facilities that directly or indirectly concern NATO member states. 

Moreover, such protection of critical energy infrastructure could be done through complementary engagement and without an over-militarization of energy security. NATO’s possible engagement in helping protect Azerbaijan's energy infrastructure can be articulated as follows: providing defensive devices for pipelines; offering assistance for developing an air-defense system; cooperating on cyber security; sharing of intelligence; training the armed forces; accelerating consultations with NATO's relevant structures; facilitating the defensive military assistance for Azerbaijan; engaging with other public and private stakeholders; etc.

Under the Environmental Investment Program, $2.7 million was invested in Azerbaijan for environmental projects in 2006. Some of the projects under this program involved the habitat improvement scheme for the semi-desert Gobustan area, a forest management project to conserve and improve forest areas. 

The construction of BTC has not caused as much environmental concerns in Azerbaijan as it has in Georgia, where it passes the Borjomi Gorge mineral water spring. In Azerbaijan, some local NGOs have raised concerns about the passage of BTC though the Kur river as well as the Gobustan area, a national historical park.

The government of Azerbaijan, specifically the SOCAR and the Ministry of Ecology and Natural Resources, have downplayed these concerns. BTC constructors have taken special, internationally recognized technological measures at the river and fault crossings to ensure the pipeline’s and the surrounding areas’ safety.