In Geopolitics Today: Wednesday, July 12th
BP Discovers New Gas Reservoirs in Azerbaijan's Caspian Sea Oil Field, Iraq to Pay for Iranian Gas Imports with Oil to Avoid US Sanctions, and other stories.
BP Discovers New Gas Reservoirs in Azerbaijan's Caspian Sea Oil Field
BP's confirmation of the discovery of deep-lying gas reservoirs beneath Azerbaijan's Azeri-Chirag-Gunashli oil field in the Caspian Sea has significant implications for the country's gas exports. The successful appraisal well drilled by BP opens up the potential for gas production to commence as early as next year. However, a new commercial agreement will be required to cover these gas reserves, as they are not included in the existing agreement for the oil field.
The development of these newly discovered gas reserves offers Azerbaijan the opportunity to boost its gas exports and align with its goal of doubling annual exports to Europe by 2027. However, substantial investments will be needed to upgrade the pipeline system, including the installation of new compressors. This discovery solidifies Azerbaijan's strategic role as a gas supplier and provides an avenue for the country to strengthen its position in the global energy market. The Absheron gas field, if invested in during a second phase, has the potential to produce up to 5 billion cubic meters of gas annually.
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Iranian President in Kenya to Strengthen Ties
During Iranian President Ebrahim Raisi's visit to Kenya, both leaders expressed their commitment to strengthening ties and signed several trade agreements. Raisi's visit to Africa marks Iran's efforts to alleviate its international isolation, with subsequent visits planned to Uganda and Zimbabwe. This diplomatic engagement comes amidst a wider competition for influence in Africa between Russia, the West, and other powers.
Raisi described the visit to Kenya as a pivotal moment in bilateral relations and emphasized the determination to expand economic, trade, political, and cultural cooperation. Kenyan President William Ruto echoed the sentiment, stating that Iran is a critical strategic partner for Kenya. The signed memoranda of understanding cover various areas, including information technology, investment promotion, and fisheries, aiming to deepen bilateral relations and foster sustainable growth and development. The Iranian president's Africa tour reflects Iran's broader diplomatic outreach to reduce its international isolation and counter the impact of sanctions.
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Centrica and Delta Midstream Sign £6.2bn Deal for LNG Supply
Centrica, the owner of British Gas, has finalized a £6.2 billion ($8 billion) agreement with US fossil fuel producer Delta Midstream, securing the supply of 1 million tonnes per annum of liquefied natural gas (LNG) for 15 years. This deal equates to approximately 14 LNG cargoes annually and has the potential to provide energy for heating about 5% of UK homes each year. The LNG will be shipped from Delfin Deepwater Port in Louisiana, with operations expected to commence in 2027.
The Centrica-Delta Midstream deal, along with recent agreements with Equinor and the reopening of the Rough gas storage facility, aims to strengthen the UK's energy security in response to concerns over the ongoing energy crisis. It seeks to enhance trade links between the UK and the US, building on the energy and security partnership signed between the two countries in December 2022. Notably, this partnership has facilitated the shipment of 9 billion cubic meters of LNG from the US to the UK this year. While LNG remains controversial due to its high carbon emissions, Centrica emphasizes the deal's significance in securing the UK's energy supply and addressing the underlying causes of the energy crisis.
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Rheinmetall to Open Armoured Vehicle Plant in Ukraine
German arms company Rheinmetall is set to open an armoured vehicle plant in western Ukraine within the next 12 weeks, as announced by the company's CEO, Armin Papperger. The plant will collaborate with Ukraine's state-owned Ukroboronprom to manufacture and repair the Fuchs armoured personnel carrier. The opening of the armoured vehicle plant and potential arms supply demonstrates Germany's efforts to enhance Ukraine's logistics and address concerns over Russia's military power in Ukraine.
The implications of Rheinmetall's plant opening and potential arms supply to Ukraine indicate a continued commitment by Germany to support Ukraine's defence capabilities. With the ongoing conflict in Eastern Ukraine, bolstering Ukraine's military strength is seen as a means to counterbalance Russian capabilities. The potential delivery of Taurus cruise missiles, with their extended range and precision capabilities, would significantly augment Ukraine's offensive capabilities as well. The announcement of cluster munition deliveries by the United States, and the German government's support for this decision, highlights the escalating nature of the conflict and the willingness of Western countries to provide additional military support to Ukraine.
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Iran Summons Russian Ambassador Over Disputed Islands
Iran has summoned the Russian ambassador in Tehran, Alexey Dedov, following a joint statement by Russia and the Gulf Cooperation Council (GCC) regarding the disputed islands with the United Arab Emirates (UAE). The statement expressed support for the UAE's initiative to seek a peaceful resolution through negotiations or the International Court of Justice. Iran's Legal Advisor Mohammad Dehghan firmly asserted that the islands belong to Iran and emphasized their non-negotiable status.
The islands in question, Abu Musa, Greater Tunb, and Lesser Tunb, have been a subject of dispute between Iran and the UAE since 1971. This latest development highlights the complexities of regional relationships, as it brings to the forefront the friction between Iran and Russia, who have traditionally maintained close ties. Meanwhile, Iran's relations with Kuwait have shown some signs of improvement, but disagreements persist over the territorial dispute involving the Durra gas field in the Gulf. While a prisoner exchange between Iran and Kuwait indicates positive steps in bilateral relations, the lingering territorial dispute remains a contentious issue.
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Iraq to Pay for Iranian Gas Imports with Oil to Avoid US Sanctions
Iraq has reached an agreement with Iran to start paying for Iranian gas imports with Iraqi crude oil, aiming to address the gas supply crisis for Iraqi power plants while navigating the complications posed by US sanctions. The reliance on Iranian gas for a third of its energy needs has been hampered by US sanctions, preventing direct payment for the imports and leaving Iraq in heavy arrears. The payment mechanism, which involved holding funds in a bank account and obtaining US approval for their use by Iran for food and medicine imports, proved cumbersome and led to a halt in Iranian gas supply.
In an effort to resolve the issue, Iraq made a recent payment of around $1.9 billion to Iran, and the newly signed agreement is expected to guarantee the continuous flow of gas. Iraq has faced challenges in its energy sector due to corruption, crumbling infrastructure, and ongoing instability, despite possessing vast oil reserves. The country has been exploring alternative options to reduce reliance on Iranian gas, such as imports from Qatar and capturing flared gas from oilfields. Some critics have urged the US to unlock the unpaid bills related to Iranian gas imports, highlighting the impact on Iraq's energy supply.