As noted in a recent Stratfor report (subscription required), upcoming Azerbaijani and Turkmen talks about the legal status of the two countries’ maritime border in the Caspian Sea could well change the balance of power in Eurasia.

As it writes:

“…Russia has a number of tools at its disposal for affecting countries near it, but lately one has proven more useful than most: control of natural gas. Russia is heir to the Soviet natural gas transport network, which spanned the entire Soviet empire, including the former Warsaw Pact states that now make up Europe’s eastern fringe. Russia now supplies the European Union with roughly a quarter of its natural gas.

…The countries with the power to change that are Azerbaijan and Turkmenistan. Turkmenistan has by some measures the world’s fifth-largest natural gas reserves, and the Central Asian states of Kazakhstan and Uzbekistan also sport not inconsequential amounts. Existing infrastructure condemns all of their collected output to flow northwest to Russia — another echo of the Soviet period.

However, a plan exists for a new network of pipes that would run from Turkmenistan under the Caspian Sea to Azerbaijan and then on to Europe — bypassing Russia. Such a network would not only reduce the throughput on the Russian system by diverting it elsewhere, but could also open up an entirely new region to foreign investment — bringing a fundamentally new source of natural gas on line. The biggest sticking point to date has been an Azerbaijani-Turkmen territorial dispute over their shared border in the Caspian Sea at precisely the area where the pipes would be laid. Remove that obstacle, and all that is left is to figure out who will pay for the project. Considering their current dependence upon all things Russian, the Europeans would almost certainly belly up to the bar for that one.”

On top of this movement, as Steve LeVine recently wrote in his always insightful Oil and Glory blog, comes an announcement by BP and Norway’s Statoil that they have doubled the reserves they initially estimated at a huge offshore Azerbaijan natural gas field. As LeVine notes:

“…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.”