Clare Nuttall in Almaty -
Confirming the progress of the energy rich Caspian basin countries in leveraging the immense appetite of emerging Asia to diversify their oil and gas export routes, and end the post-Soviet region's dependence on Russia, Uzbekistan and Turkmenistan saw progress on deals to serve China and Indian in mid-May.
Uzbekistan announced on May 17 that it expects to start exporting gas through the Central Asia-China pipeline by the end of the year, while the following day, the Indian government approved a deal on Turkmen gas imports, bringing the planned Turkmenistan-Afghanistan-Pakistan-India (TAPI) has pipeline a step closer to realisation.
Meanwhile, the consortium developing the European Union's pet gas pipeline project Nabucco proposed a shorter - and cheaper - option that it hopes will secure supplies from Azerbaijan's offshore Shah Deniz field when second-phase production starts in 2017 or 2018.
The news illustrates the growing success of the Caspian countries in their quest to export their energy to world markets without going through Russia, which retained a monopoly on regional gas transit for years after the collapse of the Soviet Union. The lack of alternative pipelines allowed Russian pipeline operators to force huge profits through their control of the route from Central Asia to Europe.
However, the boom in oil and gas prices during the last decade, and growing demand from developing Asia, in particular India and China, has encouraged Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan to look for direct access to these markets. Most of the forecast increase in global oil and gas consumption in 2012 is expected to come from Asia, and by 2035 China is expected to consume almost 70% more energy than the US, according to the International Energy Agency (IEA).
Since 2009, Kazakhstan has been able to export oil directly from its western oilfields to the Chinese border through its own pipeline network. The Central Asia-China gas pipeline opened the same year, running 1,833km from Turkmenistan - estimated to have the world's fourth largest gas reserves - via Uzbekistan and Kazakhstan, to the Khorgos crossing on the Kazakhstan-China border.
Until now, only Turkmen gas has been pumped through the pipeline. However, Uzbektransgas director Tulagan Zhurayev announced on May 17 that Uzbekistan expects to start exporting its gas through the pipeline by the end of this year. In an interview with Reuters, Zhurayev said: "We can start shipping our gas right now, but there are some legal issues which need to be settled ... We plan this year to supply between 2bn cubic metres (bcm) and 4 bcm. We have the gas and everything is ready."
Even before the Central Asia-China pipeline opened, the Turkmen government in Ashgabat began exploring options to export its oil and gas to the energy-hungry markets of India and Pakistan. The TAPI pipeline has long been under consideration, but the continuing violence in Afghanistan has put the project's viability in doubt and sent the estimated cost spiraling up to $7bn.
The four participating governments have (somewhat unusually) been in negotiations over the price of the gas even before the first metre of piping has been laid. On May 17, the Indian cabinet approved state-owned GAIL's gas purchase agreement with Turkmenistan for exports via TAPI. The deal is due to be signed during Indian Petroleum Minister Jaipal Reddy's visit to Ashgabat on May 23-24.
According to a statement from Delhi, the pipeline is now due to be operating by 2018, and will export 90 mcm of gas per day for the following 30 years. India and Pakistan will each receive 38 mcm a day, with the remaining 14 mcm to be sold to Afghanistan.
Meanwhile, the European Union's own efforts to circumvent Russia continue to founder. The Nabucco Consortium presented a proposal for a shorter version of its gas pipeline to the the BP-led consortium developing Azerbaijan's offshore Shah Deniz oil and gas field on May 16. "Nabucco West" would have a length of just 1,300km, 67% shorter than the original plan. The larger project has been dying a slow death for years as it has struggled to secure gas supplies from the Caspian to fill a planned capacity of 31 bcm.
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