Turkmenistan slashes gas subsidies as it eyes European exports

By bne IntelliNews February 3, 2014

bne -

Turkmenistan has raised the price charged to households for natural gas as the government seeks to phase out some of its energy subsidies. Already China's top gas supplier, Ashgabat says exports to Europe are now a priority.

According to the government website Turkmenistan.ru households will still receive 50 cubic metres of gas per person per month. However, any consumption over that threshold will now be charged - though at an extremely low 20 manat ($7) per thousand cubic metres.

The new pricing structure, set by presidential decree, came into effect on February 1. However, for the meantime, there is little way of gauging how much gas each household uses. Gas meters are due to be installed in all homes across Turkmenistan to measure gas consumption and encourage more efficient power usage, President Gurbanguly Berdymukhamedov announced on January 18.

Fuel subsidies in Turkmenistan are among the highest in the world, according to the International Energy Agency (IEA), and households have received free electricity, gas and water since 1993. While these generous subsidies are believed to have been a factor in reducing popular discontent with the authoritarian regime, since mid-2013 there have been growing signs the government is re-thinking that policy as it increases energy exports to international markets.

Since the opening of the Central Asia-China gas pipeline in 2009, Turkmenistan has become China's largest gas supplier. Late last year it was announced that the country plans to increase exports to the Asian giant to 65bn cubic metres a year by 2020.

Meanwhile, an article by state news agency Turkmen Dovlet Khabarlary says energy exports to Europe through the "Southern Gas Corridor" are now one of the government's priorities. Turkmen officials recently held talks with the head of the EU energy directorate Han Rhine and other EU officials, according to Trend.

Ashgabat is keen to build the planned Caspian sub-sea pipeline, which would allow the export of Turkmen gas across the Caspian to the Azeri capital Baku, and from there further west. The "Southern Gas Corridor" is an EU strategy designed to reduce European reliance on gas routed through Russia, meaning Turkmen ambition for a trans-Caspian route has backing in Brussels.

However, any project crossing the inland sea would need the blessing of the five littoral states. In particular, Ashgabat would likely find Russian and Iranian agreement difficult to secure, while Kazakhstan could also take some persuading.

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