Jacopo Dettoni in Almaty -
Hydrocarbon-rich Turkmenistan is striving to gain access to the Indian and European gas markets as both Russia and Iran, two of Ashagabat’s largest clients, loosen ties with the Central Asian country.
Turkmenistan produced over 76bn cm of natural gas in 2014, and exported 45bn cm. Looking forward, the government plans to make the most out of the country’s generous natural gas endowment by increasing exports to 170bn cm in the mid-term – Turkmenistan’s reserves are estimated at 17,500bn cm of natural gas, according to BP’s 2014 Statistical Review of World Energy, second only to those of Iran, Russia and Qatar.
Yet Russian gas powerhouse Gazprom, which historically used Turkmen gas as a back-up supply for low margin CIS markets, announced earlier in February that it would cut imports of Turkmen gas to 4bn cm in 2015 from 10bn cm in 2014. Also Iran, which imported another 4.7bn cm of Turkmen gas in 2013 to cater to the needs of northern provinces, is planning to cut imports to boost local production.
As of today, China stands out as Ashgabat’s only long-term client. Turkmenistan has quickly emerged as China’s largest supplier of natural gas, covering almost 50% of Beijing’s gas imports in 2013, or 24.4bn cm, according to BP’s report. Gas exports to China are set to reach 80bn cm by 2020, when an upgrade of the Central Asia-China gas pipeline network should be completed.
However, Beyond China, it is not clear yet who will buy Turkmen gas in the future.
Turkmenistan’s government has begun pushing the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project, which would give it access to the Pakistani and Indian markets. Yet “there are huge political risks”, Andrei Kazantsev, a native of Turkmenistan who is director of the Analytical Center of the Moscow State Institute of International Relations, tells bne IntelliNews.
“[Among others] there is a very high risk posed by the situation in Afghanistan, which makes it difficult to implement the TAPI project in the foreseeable future,” he says.
The 1,800km-long TAPI pipeline will allow Turkmenistan to supply gas from its Galkynysh field - one of the world's largest, with estimated reserves of 13,100bn cm - to the Pakistani and Indian markets through Afghanistan. At full capacity it will export up to 33bn cm of gas annually. The project has been on the table since the early 1990s. However, as soon as the Taliban seized power in Afghanistan, it became clear that no financial institution would take the risk of financing it - total costs are estimated at some $10bn.
Turkmen President Gurbanguly Berdymukhamedov has recently shown a commitment to revive the project. Yet securing financing for TAPI remains an uphill struggle. In September both Exxon Mobil and Chevron pulled out of the race to lead a consortium that would raise money for the project because of Ashagabat's refusal to grant the two companies equity in the pipeline. Total of France and Malaysia’s Petronas have been rumored to be interested in the job, but neither has ever confirmed such interest.
Looking west, Turkmenistan is trying to build some momentum around the project of a trans-Caspian pipeline that would link its gas fields with Azerbaijan and then on to Turkey and Europe bypassing Russia, which represents the biggest opportunity, but also the biggest challenge for the whole project.
“Two countries that are very firmly standing against the implementation of the Trans-Caspian project are Russia and Iran, and they can be very successful at it, because the legal status of the Caspian Sea has not been well defined,” Kazantsev said. “Additionally, standing in the way of the construction of the Trans-Caspian gas pipeline is the Azerbaijan-Turkmen dispute on the ownership of the gas-rich part of the Caspian Sea [de facto operated by Azerbaijan, but Turkmenistan considers this part of the shelf to be its own].”
The legal regime of the Caspian sea has remained uncertain since the collapse of the old Soviet order as each one of the three new Caspian states – Azerbaijan, Kazakhstan and Turkmenistan – claimed its rights over the basin’s generous hydrocarbons resources.
Russia and Iran have always proved reticent to strike any deal that would somehow compromise their old hegemony over the basin. This all resulted in a fragile order where Russia, and to some extent Iran, retained a veto power over the oil and gas development in the basin. Within this context, the Kremlin has always opposed a trans-Caspian gas pipeline linking Turkmenistan and Azerbaijan that would pose a potential threat to its monopoly of European gas supplies.
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