Turkmengaz and Gazprom End Gas Supply Contract Over Pricing Dispute

Turkmenistan’s state gas company, Turkmengaz, and Russia’s energy giant, Gazprom PJSC, were unable to extend their gas supply contract due to a disagreement over pricing.

Maksat Babayev, the Turkmen Minister of State and Chairman of Turkmengaz, shared details of the contract’s termination during a press conference following the Oil and Gas of Turkmenistan - 2024 international conference and exhibition in Ashgabat on October 25.

“The contract stipulated that the prices for this period be reviewed on 30 June [2024],” Babayev said, as reported by TASS.

“The extension would be possible if the sides agreed on the price. We held negotiations and failed to find a common understanding regarding the commercial part. Therefore, according to the terms of the contract, it was during this period when the price should have been reviewed. And the contract should be terminated on 30 June if the sides did not agree. This is basically what we did,” he added.

Babayev emphasized that commercial terms were crucial for Turkmengaz when deciding to start, resume, or halt supplies. “Today the demand for our gas from the north, west, and east is increasing. Therefore, we can say that we are at the stage of negotiations with different buyers and countries every day,” the minister concluded.

Gazprom’s previous five-year contract with Turkmengaz, signed in 2019 for the annual supply of 5.5 billion cubic meters of Turkmen gas, expired on June 30, 2024. In February, Russian Ambassador to Ashgabat Ivan Volynkin confirmed that Turkmenistan had fulfilled its gas supply obligations for 2023. In 2022, Turkmengaz delivered 5 billion cubic meters of gas to Russia, and in 2021, this figure was 10 billion cubic meters.

At the conference, Babayev also addressed concerns over increased Russian natural gas exports to China. 

“In fact, the position of Turkmengaz, Turkmenistan, is that we have always been in favor of the diversification of export routes. Today we are also interested in an increase in new directions, routes or the amount of gas under the existing contracts or directions,” the official said.

Negotiations are also ongoing for the construction of the fourth line of the transnational Turkmenistan-Uzbekistan-Kazakhstan-China gas pipeline, although price agreements have not yet been finalized.

Producing about 80 billion cubic meters of natural gas per year, Turkmenistan holds extensive gas reserves estimated at 13.4 trillion cubic meters (473.2 trillion cubic feet), ranking fourth globally after Russia, Iran, and Qatar. Roughly 75% of Turkmenistan’s exports come from the gas sector, with China and Russia as its principal buyers, driving much of the country’s recent economic growth.

Currently, Turkmenistan supplies China with over 30 billion cubic meters of gas annually through three lines (A, B, and C) of the Central Asian Gas Pipeline. With the completion of line D, Turkmen gas supplies to China are expected to reach the contracted 65 billion cubic meters per year.