After what has been a two year break from exporting energy resources to Russia, gas-rich Turkmenistan is again turning northward and testing Moscow’s willingness to do business and let it make use of the Russian-controlled Central Asia-Center gas pipeline.
The Soviet-era network runs from Turkmenistan, which lies along the eastern shore of the Caspian Sea, to Russia via Uzbekistan and Kazakhstan. Controlled by Russia’s Gazprom, the route consists of 2,000 km (1,200 mi) of pipes, with a capacity of about 90 billion cubic meters (bcm) per year.
“We have a working system of pipelines running towards the northern direction through which Turkmenistan historically exported natural gas to Russia and other CIS countries,” said Myrat Archayev, the CEO of Turkmenistan’s state energy company Turkmengas, according to Kommersant.ru.
Ashgabat’s interests in re-starting its export activities do not end with Russia, however.
“If mutually acceptable agreements are achieved with buyers and transit countries, this existing pipeline can be used to ship natural gas from Turkmenistan to CIS countries and Eastern Europe,” Archayev said.
Archayev, who is considered one of the country’s top energy officials, was speaking at the 22nd “Oil and Gas of Turkmenistan” international conference and exhibition, held in Turkmenistan’s capital city Ashgabat from November 2-3.
Archayev said that using Russia as a transit route, rather than depending upon it as a buyer, is a possibility, without elaborating whether talks with Moscow were underway.
Turkmenistan’s independence from the USSR, which had dissolved by December 1991, meant the newly created state had sovereignty over what are some of the world’s largest natural gas deposits. Proved natural gas reserves are said to be slightly over 7.5 trillion cubic meters (tcm) according to U.S. government figures – making Turkmenistan owner of the world’s sixth largest – but some estimates put the amount of gas trapped underneath the Central Asian and Caspian country at around 50 tcm.
Currently, the state company Turkmengas is developing about 30 gas and gas condensate deposits. By 2030, the company plans to produce 230 billion cubic meters of gas per year.
But despite having an abundance of gas, exporting it has been a problem.
Throughout the 1990s and most of the 2000s, Turkmenistan sold its lion’s share of gas exports to Russia. A lack of routes beyond the Central Asia-Center pipeline meant Russia had a monopoly on Turkmenistan’s export market. A small amount was also supplied to northern Iran via the Dauletabad-Sarakhs-Khangiran pipeline, commissioned in 2010 and which has a capacity of 12 bcm per year; and the Korpeje-Kurt-Kui gas pipeline, commissioned in 1997, with an 8 bcm in annual capacity.
Turkmenistan’s export woes have not stopped with logistics and supply routes, however. Geopolitics has played a hand in Ashgabat’s ability to move gas beyond Turkmenistan’s borders.
In April 2003, when Russia signed a 25-year gas purchase agreement with Turkmenistan, nothing foreshadowed major conflicts between the two. But things started to change by 2009, when the global economic downturn resulted in Russia, which had been importing 10 bcm of Turkmen gas, halted its volumes of foreign energy imports. Bilateral relations also soured that year thanks to an explosion on a Central Asia-Center pipe delivering Turkmen gas to Russia.
By early 2015, Gazprom announced it was scaling back its Turkmen imports to just 4 bcm; and one year later, the company stopped buying Turkmenistani gas altogether due to a price dispute.
The political-economic shifts meant Ashgabat, which is reliant on its hydrocarbon exports for roughly 25 percent of Turkmenistan’s gross domestic product, has been left with no choice but to look for new customers.
“Two more natural gas pipelines in the southern direction can supply natural gas to consumers in the northern provinces of Iran,” Archayev explained at last week’s conference, signaling that Iran still remains a viable market, although exports were halted earlier this year due to payment arrears.
Ashgabat is also considering gas swaps with Iran, using its territory for a gas transit route to Turkey and Armenia, as well as exporting gas to its Caspian Sea neighbor Azerbaijan.
Exporting gas to Turkey via swaps requires Tehran’s approval. According to remarks made in October by the executive director of the National Gas Company of Iran, Hamid Reza Araqi, Tehran likely will not sign off on the idea. Araqi noted that Tehran’s decision will not be applied to Azerbaijan, and Turkmen gas will continue to be transported to Azerbaijan via Iran.
Despite it having plenty of gas resources to power its economy, Azerbaijan buys additional gas from abroad at low prices in the summer, in order to fully benefit from the commercial potential of State Oil Company of Azerbaijan Republic (SOCAR) gas storage facilities.
"Turkmenistan, Turkey and the EU countries are working on the Trans-Caspian gas pipeline construction project, which should ensure long-term and reliable supplies of natural gas to the Turkish and European markets, if the parties concerned reach appropriate agreements" Archayev said.
The route would pass underneath the Caspian Sea and emerge in Azerbaijan, and allow for the delivery of 10 to 30 bcm of Turkmen gas per year to Europe.
While prospects for developing routes to western markets look hopeful, geopolitics have left Turkmenistan turning eastward in recent years.
China became Turkmenistan’s only major customer after the 2016 price dispute with Russia, receiving gas through the Turkmenistan-Uzbekistan-Kazakhstan-China pipeline, constructed in 2009 and consisting of three operating branches. Lines A and B can each carry 15 bcm, and Line C can carry 25 bcm, for a combined export amount of 55 bcm of gas annually. All of the lines have not yet reached full capacity. Officials are considering building Line D, which will be laid along a new route that includes Turkmenistan, Uzbekistan, Tajikistan, Kyrgyzstan and China.
According to the Director General of China Natural Petroleum Corporation (CNPC) International Turkmenistan, Li Shulian, China’s total procurement of gas from Turkmenistan will, by the end of November, reach 200 bcm.
Since the three lines pass through Uzbekistan and Kazakhstan – two other gas-producing countries in Central Asia, bordering Turkmenistan – both are able to contribute to the shipments to China, thanks to two contracts already in place for each to supply 10 bcm to the pipelines.
“We are ready to help Turkmenistan in the construction of the TAPI gas pipeline, as well as in the implementation of the Trans-Caspian gas pipeline project,” Li Shulian said at last week’s event, referring to the Turkmenistan-Afghanistan-Pakistan-India gas pipeline, or “TAPI,” as well as an underwater route that will deliver Turkmen gas westward.