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Russia's gas
dreams
By Sergei Blagov
MOSCOW - As part of Russia's all-around energy
game, the Kremlin has pledged to boost natural-gas
supplies to Turkey, and possibly to Israel as
well. But despite its ambitious vision of tapping
gas export markets in the Mediterranean, Europe
and the Asia-Pacific region, Moscow still
struggles to sustain its traditional influence
in its own Eurasian back yard.
Russia will increase natural-gas
supplies to Turkey, Russian President Vladimir
Putin announced on Tuesday, after talks with
visiting Turkish Prime Minister Recep Tayyip
Erdogan. Russian companies would join construction
of Turkish distribution facilities, said Putin,
adding that negotiations are on over joint
liquefied natural gas (LNG) projects and Russian
gas supplies to third countries via Turkey.
Russian and Turkish
officials have reportedly discussed the possibility
of extending the Blue Stream pipeline, which runs
from Russia to Turkey via the Black Sea, to Israel.
Last year, Gazprom chief executive officer
Alexei Miller traveled to Israel for talks on
natural-gas exports via a Russian pipeline to Turkey.
Miller met Prime Minister Ariel Sharon, who
reportedly indicated Israel's interest in long-term
gas-supply agreements with the Russian gas monopoly.
The Blue Stream pipeline carried some 46 billion
cubic feet (1.3 billion cubic meters) of Russian
natural gas to Turkey in 2003. In 2004, Blue
Stream exports are estimated at 70.7 billion cubic
feet (2bcm).
Russia says it has
the world's largest known natural-gas reserves and
one-eighth of the world's oil reserves. According
to Russia's Economic Development and Trade
Ministry, this year Russia's natural-gas exports will
reach a record high 198bcm (more than 189.4bcm in
2003). In 2007, according to the ministry, gas
exports could reach 252bcm.
Russia's state-controlled Gazprom, which exports
natural gas to nine European countries, including
Turkey, netted US$16.5 billion from gas exports in
2003 and its gas-export revenues are estimated at $18
billion in 2004. Russian gas deliveries to Western
Europe began back in 1968, and the continent has
remained Gazprom's main export market since. Under
contracts already signed, Gazprom's exports to
Europe would reportedly reach 180bcm by 2010. The
Yamal-Europe gas pipeline, now being built through
Belarus and Poland, would have an annual capacity
of 35bcm.
Russia has been mulling an
ambitious $6 billion project to supply Siberian
gas directly to Europe. A 1,200-kilometer
underwater section of the pipeline with annual
capacity around 19bcm would pass through
international waters and link Russia's Vyborg with
German shores. To deal with this project, Gazprom
would draw on its Blue Stream pipeline experience.
Russia also plans to boost its LNG output and
exports. The Prigorodnoye LNG plant in southern
Sakhalin, with an annual capacity of 9.6 million
tonnes a year, is due onstream in 2007, aiming to
tap Japanese and Korean energy markets. A
tentative long-term deal to export Sakhalin LNG to
the US East Coast has been under discussion as
well.
Moscow also views eastern Siberia,
with estimated reserves of 6.6 trillion cubic
meters, as a future gas hub, with output reaching
110bcm per year by 2020. Russian industry
estimates suggest that the Asia-Pacific region's
demand for natural gas could go up from 370bcm in
2005 to 651bcm in 2020. By 2020, Russia aims at
exporting up to 38bcm of gas to the Asia-Pacific,
mainly China, Japan and South Korea, including
re-export from Central Asia.
The delivery
of gas to China has been planned to go via a
2,000km pipeline from the Kovykta gas
field - with proven reserves of 2 trillion cubic
meters and the capacity to produce 36bcm per year
- to Blagoveshchensk near the Chinese border. The
first deliveries of 20bcm annually of natural gas
to China along with 10bcm to South Korea are
expected in 2010. However, Russia is seemingly
flip-flopping on a new China-bound gas pipeline,
although Beijing reportedly offered to bear part
of the construction cost in return for gas.
In
terms of a multilateral approach, Russia has been pushing for
a "Eurasian Alliance of Natural Gas Producers" that
would include Kazakhstan, Russia, Turkmenistan and Uzbekistan.
It has been dubbed a
"Central Asian OPEC" that would aim at "cooperation in
energy policy and measures to defend interests of
natural gas producers". However, the Russia-dominated Central
Asian OPEC (a reference to
the Organization of Petroleum Exporting Countries)
seems to remain an elusive goal, and Moscow
still struggles to sustain its traditional influence
in its own back yard.
Turkmenistan's president for
life, Saparmurat Niyazov, has been acting up
lately, causing strains in ties with Russia. On
December 31, Turkmenistan cut off natural-gas supplies to
Russia and Ukraine. Gas deliveries to Russia were
suspended for a week for "maintenance operations".
Turkmen authorities indicated that a new agreement
on the sale of gas to Russia would be reached in
early January. Turkmen authorities reportedly
demand $60 per 1,000 cubic meters, an amount to
which Gazprom is not inclined to concede.
In April 2003, Russia
and Turkmenistan signed a 25-year contract on
gas supplies. Turkmenistan pledged to supply 100bcm of
gas to Russia from 2010 onward, or a total of
2 trillion cubic meters in 25 years. Turkmen
authorities had claimed that the deal would
bring Turkmenistan $200 billion and $300 billion to Russia
in those 25 years. Turkmenistan resumed
natural-gas supplies to Russia this Monday. However, Gazprom
reportedly declined to increase the price and
continues to pay Turkmenistan $44 per thousand
cubic meters, 50% in barter and 50% in cash, as it
was stipulated in an April 2003 deal.
Turkmenistan's gas is important to Moscow
because Gazprom needs it to make up for the
shortages created by its export commitments to its
Western European customers. Gazprom's annual
shortfall in supplying Russia's domestic market
has been estimated at 30-40bcm. In the long term,
Turkmenistan's unpredictability could eventually
threaten Moscow's plans of Central Asian gas
re-export to the Asia-Pacific.
Sergei Blagov covers Russia and post-Soviet
states, with special attention to Asia-related
issues. He has contributed to Asia Times
Online since 1996. Between 1983 and 1997, he was
based in Southeast Asia. In 2001 and 2002, Nova
Science Publishers, New York, published two of his
books on Vietnamese history.
(Copyright 2005 Asia Times Online Ltd.
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