Tectonic shift under way in Turkmen gas
By Robert M Cutler
MONTREAL - Events this week confirm that Turkmenistan has taken a decisive
strategic decision to diversify its gas exports not only beyond Russia but also
beyond China.
First, and perhaps most spectacularly, Ashgabat has announced that it will rely
upon its own financial resources and technology to renovate and rebuild the
East-West Pipeline across the southern part of the country, opening the
possibility that gas from the eastern provinces of Turkmenistan may eventually
transit to Europe.
That strengthens the prospects for the Nabucco pipeline project, which is
planned to take gas from the Caspian Sea basin through
Georgia and Turkey to the Baumgarten hub in Austria for distribution throughout
the European Union.
Second, President Gurbanguly Berdimuhamedow is making his first visit to India,
and discussions about the long-bruited Turkmenistan-Afghanistan-Pakistan-India
(TAPI) pipeline will figure prominently in his negotiations. Third, it now
appears likely that the United Arab Emirates will receive a concession to
explore for hydrocarbon resources in one of the blocks of the country’s
offshore Caspian Sea sector.
Turkmen news agencies announced that the state enterprise Turkmengaz will fund
the East-West Pipeline project, in which another state enterprise,
Turkmennebitgazgurlushik, will participate. The pipeline will be designed for a
capacity of 30 billion cubic meters per year (bcm/y). The design phase will
start immediately, and it is anticipated the construction will be finished in
five years. The gas will come from the South Yolotan field, which a British
firm, Gaffney Cline, estimates holds 6 trillion cubic meters, within a possible
range of 4 trillion to 14 trillion cubic meters. (See
Turkmenistan gas sets Ciceronian riddle, Asia Times Online, October 30,
2009).
In March last year, the signing of a deal for Russian participation was
postponed in Moscow, without warning, by Berdimuhamedow himself, who ostensibly
had travelled there for the purpose of that signing. A condition for Russian
participation would be that the gas go to Russia. That same month, Turkmenistan
announced an international tender for the project, for which it is reported
that over 70 companies from all over the world submitted bids. Relations
between the two countries worsened further after an explosion in April 2009
that severed gas exports to Russia for the remainder of the year.
For this Turkmenistan blamed Gazprom’s subsidiary in the country for
diminishing the quantities it was taking without telling their Turkmen
counterparts: the resulting gas buildup would have caused the explosion.
Russian media in turn blamed the poor condition of the pipeline in Turkmenistan
as well as Turkmengaz's technical workers. In fact, the explosion helped
Gazprom save money by cutting losses from its previously agreed contract with
Turkmenistan. Exports to Russia, as well as earnings, plummeted. Some reports
suggest that Russia's imports from Turkmenistan this year will barely amount to
10 bcm.
The latest announcement on the pipeline also effectively kills a trilateral
project including Kazakhstan to renovate and refurbish the segment of the
Central Asia-Center pipeline that the three countries had, at Russia's behest,
designated the Caspian Coastal Pipeline (CCP), also "Prikaspiiskii" and,
erroneously "Pre-Caspian". This idea was originally introduced by
Turkmenistan's former president Saparamurat Niyazov in 2003, but its
authoritative agreement was delayed throughout the decade. (See
Four-way street in Kazakhstan, Asia Times Online, September 18, 2009.)
As to the TAPI pipeline project, this showed potentially significant
development as Berdimuhamedow agreed in New Delhi to promote a bilateral
intergovernmental commission as a principal forum for economic cooperation with
attention to energy questions. India declared its interest in the
implementation without delay of the TAPI project, noting that it looked forward
to the participation of its experts in hydrocarbon exploration, development,
and production, in Turkmenistan. New Delhi is also prepared to host a meeting
of technical experts to discuss the project, with the participation of the
Asian Development Bank, which has declared its support.
Finally, the United Arab Emirates is entering the field of competition for
Turkmenistan's gas. The UAE, whose sovereign wealth fund reportedly exceeds
$300 billion, has been exploring for oil in Turkmenistan for a decade, using
Dubai-based Dragon Oil as its vehicle. As such, it has an inside track to win
exploration rights for offshore gas exploration blocks.
Moreover, as a 20% shareholder in the Austrian firm OMV, which leads the
Nabucco project, the UAE is well placed to find easy export routes for any
offshore gas that it finds. The German firm RWE, another Nabucco shareholder,
has reportedly detected gas in the offshore block that it is exploring.
Thus one of the immutables of Caspian Sea energy development until recently is
changing. Turkmenistan is no longer dependent upon Russia to take its gas but,
even more important, it does not wish to be dependent upon China any more than
it has been on Russia in the past. (See
Gas pipeline gigantism, Asia Times Online, July 17, 2008).
Developments are pointing more and more towards the eventual success of
Nabucco, and also even White Stream, which seeks to take gas under the Black
Sea from Georgia to Romania (bypassing Turkey) and on to Europe, as sufficient
supplies for both now become evident if one combines the Azerbaijani and the
Turkmen offshore deposits.
Dr Robert M Cutler (http://www.robertcutler.org),
educated at the Massachusetts Institute of Technology and The University of
Michigan, has researched and taught at universities in the United States,
Canada, France, Switzerland, and Russia. Now senior research fellow in the
Institute of European, Russian and Eurasian Studies, Carleton University,
Canada, he also consults privately in a variety of fields.
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