Status of Turkmen gas transportation projects as of December 2014

Ashgabat, Turkmenistan, Dec.30

By Huseyn Hasanov- Trend:

Turkmenistan is one of the key players on the gas market in the Caspian region and Central Asia.

According to a British Petroleum report, Turkmenistan ranks fourth in the world for natural gas reserves after Russia, Iran and Qatar.

The largest fields are located in Mary province in the east of the country, namely, Galkynysh and Yashlar fields with total resources estimated by local geologists and British GCA at 26.2 trillion cubic meters of gas.

Turkmenistan produced over 62.3 billion cubic meters of gas in 2013, which is by 0.4 percent more than in 2012, according to the BP Statistical Review of World Energy-2014. Turkmenistan accounted for 1.8 percent of the world gas production volume in 2013.

The gas consumption in the country stood at 22.3 billion cubic meters during the reporting period, which is by 15.5 percent less than in 2012.

The Turkmen gas is consumed by China, Iran and Russia; the Chinese market tends to increase its demand for this fuel.

Discussed projects

Turkmenistan sells its gas at the border. Among the projected gas pipelines are from Turkmenistan to India (the Turkmenistan-Afghanistan-Pakistan-India - TAPI gas pipeline), to Europe (the Trans-Caspian gas pipeline through Azerbaijan) and an additional gas pipeline to Russia in the medium-term or long-term prospect (the Caspian gas pipeline via Kazakhstan).

TAPI (Turkmenistan-Afghanistan-Pakistan-India)

The design capacity of the TAPI is 33 billion cubic meters of natural gas per year.

The estimated length reaches 1,735 kilometers. It is expected that the pipeline will extend from the largest gas field in Turkmenistan 'Galkhynysh' through the Afghan cities of Herat and Kandagar to the Fazilka settlement on the Pakistani-Indian border. Buyers are Pakistani, Afghan and Indian gas companies. Bangladesh wants to join TAPI as a buyer of raw material.

Project status

TAPI construction may start in 2015, according to the Turkmen side.

The basic document to advance the TAPI project is an inter-state agreement to start the implementation of TAPI, signed in Ashgabat in 2010. Instability of transit to Afghanistan remains a serious obstacle, but Kabul states that it can ensure the safety of the route.

TAPI is currently at an important stage of development.

An international tender will be announced in February 2015 to choose the leader of the consortium. The preferences, namely a long-term contract for at least 20 years, were offered to this leader.

Previously, gas purchase-sale transactions were conducted. The feasibility study of the project was updated. The sources of raw materials were determined. TAPI Limited pipeline company was established. Turkmengaz, Afghan Gas Corporation, Pakistan's Inter State Gas Systems (Private) Limited and Indian GAIL with equal shares joined it.

The project operator is expected to get a significant share in TAPI Limited. At this stage, TAPI promotes the Asian Development Bank (ADB), playing the role of a transactional advisor of the project.

Russia shows an interest in TAPI project at a high level. TAPI implementation is supported by the US, which opposes a similar project from Iran to Pakistan. The Turkmen media earlier reported that the heads of such companies as Chevron, Exxon Mobil, BP, BG Group, RWE, Petronas, reviewed the TAPI conditions and expressed the intention of participating in it. According to the Indian sources, Shell company also showed an interest. South Korean "Korea Gas Corporation" (Kogas) voiced their proposals on TAPI.

Trans-Caspian gas pipeline

The project of laying the 300-kilometer gas pipeline through the Caspian Sea to the shores of Azerbaijan is considered optimal for supplying the Turkmen energy resources to the European market. Turkmen hydrocarbons may be further supplied to Turkey, bordering with the European countries.

The Trans-Caspian project can be implemented as part of the EU lobbied "Southern Gas Corridor" project.

The design capacity of the Trans-Caspian pipeline is connected with the demand for Turkmen gas in Europe.

Status

There is no direct agreement on the implementation of the Trans-Caspian gas pipeline yet. The negotiations have been held among the main concerned sides - the EU, Azerbaijan and Turkmenistan since 2011.

Ashgabat believes that in order to lay the pipeline through the Caspian Sea's bottom, the legal status of which hasn't been yet defined, it is sufficient to have the consent of the parties, i.e. Turkmenistan and Azerbaijan, the territories of which are covered by the project.

Baku is ready to provide its territory, transit opportunities and infrastructure for the project's implementation, as stated by the representatives of the State Oil Company of Azerbaijan (SOCAR). The work on environmental examination is expected to be carried out in 2015.

Turkmenistan said it is ready to supply Europe with an annual volume of gas up to 40 billion cubic meters. Some 10 billion cubic meters of this can be provided by the Malaysian company Petronas working in the Turkmen sector of the Caspian Sea.

The remaining volume can be provided with the help of 800-km East-West gas pipeline, being built in the country.

The gas pipeline stretches from the Galkynysh field and runs to the coast of the Caspian Sea.

AGRI (Azerbaijan-Georgia-Romania Interconnector)

Turkmenistan has interest in the Azerbaijan-Georgia-Romania Interconnector (AGRI). The project includes delivery of Azerbaijan's gas via the gas pipelines to the Black Sea coast of Georgia, where the gas will be liquefied at a special terminal, after which, tankers will deliver it to a terminal at the Romanian port of Constanta.

It will be further turned into gaseous state and delivered via the gas infrastructure in the country to meet the needs of Romania and other European countries. The project's cost will depend on the design capacity and can vary from 1.2 billion EUR to 4.5 billion EUR.

It is necessary to construct a separate gas pipeline branch through the seabed of the Caspian Sea up to Azerbaijan's coast or to deliver liquefied natural gas with tankers across the sea, in order to supply this project with Turkmenistan's gas.

AGRI project participants are the State Oil Company of Azerbaijan (SOCAR), Georgian Oil and Gas Corporation (GOGC), the Hungarian company MVM and Romanian company Romgaz.

In February 2011, the parties created a joint venture called SC AGRI LNG Project Company SRL for the implementation of the project.

Caspian Gas Pipeline (Turkmenistan-Kazakhstan-Russia)
The Caspian Gas Pipeline's designed capacity stands at 30 billion cubic meters per year. Gazprom may act as a buyer.

The presidents of Russia, Kazakhstan and Turkmenistan signed an agreement on its implementation in May 2007.

Project status

The development of the feasibility study for the project was suspended under the influence of the global recession and changes in the energy situation.

High-ranking representatives of Russia earlier stated that an agreement was reached to freeze the project. In turn, Turkmenistan stated that no such negotiations have been held.

Implemented projects

Central Asia- Center Gas Pipeline (Turkmenistan-Uzbekistan-Kazakhstan-Russia)

The Central Asia-Center gas pipeline was put into operation in late 1960's with a throughput capacity of up to 80 billion cubic meters per year. Over time, the pipeline's power was reduced to 40-50 billion cubic meters per year. Reconstruction is necessary.

Gazprom, the company buying the gas, signed an agreement with Turkmenistan for gas supplies for a 25 year span in 2003.

Project status

At present, the Central Asia-Center Pipeline does not operate at full capacity. Russia suspended Turkmen gas imports in April 2009 due to an accident. Technical issues have been resolved, but global recession forced Russia to reduce its purchases to 10-11 billion cubic meters of gas since 2010, four times less than in 2008. Data on the current negotiations is poor.

In 2012 it became possible to supply Russia with raw materials not only from the eastern fields of Turkmenistan, but also from the west, thanks to the construction of a connecting branch from the Caspian Sea coast, where Petronas can begin industrial gas production on the offshore block.

Russian company Gazprom announced in September 2013 that it expects to revise the terms of gas purchase in Turkmenistan as a price formula for purchasing Turkmen gas was determined at the peak of a European price rise. Since then the formula for selling Gazprom's gas to Europe has been changed.

Trans-Asian gas pipeline (Turkmenistan- China)

The Turkmenistan -Uzbekistan -Kazakhstan-China gas pipeline was put into operation in 2009.

As of November 13, 2014, the total volume of marketable gas delivered from Central Asia to China by pipelines A, B and C has reached 100 billion cubic meters. Some 93 billion cubic meters of them were delivered from Turkmenistan.

In particular, 66.3 billion cubic meters of gas was delivered from the part of the Turkmengaz state concern and 26.7 billion cubic meters from the contractual territory Bagtyyarlyk, where CNPC Corporation carries out the development on the basis of a production sharing agreement with the government of Turkmenistan.

Besides Bagtyyarlyk field developed by China's CNPC, Galkynysh field is a source of raw materials. It is being developed with a multi-billion loan from the Chinese government.

Project status

CNPC started purchasing natural fuel in this region in 2009 after commissioning the first two - A and B - branches of the gas pipeline running from Turkmenistan through the territories of Uzbekistan and Kazakhstan. The third - C - branch of the pipeline was commissioned in May 2014. This branch also runs on this route ending in Khorgos, China.

Currently the work on construction of the additional fourth - D - branch is underway. The D branch that will run on a new transit - through Uzbekistan, Tajikistan and Kyrgyzstan - will be put into operation in late 2016. The D branch with the length of nearly 1,000 kilometers, will go to China through Ulugchat County.

It is planned to increase the volume of the annual Turkmen natural gas supplies to China to 65 billion cubic meters 2021.

Korpeje-Kurt-Kui gas pipeline (Turkmenistan-Iran)
The pipeline was commissioned in December 1995. Its capacity has been brought to 8 billion cubic meters per year.

Project status

The National Iranian Gas Exports Company (NIGEC) is the purchaser of gas. There is potential to increase the capacity of the pipeline to 14 billion cubic meters of gas.

Dovletabad-Sangbast gas pipeline (Turkmenistan-Iran)

Dovletabad-Sangbast gas pipeline (to Iranian border) was commissioned in late December 2009. Its capacity is up to 6 billion cubic meters per year. The related branch on Iran's territory from Sarakhs to Sangbast settlement through Hangeran was opened in November 2010. There is no data about the current supplies.

Project status

The National Iranian Gas Exports Company (NIGEC) is the purchaser of gas. There is potential to double the gas pipeline's capacity.

Keimir gas compressor station was commissioned in December 2013. In the case of necessity, this station will also be able to deliver fuel to Turkmenistan-Iran pipeline through the complex gas treatment plant at Akpatlauk field which is located in the close proximity of Keimir.

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