Best time for Turkmenistan to export gas to Europe

Oil&Gas Materials 6 May 2015 18:02 (UTC +04:00)

Baku, Azerbaijan, May 6

By Aygun Badalova - Trend:

The possibility of exporting gas to Europe could not come at a better time than now for Turkmenistan, an expert on Central Asia Bruce Pannier believes.

"The EU is looking to drastically cut back on the amount of Russian gas it imports, Pannier told Trend. "The process was already underway since 2009 but the events in Ukraine and the subsequent souring of relations between the EU and Russia have hastened the EU efforts to find non-Russian sources of gas that can deliver to Europe by routes that do not pass through Russia."

With Iran, at least for now, unable to play any role in transporting Turkmen gas to Europe, Pannier believes, the only option is construction of the Trans-Caspian pipeline (TCP), a project that has been under discussion for some 20 years now.

He said that Turkmenistan has always expressed a desire to ship gas via a Trans-Caspian pipeline but for several reasons no substantial progress was made towards realizing the TCP.

"Back then Turkmenistan had other options for diversification and eventually two pipelines were built allowing Turkmenistan to export gas to Iran and there is a deal to build four pipelines to China," Pannier said.

But plans to build the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline are moving at a crawl because of the instability in Afghanistan and some doubts about stability in Pakistan's southern Baluchistan region, Pannier stressed.

Realistically TAPI might not move forward for a decade or more, he believes.

Expert mentioned that Russia has severely cut back on the amount of Turkmen gas it buys - less than 10 years ago Russia was purchasing more than 40 billion cubic meters (bcm) of Turkmen gas per year, this year Russia said it would buy 4 bcm.

Pannier believes, there are also questions about how much longer Iran will buy Turkmen gas.

"Iran needed the Turkmen gas for areas in northern Iran that were not connected to the Islamic Republic's internal pipeline system. Despite sanctions Iran has moved forward with plans to link the northern part of the country to gas fields in the south. It will not be too many more years before Iran's pipeline network can supply all the gas northern Iran needs," Pannier said.

"So Turkmenistan is left with only China as a guaranteed customer, and Chinese officials are surely aware of this," he added.

It is an unfavorable situation for Turkmenistan to attempt to bargain a price for its gas with the only customer it has, especially when China has other potential sources for obtaining gas, expert believes.

"So Turkmenistan's need for a new customer is more urgent than it has been since the mid-1990s, when Russia was its only customer and Turkmenistan was involved in endless disputes with Russia about the price for its gas," Pannier said.

At the same time, expert believes the European Commission's expectations of Turkmen gas reaching Europe in 2019 or 2020 will not come true.

"There are still too many legal issues about the Caspian Sea's status that Russia will raise that will slow down the project," Pannier said.

Also, Russian-EU ties are not good right now and Moscow really has no reason to sit still while a new gas export route is built to help replace Russian gas to Europe, he added.

For now, Turkmenistan, holding 9.4 percent of the world's total conventional gas reserves, exports gas to Russia, Iran and China.

Natural gas rich Turkmenistan has ambitious plans to boost gas output from current 70 to 75 billion cubic meters per annum (bcm/a) to around 250 bcm/a by 2030.

In 2014, Ashgabat exported 25.9 bcm to China. At the same time Turkmenistan has contracts with China to increase its export to 65 bcm/a of gas by 2020.

Nevertheless, Turkmenistan repeatedly declared about its aim to diversify export route and the European direction is being considered as one of the options.

European Energy Commission Vice President Maros Sefcovic said in an interview with Reuters last week that for Turkmenistan it is very important to diversify its export options, while for the EU it is very important to diversify its imports. He said that EU expects supplies of Turkmen gas to begin by 2019.

He added that environmental risks of connected to the proposed pipeline (Trans-Caspian pipeline) could be mitigated.

Last week Ashgabat hosted a quadripartite meeting, which was attended by the heads of the fuel and energy sectors of Turkmenistan, Azerbaijan, Turkey, as well as representatives of the European Commission.

A declaration, which confirmed the desire of Turkmenistan, Azerbaijan, Turkey and the EU to continue active cooperation within international organizations on the establishment of effective mechanisms in order to ensure energy security, was initialed following this meeting.

Follow the author on Twitter: @AygunBadalova