China may replace Russia as gas partner for Turkmenistan

China may replace Russia as gas partner for Turkmenistan

Baku, Azerbaijan, July 13

By Aygun Badalova - Trend:

Much of Turkmenistan's future stability will hinge on the specific partner that will replace Gazprom, who was recently declared by the Central Asian country as an insolvent one, Luca Anceschi, lecturer at the British University of Glasgow believes.

"Much of Turkmenistan's future stability will hinge on the specific partner that will replace Gazprom. It might be China, but I think that it is in the interest of the Turkmen government to finalise as soon as possible a new set of energy deals with other partners, located in both Asia and the West," Anceschi told Trend on July 13.

Recently Turkmenistan said that Russia's Gazprom has become insolvent on its contracts for sale and purchase of natural gas due to the ongoing world economic crisis and the economic sanctions imposed on Russia by the West.

Gazprom JSC hasn't paid its debts to Turkmengaz state concern for the supplied gas since early 2015, according to Turkmenistan 's Ministry of Oil and Gas Industry and Mineral Resources.

Anceschi said that the energy partnership between Turkmenistan and Russia has always been controversial.

"Progress in deal re-negotation or price recalculation has been usually accomplished through the eruption of crises, as it indeed happened in 2003 and 2008," he said.

The current spat between Turkmengaz and Gazprom might somehow replicate this pattern, he added.

Anceschi believes, on the one hand, Gazprom has certainly seen its potential limited by the sanctions imposed on Russia. On the other, Turkmengaz's declaration captures the extremely poor juncture experienced by this energy relationship.

Anceschi also noted that used to buy more than 40 billion cubic meters of Turkmen gas not long ago. Gas volumes traded are currently marginal, with 4-5 bcm purchased in 2014 and a similar quota project for this year.

Russia gets Turkmen gas via the Central Asia - Center pipeline, transited through Uzbekistan and Kazakhstan. Gazprom acts as a buyer. It signed an agreement on gas supplies with Turkmenistan for 25 years in 2003.

At this stage, the Central Asia - Center pipeline does not fully operate. Russia temporarily stopped importing Turkmen gas because of the breakdown in April 2009. The technical issues were resolved. Under the influence of the global recession, Russia has reduced purchases to 10-11 billion cubic meters of gas since 2010, which is four times less than earlier.

The annual volumes dropped by 2.5 times in 2015 and stood at 4 billion cubic meters.

Currently China the biggest importer of Turkmen gas. In 2014, Ashgabat exported 25.9 bcm to China. By 2017, the capacity of the system from Turkmenistan to China is expected to increase to 80 bcm of gas, and by the end of 2021, Turkmenistan will annually supply 65 billion cubic meters of gas under the agreement signed between China National Petroleum Corporation (CNPC) and Turkmengaz.

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Aygun Badalova is Trend Agency's staff journalist, follow her on Twitter: @AygunBadalova

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