Ashgabat, Turkmenistan, Jan. 5
By Huseyn Hasanov – Trend:
Turkmenistan is one of the key players on the gas market in the Caspian Sea region and Central Asia. The country ranks fourth in the world in terms of the volume of natural gas reserves after Iran, Russia and Qatar, according to the BP report.
The largest resources are accumulated in Mary province in eastern Turkmenistan. The reserves of Galkynysh, Yashlar and recently discovered Garakel fields are estimated at 27.4 trillion cubic meters. Galkynysh field accounts for 21.2 trillion cubic meters, Yashlar field accounts for five trillion cubic meters and Garakel field accounts for 1.2 trillion cubic meters of these reserves.
Under the program for developing the country's oil and gas industry till 2030, it is planned to increase the gas production to 230 billion cubic meters. The major part of this volume will be exported.
According to official data of the Turkmen side, it was planned to export 38.5 billion cubic meters of gas to Iran and China in 2017 as compared to 37 billion cubic meters in 2016. Russia’s Gazprom PJSC, which purchased natural gas in Turkmenistan under a contract signed in 2003, announced in early January 2016 that the deal was canceled.
Currently, there are agreements on two gas pipelines: Turkmenistan-China and Turkmenistan-Iran.
Implemented Projects
CIS
Central Asia – Center gas pipeline (Turkmenistan-Uzbekistan-Kazakhstan-Russia)
The Central Asia - Center (CAC) gas pipeline was commissioned in late 1960s with the capacity of up to 80 billion cubic meters per year. The pipeline’s capacity dropped to estimated 40-50 billion cubic meters with time. It needs reconstruction.
The buyer is Russia’s Gazprom company which signed an agreement with Turkmenistan in 2003 for gas supply within a period of 25 years. The deal was terminated at the initiative of the Russian side in 2016.
Project status
The Central Asia-Center gas pipeline is inactive.
In July 2016, the Russian side, filing a lawsuit with the Stockholm Arbitration Court, demanded nearly $5 billion from the Turkmengas State Concern for the gas supplied in 2010-2015.
It was reported in November 2016 that Gazprom and Turkmengas suspended the arbitration process due to the work on the peaceful resolution of the dispute and decided to take a two-year pause in the sale and purchase of gas.
Gazprom has been trying since 2008 to review the price of purchased Turkmen gas. In this regard, under the agreement signed in 2010, Gazprom bought 10 billion cubic meters of gas per year from Turkmengas, which is four times less than previous volumes.
In 2015, Gazprom reduced the volume of purchases to four billion cubic meters, deciding to unilaterally switch to payment at the cost of breakeven exports to Europe.
In the spring of 2015, Ashgabat said that Gazprom did not fully pay for supplies, calling it an “insolvent partner”. Gazprom has stopped receiving Turkmen gas since January 2016.
Meanwhile, it should be noted that in 2012, it became possible to supply Russia with raw materials, obtained 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 is capable of launching commercial gas production at the offshore block.
CHINA
Trans-Asian gas pipeline (Turkmenistan-China)
The gas pipeline was put into operation in 2009. China National Petroleum Corporation (CNPC) is the purchaser of gas.
Total length of the pipeline, originating from the Malay field and deposits on the right bank of the Amu Darya River, is more than 9,000 kilometers. Some 490 kilometers of it was laid through the territory of Uzbekistan, 1,304 kilometers – through Kazakhstan, and more than 7,000 kilometers – through China to major industrial centers such as Shanghai, Guangzhou, and Hong Kong, from where gas is distributed to other networks.
As of October 2017, in total, 184 billion cubic meters of Turkmen gas was supplied from Turkmenistan to China. Bagtyyarlyk and Galkynysh fields are the sources of raw materials. Bagtyyarlyk field is being developed on the basis of a Production Sharing Agreement (PSA) of the Turkmen government with CNPC, and the Galkynysh field is being developed thanks to a multi-billion dollar loan support from the Chinese government.
Project status
CNPC started purchasing natural gas 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 Khorgas, 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 up to 65 billion cubic meters in 2021.
IRAN
Korpeje-Kurt-Kui gas pipeline (Turkmenistan-Iran)
The pipeline was commissioned in December 1995. Its capacity has been brought up to 8 billion cubic meters per year.
The National Iranian Gas Exports Company (NIGEC) is the buyer of gas.
The length of the gas pipeline from Turkmenistan’s Korpeje field to the Iranian town of Kurt-Kui is 197 kilometers, and the length of the gas pipeline through the territory of Turkmenistan is 132 kilometers.
Ashgabat said that seven billion cubic meters of gas would be delivered to Iran in 2017 as in 2016. However, the Turkmen side said that the deliveries were limited in January 2017 due to debts in the volume of $1.8 billion.
In December 2017, Turkmenistan supported the offer of Iran’s national gas company to appeal to the International Court of Arbitration, because Tehran didn’t agree with the volume of debt.
Project status
There is potential to increase the capacity of the pipeline up 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 six billion cubic meters per year. The related branch on Iran’s territory from Sarakhs to Sangbast settlement through Hangeran was opened in November 2010.
Project Status
There is potential to double the gas pipeline’s capacity.
East-West gas pipeline (internal main pipeline)
Project Status
The commissioning of the East-West gas pipeline in December 2015 contributes to expansion of Turkmenistan's possible export routes.
The gas transmission system has a length of 773 kilometers and a capacity of 30 billion cubic meters of gas per year.
Its construction was carried out using the capacities of state concerns Turkmengaz and Turkmennebitgazgurlushyk. The project's approximate cost exceeds $2 billion.
The East-West gas pipeline is intended to transport natural gas from the biggest deposits in the country’s eastern regions - Galkynysh and Dowletabat - to other gas pipelines of the country and to increase capacities and reliability of gas exports, as well as the domestic gas supply.
Construction of this strategically important inter-regional gas pipeline started in May 2010 at the Shatlyk gas compressor station, located in the Mary province.
The East-West pipeline can be used to supply Turkmen gas to Europe both through the traditional route - across Russia, and across the Caspian Sea.
Experts believe the construction of a 300-km gas pipeline across the Caspian Sea to the coast of Azerbaijan could be the most optimal route for gas transmission. Azerbaijan, in this case, could deliver Turkmen gas to Turkey, from where it would go to European markets.
TAPI gas pipeline (Turkmenistan-Afghanistan-Pakistan-India)
Gas companies of Afghanistan, Pakistan and India are the buyers of gas as part of this project. Bangladesh also wants to join the TAPI as a buyer, but there has been no progress in this direction in 2017.
Participating states created a consortium, TAPI Pipeline Company Limited, and Turkmenistan’s state concern Turkmengas was chosen to lead the company.
Negotiations are underway with potential participants. Currently, the project is being promoted by the Asian Development Bank (ADB), which is acting as a transaction adviser to the project.
In December 2015, an agreement on shareholders was signed by Turkmengas, the Afghan Gas Enterprise, Pakistan’s Inter State Gas Systems (Private) Limited and the Gail Limited (India).
Galkynysh, the second biggest gas field in the world (after South Pars in the Persian Gulf), will be a resource base for the TAPI.
The third phase of development of the gas deposit was launched in December 2015 by a Japanese-Turkish consortium that includes JGC, Mitsubishi, Itochu, Chiyoda, Sojitz, Chalik Group of Companies and Ronesans Endustri Tesisleri Insaat Sanayi ve Ticaret Anonim Sirketi.
Project Status
Turkmenistan launched construction of its section of the TAPI on Dec. 13, 2015.
The pipeline’s length is 1,814 kilometers: 214 kilometers are planned to run through Turkmenistan, 774 kilometers through Afghanistan (from Herat to Kandahar), and 826 kilometers through Pakistan (from Quetta to Multan).
The pipeline will end at the Fazilka settlement on the border between India and Pakistan.
TAPI’s design capacity is up to 33 billion cubic meters of gas per year. The gas pipeline, including its auxiliary ground infrastructure, are planned to be put into operation in December 2019.
The basic document is Ashgabat interstate agreement of the participating states signed in 2010 about the beginning of practical implementation of the TAPI project. Instability in transit Afghanistan is still a major obstacle to the implementation of the project, but Kabul says it will be able to ensure the safety of the route.
Russia shows interest for this project at a high level, its implementation is supported by the US, which oppose a similar project from Iran to Pakistan.
Representatives of the Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), Saudi Fund for Development and the Japanese government also expressed their interest to participate in financing the TAPI project.
It was reported in October 2016 that the Islamic Development Bank (IDB) allocates a loan worth $700 million to finance the TAPI pipeline’s Turkmen section. The agreement was signed with Turkmenistan’s State Bank for Foreign Economic Affairs.
The loan will be allocated in two tranches: $350 million of the total volume will be used for construction and installation work and purchase of gas compressors, and the remaining amount – for the purchase of pipes and equipment. The term of loan is 15 years.
It was reported in November 2017 that Turkmenistan’s State Bank for Foreign Economic Affairs concluded an agreement with the Saudi Fund for Development on financing the purchase of gas pipes, and those meant for the construction of the TAPI pipeline’s Turkmen section. The cost of the agreement has not been disclosed.
DISCUSSED PROJECTS
* Turkmenistan sells its gas at the border.
The designed gas pipelines from Turkmenistan: to Europe (the Trans-Caspian gas pipeline through Azerbaijan) and the Caspian gas pipeline through Kazakhstan.
EUROPE
Trans-Caspian pipeline
Turkmenistan explores the possibilities for export of its energy resources to the European market. The project of laying the Trans-Caspian gas pipeline to the coast of Azerbaijan, where the Turkmen raw materials can be delivered to Turkey and further to Europe, is being promoted with this purpose.
The Trans-Caspian project can be implemented as part of the Southern Gas Corridor project. The Trans-Anatolian Natural Gas Pipeline (TANAP – which involves Turkey and Azerbaijan) or Azerbaijan-Georgia-Romania Interconnector (AGRI) projects may be useful in this field.
Turkmenistan’s negotiations are being continued with Azerbaijan, Turkey, Georgia and the European Union in connection with the implementation of the Trans-Caspian pipeline project. The EU continues to actively promote this project, expecting to receive Turkmen gas in 2019. However, there were no practical steps in this direction in 2017.
In order for this to become a reality, it will be necessary to lay the 300-km gas pipeline along the bottom of the Caspian Sea, the legal status of which is yet to be determined by Caspian states, to the shores of Azerbaijan.
Ashgabat believes that the consent of the parties (Turkmenistan and Azerbaijan), the territory of which is covered by the project, is sufficient for laying the pipe along the bottom of the Caspian Sea.
Azerbaijan, for its part, has expressed readiness to provide its territory, transit opportunities and infrastructure for the implementation of the project.
Project Status
There are no direct agreements for the implementation of the Trans-Caspian gas pipeline.
Negotiations have been conducted since 2011 between the interested parties – the EU, Azerbaijan and Turkmenistan.
In May 2015, Ashgabat declaration on energy was signed by energy ministers of Azerbaijan, Turkey, Turkmenistan and European Commission Vice-President for Energy Union Maros Sefcovic. Later, Georgia also joined the negotiations.
Turkmenistan declared its readiness to supply 40 billion cubic meters annually to Europe, 10 billion cubic meters of which can be provided by the Petronas company, which operates in the Turkmen sector of the Caspian Sea. The remaining volume can be provided by the 800-km East-West pipeline, which originates from the Galkynysh field and finishes off the coast of the Caspian Sea.
TANAP
Azerbaijan and Turkey signed an intergovernmental agreement on June 26, 2012 on implementation of the Trans Anatolian Natural Gas Pipeline (TANAP) project, designed to supply the Azerbaijani gas at the initial stage.
Following the negotiations with Turkmenistan’s President Gurbanguly Berdimuhamedov in November 2014, Turkish President Recep Tayyip Erdogan said that TANAP could also count on supplies of Turkmen gas to Europe.
In this connection, Turkmenistan’s Turkmengas State Concern and Turkey’s Atagas concluded a framework agreement on cooperation in the issues of purchase and sale of natural gas.
Previously it was reported that TANAP project envisages the construction of a system of gas pipelines from Azerbaijan’s Shah Deniz field through Georgia, Turkey, Greece, Albania, to the south of Italy by 2019.
It is planned to supply six billion cubic meters of gas to Turkey and 10 billion cubic meters of gas to Europe via TANAP.
The pipeline’s capacity may be increased up to 31 billion cubic meters in the future. At the current stage, the project’s cost is estimated at $10-11 billion.
AGRI
* Turkmenistan is highly interested in the Azerbaijan-Georgia-Romania Interconnector (AGRI) project, which envisages the supply of liquefied Caspian gas through Georgia’s Black Sea coast to Romania.
The project’s cost will depend on the design capacity and can vary between 1.2 and 4.5 billion euros.
To supply this project with Turkmen gas, as in the case of other projects, it is necessary to build a separate gas pipeline along the Caspian seabed to the coast of Azerbaijan or to deliver liquefied gas through the sea via tankers.
RUSSIA
Caspian gas pipeline (Turkmenistan-Kazakhstan-Russia)
The design capacity of the Caspian gas pipeline is up to 30 billion cubic meters per year. Gazprom PJSC can act as a buyer of the gas.
Project Status
The preparation of the feasibility study has been suspended due to global recession and changes of the situation on energy market.
Senior Russian officials said that an agreement was reached to freeze the project. Turkmenistan said that there were no such negotiations.
Two years ago Turkmen President Gurbanguly Berdimuhamedov recalled this project during the opening of the internal East-West gas pipeline. However, no progress has been achieved on this issue so far.