Why Gazprom decided to resume imports of Turkmen gas?

Oil&Gas Materials 23 April 2019 12:15 (UTC +04:00)

Baku, Azerbaijan, April 23

By Leman Zeynalova – Trend:

Russian Gazprom’s decision to resume imports of Turkmen gas seems to be political, not economic, Bruce Pannier, expert on Central Asia, told Trend.

“Some think Gazprom’s decision to resume purchases of Turkmen gas is aimed at persuading Turkmenistan to delay any plans for a Trans-Caspian Pipeline (TCP) project. But the volume of Turkmen gas suggests there is some other reason. The 10-week contract calls for delivery of some 1.16 bcm of gas, or some 6 bcm annually if the contract is extended. The TCP would carry some 30 bcm of gas, five times what Gazprom appears ready to take. And we don’t know the price is, but according to reports, it was rumored to be a mere US $110 per 1,000 cubic meters. Turkmenistan could probably receive a better price for sales to Europe through the TCP,” said the expert.

He pointed out that Gazprom does not need this gas, so the decision to resume imports of Turkmen gas seems to be political, not economic.

“What Russia gets in return for buying Turkmen gas is unclear. The Kremlin knows Turkmenistan desperately needs to start selling gas to some customer other than China, though again, the amount Gazprom is looking to take amounts to only some US $670 million annually for Turkmenistan. There is more to this deal than simply a gas-for-cash transaction,” added Pannier.

The expert believes that the negotiations on how much gas and at what price are continuing.

“Gazprom is in a fantastic position at the bargaining table, knowing Turkmenistan needs to sell gas. The 10-week contract is a “sample,” a reminder that some money is better than no money. Turkmenistan will find it difficult to say ‘no’ to any reasonable, and maybe even a not-so-reasonable offer. That said, Turkmenistan will not want to sell to Gazprom at a ridiculously low price. Turkmenistan still hopes to sell up to 55 bcm to China one day (when Line D is built and operating) and if Gazprom buys Turkmen gas at a cheap price, China will want to renegotiate its own contract with Turkmenistan and reduce the price it pays for Turkmen gas. So will any other future customers,” he explained.

Turkmenistan has recently resumed the export of natural gas to Russia after a three-year break. Gazprom company intends to purchase up to 1.155 billion cubic meters of natural gas from Turkmenistan until June 30.


Follow the author on Twitter: @Lyaman_Zeyn