Status of Turkmenistan’s gas transportation projects for December 2015

Ashgabat, Turkmenistan, Dec.28

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 for the volume of natural gas reserve 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.

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.

Over 76 billion cubic meters of gas was produced in Turkmenistan in 2014, while the export exceeded 45 billion cubic meters.

It is planned to increase the gas production in Turkmenistan to 83.8 billion cubic meters in 2015 and export 48 billion cubic meters of this volume.

The rich resource base of Turkmenistan's thermal power plant enables to sign long-term contracts on stable electricity supply. Currently, there are agreements on three gas pipelines: Turkmenistan-Russia, Turkmenistan-China and Turkmenistan-Iran.

Diversification of gas export is one of the primary tasks of Turkmenistan's energy policy.

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 has signed an agreement with Turkmenistan in 2003 for gas supply for a period of 25 years.

Project status

CAC doesn't operate at full capacity. Russia suspended the import of Turkmen gas in April 2009 due to the accident. The technical problems were resolved, however, due to the global recession, Russia has reduced the purchases to 10-11 billion cubic meters of gas since 2010, or four times less than in 2008.

The annual volume of supplies to Russia dropped by 2.5 times more and stood at 4 billion cubic meters in 2015.

Gazprom said that the volume of purchases in 2015 has dropped due to the decrease in demand for Russian gas in Europe and Ukraine. Due to the decrease in the prices for gas exported to Europe, the price set for Turkmen gas ($240 per 1,000 cubic meters) no longer suited Russia.

Turkmenistan's Ministry of Oil and Gas Industry and Mineral Resources said in mid-July 2015 that without explaining the reason, Gazprom Export LLC hasn't paid the remaining sum for the natural gas delivered from Turkmenistan since early 2015.

Gazprom, for its part, field a suit in the arbitration court in Stockholm against Turkmengaz and demanded to revise the prices on the contract for gas supply, said the sources close to Gazprom.

Construction of a junction line in 2012 from the coast of the Caspian Sea, where Petronas can start the industrial gas production at the offshore block, gave an opportunity to provide Russia with raw materials not only from Turkmenistan's eastern fields, but also from the West.

CHINA

Trans-Asian gas pipeline (Turkmenistan- China)

The gas pipeline was put into operation in 2009. CNPC is the purchaser of gas.

As of November 12, 2015, the total volume of gas supplied from Turkmenistan to China (since 2009) reached 121 b c m. Some 82 b c m were also supplied by the Turkmengas State Concern and 39 billion cubic meters - from the Bagtyyarlyk contractual territory. CNPC is engaged in development on the basis of a production sharing agreement.

The total capital investment in the project at Bagtyyarlyk reached $5.56 billion.

Galkynysh field also becomes a raw material source for the Trans-Asian gas pipeline. It is being developed due to the multi-billion credit support 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 b c m in 2021.

IRAN

Korpeje-Kurt-Kui gas pipeline (Turkmenistan-Iran)

The pipeline was commissioned in December 1995. Its capacity has been brought to 8 b c m per year.

The National Iranian Gas Exports Company (NIGEC) is the purchaser of gas.

Project Status

There is potential to increase the capacity of the pipeline to 14 b c m 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 b c m 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.

The National Iranian Gas Exports Company (NIGEC) is the purchaser of gas.

Project Status

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.

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. Contract works involved foreign companies too.

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, which is capable of pumping daily 90 million cubic meters of natural gas, 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 too wants to join the TAPI as a buyer.

Four states participating in the project had undertaken preparatory works: contracts were signed for purchase-sale of Turkmen gas, the UK-based company Penspen completed a feasibility study for the project, and a consortium - TAPI Pipeline Company Limited - was created.

Turkmenistan's state concern Turkmengas was chosen to lead the TAPI Pipeline Company Limited.

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 (India) Limited.

Galkynysh, the second largest 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 locality 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 infrastructures, 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 the 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.

Earlier it was reported that heads of such companies as Chevron, Exxon Mobil, BP, BG Group, RWE, Petronas, having familiarized themselves with the terms of TAPI, expressed their intention to participate in it.

Indian sources said that the interest was shown by the Shell company as well. South Korean Korea Gas Corporation (Kogas) and Dragon Oil (UAE) also made proposals for TAPI.

DISCUSSED PROJECTS

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 within the framework of the Southern Gas Corridor project.

Talks between Turkmenistan and Azerbaijan, Turkey, Georgia and the European Union regarding the implementation of the Trans-Caspian gas pipeline have recently intensified.

The EU has started to actively lobby for the project, expecting to receive Turkmen gas in 2019.

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 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.

In turn, Azerbaijan has expressed readiness to provide its territory, transit opportunities and infrastructure for the implementation of the project. The representatives of SOCAR (State Oil Company of Azerbaijan) stated about this fact.

Project Status

There are no direct arrangements for the implementation of the Trans-Caspian gas pipeline.

The negotiations have been conducted since 2011 among the major stakeholders - the EU, Azerbaijan and Turkmenistan.

Turkmenistan declared its readiness to supply 40 billion cubic meters annually to Europe, 10 billion of which can be provided by the Petronas operating in the Turkmen sector of the Caspian Sea. The remaining volume can be achieved by the 800 km East-West pipeline being built on the territory of the country, which originates from the Galkynysh field and finishes off the coast of the Caspian Sea.

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 OJSC can act as buyer of the gas.

There is a political decision regarding the project - in May 2007, the presidents of Russia,
Kazakhstan and Turkmenistan signed an agreement on its construction.

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 earlier that an agreement to freeze the project was reached. Turkmenistan said that no such negotiations were conducted.

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