Turkmenistan still has an option to direct its gas westward

Turkmenistan still has an option to direct its gas westward

Baku, Azerbaijan, Aug. 11

By Azer Ahmadbayli – Trend:

Enormous quantities of natural gas are concentrated in one limited (Caspian) region. The nations that own it – Russia, Iran, Turkmenistan, Uzbekistan, Azerbaijan – each has its market to sell the gas, but all of them would willingly diversify their gas export in order not to depend on one customer.

On August 1, Iran inaugurated a 170-km Damghan-Sari pipeline with 40 million mcm/d of carrying capacity, a source in Iran’s Oil Ministry told Trend. The project is worth about $250 million. The pipeline will enable to transport gas to six north-eastern regions: Semnan, Golestan, Mazandaran, North Khorasan, Khorasan Razavi, and South Khorasan. Iran’s gas production capacity in northeast regions stands at about 14 bcm/y, about 12 bcm/y less than the demand.

Iran’s oil minister and top gas industry officials took part in the event, the source said, adding that the pipeline will lessen dependence on Turkmen gas import in northeast regions.

Iran imported about 5.86 bcm of gas from Turkmenistan during 2016, about 53 percent less than the previous year, according to an official document prepared by Iran's Oil Ministry. In early 2017, gas export was completely stopped due to a $1.8 billion debt dispute between the states.

Tehran, at least verbally, was making contradictory statements during the last several years about importing Turkmen gas – from calls to completely abandon the deliveries to assurance that Iran will definitely continue buying it. But whatever Iranian officials say, in the long term Turkmen gas will remain a direct rival for that of Iran in south-eastern (IP pipeline vs. TAPI) and European (Iran is firmly against construction of Trans-Caspian pipeline) directions. After all the South Pars phases are put into operation, Iran will have volumes sufficient for feeding north-eastern provinces, as well as for exporting its own gas to Pakistan and/or Europe in case of need.

Now what do we have on hand for Turkmen gas export? In early 2016, Russia canceled gas import agreement with Ashgabat and is no more the buyer of Turkmen gas. Iran, as it was mentioned above, may say one day that it does not need Turkmen gas anymore.

By having built three branches of the Central Asia-China gas pipeline and building now the Line D of it, China requires more gas from Turkmenistan. In 2016, according to BP Statistical Review of World Energy, China imported 29.4 bcm of Turkmen gas. So, for the time being, Turkmenistan is left alone with the Red Dragon, which became a single customer of Turkmen gas.

It is wrong to believe that Ashgabat does not realize the potential consequences of having a single gas buyer. No doubt, Ashgabat would be happy to have alternative routes, but how to get hold of them?
Turkmenistan still has an option to diversify its gas export, particularly to the West. To achieve this goal, Ashgabat has to change its persisting, since the time it gained independence, concept of “selling gas on border”. The second critical thing to change to improve the current situation is to allow the Majors get stakes in projects of development of giant onshore gas fields, such as Galkynysh. By the by, China’s CNPC is the sole foreign company to have a PSA type contract with Ashgabat for the development of an onshore gas field (2007, Bagtyyarlyk contract area).

Authorization for PSA type contracts would radically arouse the Majors’ interest in commercialization of gas export, including field development and construction of export pipelines. International financial institutions will also contribute. New contracts, if signed, should take account of Turkmenistan’s national interests.

The EU can also play a certain role in development of closer relations with Turkmenistan. This can be done through the support to Turkmenistan’s international initiatives made as far back as in 2008, concerning implementation of international legal instrument under the auspices of UN on provision of energy resources to the world markets.

The European support should be not in the form of verbal solidarity with the Ashgabat’s suggestion or another routine UN resolution, but in the form of practical steps resulting in a system of guarantees allowing Turkmenistan and other smaller countries pursue more independent energy policy.
If such mechanism runs, Turkmenistan can address the needs of western oil companies giving them a foot in the door to Turkmen giant gas reserves, and for the foreseeable future Turkmen gas may appear in European gas network.

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