This commentary is from USAK’s Energy Review Newsletter
http://www.turkishweekly.net/energyreview/TurkishWeekly-EnergyReview10.pdf
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Following the death of the leader of Turkmenistan Saparmurat Turkmenbashi discussions about possible development scenario of Turkmenistan is one of the key issues of concern to many specialists in international relations. Being of the major exporters of gas in the Eurasian region this state during the period of the rule of Turkmenbashi has got several long-term agreements concerning supplying of the natural gas.
In particular, there is 25 years contract with Russia and 30 years with China. These countries primarily interested in whether the change of government, the continuity in the performance of their duties in accordance with the signed agreements. In addition to these states, the European Union is also interested in supplying of gas to their home countries and has increased lobbying project of NABUCCO pipeline and almost forgotten Transcaspian pipeline project.
There raise a question of who will be the principal purchaser of gas in Turkmenistan, because maybe some of the causes response to the issue could play a crucial role in the distribution of gas resources in the Eurasian space. As the leading sector of the economy of Turkmenistan, the gas industry has been built on 1960-ies. The high quality of the gas produced in this state, in which virtually no sulphur, carbon dioxide, has been particularly attractive for industrial and commercial areas of the economy of the former Soviet Union. Since its independence, Turkmenistan has provided gas production in its territory mainly their capabilities. In exploration and production mainly in the state-owned companies as Turkmengeologia, Turkmenneft and Turkmengaz which has produced about 80% of the total gas production in the state.
The main production area of natural gas is East Turkmenistan, which has an area of 180,000 square. km. In this region, a number of fields, among which are the deposits such as Dovletabad with stocks, according to some estimates, consist about 4.5 trillion. cubic meters. However, the exact figure on the availability of gas, both in this and other fields is not possible since there is no possibility of monitoring by independent experts. There are reports that large gas deposits also exist in Malay, Shatlyk, Odjak, Samantepe etc.
Another large hydrocarbon deposits existed in the south-east in Mary province. This gas reserve could be exploited within 15-25 years. There are deposits of gas and in the western part of Turkmenistan. Some oil and gas fields available in the Turkmen sector of the Caspian Sea. According to official sources nowadays Turkmenistan may supply gas to 220 million cubic meters per day.
So far, in addition to domestic consumption Turkmenistan exports its gas through pipelines to Iran, and through Kazakhstan to Russia. In 2005, it signed an agreement with Russia on the supply of Turkmen gas in the country within 25 years. Another agreement was reached on the construction of a gas pipeline to China, which over a period of 30 years would allow the export of gas annually in the amount of 30 billion cubic meters. Gas here will come from the recently discovered deposit Iolotani gas reserves, where accordingly to the Turkmen sources reach 1.7 million cubic meters. Negotiations are under way for the signing of a similar agreement with India. With this agreement also planned pipeline construction the capacity of which is planned to reach 33 billion cubic meters.
The main consumers of natural gas are Iran, Russia and Ukraine. In 2006 to the markets of these states have been exported 45.5 billion cubic meters of gas. Most of part of this gas has been purchased to Ukraine via Russian pipeline, the remainder Russia by Gazprom and Iran. Volumes of gas from Turkmenistan each year continues to grow. For example, in 2007 only in the direction of the Iranian plans to export up to 14 billion cubic meters of gas. The talks between Gazprom and Turkmenistan on the delivery by this state in Russia 50 billion cubic meters annually within three years.
There is also a capability for the production of LNG, the demand for which in world markets has never stopped growing. Thus, Turkmenbashi KNPZ and Naip gas refinery set of a year, on average, is 400,000 tons of liquefied gas. It is expected that by 2020, LNG production will reach 2 million tons per year. To date, the LNG is exported to Iran, Afghanistan and other countries in the region by rail. It is planned to export to the Far East through sea transportation route. This port Kianla started on the construction of a terminal for the storage and shipment of LNG in the Caspian seaside states, and from there to Europe.
However, implementation and enforcement of much natural gas should be clearly defined to Turkmenistan to perform functions under the treaties. Indeed, in the view of many experts are skeptical that Turkmenistan will be able to provide all of the requisite number of gas. In the first place, because it is difficult at this time to estimate the growth in real production in the country. Thus, some experts believe that in 2010, gas production will remain at current levels, although so far Turkmenistan will have to be much more gas for export, or some arrangement would simply is not feasible. Anticipating this, Russia has already taken some steps to the responsibilities for the supply of gas to the country, where a new leader of Turkmenistan Gurbanguly Berdimukhamedov again gave assurances to Prime Minister of Russia Fradkov during his visit to Ashgabat in February in this year. If the expectation about lack of necessary volume of gas will be confirmed there would be nothing to Turkmenistan to export to China. In this case, Russia will be double winners, as a country that has access to Turkmen gas, and as the only gas exporter to China.
The solution to this problem may lie in direct investment in the gas industry of Turkmenistan, on the part of China. The same applies to Europe, which would provide an alternative route directly, bypassing Russia through Transcaspian pipeline and by the NABUCCO pipeline with exemplary route Asia-Azerbaijan-Georgia-Turkey-EU to import Turkmen gas. Currently, the share of foreign companies in mining Turkmen gas does not exceed 10%. However, after the death of Turkmenbashi current government may revise their views on the opening of its economy to foreign capital and foreign companies will be able to increase gas production to the levels required for its exports.
However, there is another problem, which could impede the implementation of these projects. So far, there is no accurate information on actual holdings gas deposits in Turkmenistan. The widely divergent, in the view of some experts think gas reserves in Turkmenistan is much lower than the official sources. In this case, the multi lines initiatives which are included Turkmenistan-China, Turkmenistan-Afghanistan-Pakistan pipeline, Transcaspian pipeline and NABUCCO may prove costly empty undertaking some of which include political risk in constructing them through the unstable region. In this case, it is in the interest of Turkmenistan to allow independent experts to audit their deposits in the identification of unknown reserves of the natural gas.
For evidence of the high amount of resource, Turkmenistan should find ways to break the isolation of economic sanctions and declare open regime to foreign investment. Otherwise, the country may be in the very near future the main source of instability and a threat to security within the country and the region as a whole. And in this case it will be a very difficult to predict what kind of developments will be followed. But is a clear that the outcome will have a negative effect on the entire surrounding region.
Editor of USAK Energy Review
This commentary is from USAK’s Energy Review Newsletter
http://www.turkishweekly.net/energyreview/TurkishWeekly-EnergyReview10.pdf
To subscribe email to energyreview@turkishweekly.net
