This commentary is from USAK’s Energy Review Newsletter
http://www.turkishweekly.net/energy
To subscribe email to energyreview@turkishweekly.net
Development of energy policy on the territory of Eurasia in the era of globalization reveals some interesting trends. One of the such trends is the dependency of stable development of the integration process within the EU from a neutral Turkmenistan. At first glance, this might seem unrealistic. But the reality is another.
On 23 April, President of Turkmenistan Gurbanguly Berdimukhamedov made his first official foreign visit to Moscow. For Russia and Turkmenistan, the major theme was cooperation in the energy sphere. President of Turkmenistan hopes to attract more foreign investment for the development of gas fields and construction of additional transport corridors for exporting the Turkmen gas to world markets.
Topic of buildig additional pipelines is also a hot issue in Russia; it wants new export routes to pass through its territory. It is no secret that Turkmenistan with the support of the EU is looking for alternative ways to transport Russia and primarily it was the Transcaspian gas pipeline. The parties have agreed to build a new Caspian pipeline. This pipeline will be held along the shore of the Caspian Sea on the territories of Turkmenistan and Kazakhstan, with the yield on the Russian territory. Construction of the pipeline was primarily due to the contract signed between Turkmenistan and Gazprom, under which the country was committed to until 2009 to 40 billion cubic meters of gas a year.
President of Turkmenistan Berdimukhamedov once again assured the Russian side that these commitments will be fulfilled. It may be recalled that Russia had rushed to secure the guarantee even during the visit of Prime Minister of Russia Fradkov in Turkmenistan at a ceremony to bid farewell to former President Saparmurat Turkmenbashi. Even then Berdimukhamedov said that the responsibilities of the treaty would be implemented.
Stable supply to the Russian giant is particularly important. Today Gazprom is a monopolist in the production and export of natural gas from Russia to Europe. Many countries in Europe are dependent on the supply of Russian gas. For example, Bulgaria offers to its market only Russian gas, and it covers up to 14% of energy needs of the country. Russian gas accounts for more than 80% of total gas imports in Greece, 67% of the Czech Republic, 65% of Hungary, more than 60% of Poland. Note that with the exception of Greece, all the other countries are new members of the EU. Therefore, the entry of these States in the Union has grown the dependence on Russian gas EU as a whole.
However, the old EU members also depend on the supply of Russian gas and the relationship continues to grow. Thus 42% of the gas consumed in Germany comes from Russia. In Italy, it is equivalent to 30%, France 20%. After construction of Northern pipeline located on seabed of the Baltic Sea, dependence on the supply of gas to these countries will raise even more. Gazprom is also heavily involved in policy on the acquisition of the gas distribution networks in European countries. This will allow Gazprom to ensure access to the final consumer and thus provide a stable demand, and thereby increase the company’s profits.
With the increased responsibilities to its European customers, the need for additional volumes of gas for a stable supply. Currently gas from Gazprom is growing at 1-2% per annum. Gazprom has been reluctant to increase production and develop new fields. The basic policy of monopoly is not investment in exploration and production of gas and gas infrastructure acquisition in the European countries.
The development of promising gas fields like Shokman and Kovykty delayed because of the lack of investment, technology and infrastructure. The way out of this situation, Gazprom sees increase in the supply of natural gas from Central Asia. Along with Turkmenistan similar treaties were signed with Uzbekistan and Kazakhstan. Gazprom hopes to be able to meet obligations to export natural gas to European countries at the expense of imports from these countries. It is therefore necessary to ensure the stability of gas supplies from those countries. Otherwise, over the coming years, Gazprom may face a challenge to its exports of gas. That is why Russia rushed to secure the supply of natural gas from Turkmenistan.
After the death of President Niyazov, the new government has already begun to search for alternative ways to export its gas to Europe. And that is why Russia has agreed to begin construction of the Caspian pipeline to provide additional guarantees for the import of gas from Turkmenistan. Western consumers of natural gas, are analyzing the current situation in the gas market, too, in turn, they are trying to secure the supply of natural gas from Russia. One of the tools for achieving this goal is to extend the contracts for the supply of gas from Russia to these countries. So in Athens, Greece recently signed a contract with Gazprom to extend the contract for the supply of gas from 2016 to 2040. Previous contracts extended France and Bulgaria till the 2030, Italy till 2017 until 2035, the same did also some other countries.
In doing so, in each case, Gazprom has the right to access to the end user in these countries. In Italy, in particular, Gazprom will sell end-user up to 3 billion cubic meters annually, and in France up to 1,5 billion cubic meters per year. Extension of these instruments was primarily due to be taken to guarantee the stable supply of gas to their markets in the case of a possible shortage of gas in Russia in the future.
There was an interesting conversation created panic wave in connection with future projections. Stable supply from Russia into the European countries is dependent from stable supply from the Central Asian countries. And with a shortage of gas in Turkmenistan and Kazakhstan, or for those countries to alternative transportation corridors, it is feared that Russia might not meet its obligations to the Europeans.
It is an irony in the fact that in the case of constructing Transcaspian pipeline and connecting it to the Baku-Tbilisi-Erzurum gas pipeline and the planned Nabucco pipeline, gas will come to European consumers who are not the same consumers receiving natural gas coming from Russia. At first glance may seem natural gas alternative for European countries, but in case of concrete country consumers from two different directions. If gas supplies to the Russian direction depends primarily Germany, France and Italy, the gas from Nabucco will come to Hungary, Romania and Austria. Even then, Hungary is expected to draft Nabucco, but prefers to support the project for the extension of the Blue Stream pipeline to its territory. Hungary considers it more real. But the Blue stream will be an alternative to the Nord Stream pipeline. So competition for Russian gas inside the EU can only grow.
The situation could become even more dramatic if the countries exporting natural gas to agree on the establishment of a gas OPEC and so natural gas from other parts of the world will be imported in agreement with Russia. In this case, competition within the European Union between the members of the organization will further deteriorate. The neutral Turkmenistan is clearly affects the stability of the EU.
Rovshan Ibrahimov, Chief Editor, USAK Energy Review
rovsen@azerimail.net
This commentary is from USAK’s Energy Review Newsletter
http://www.turkishweekly.net/energy
To subscribe email to energyreview@turkishweekly.net
