NATURAL GAS IN TURKMENISTAN
Turkmenistan has the forth largest natural gas reserves in the world behind Russia, Iran and Qatar. Some sources have it listed as fifth in the world behind United States. It is the sixth largest natural gas reserve holder in the world according to the Oil and Gas Journal, and was among the top 15 dry natural gas producers in 2014. Some of the differences in the world rankings are related to how shale gas is counted. Much of Turkmenistan’s natural gas is in the eastern Caspian Sea.
Natural gas - proved reserves: 17.5 trillion cubic meters (January 2014 est.), country comparison to the world: 6. Natural gas - production: 69.2 billion cubic meters (2013 est.), country comparison to the world: 13. Natural gas - consumption: 22.3 billion cubic meters (2013 est.), country comparison to the world: 33. Natural gas - exports: 46.9 billion cubic meters (2013 est.), country comparison to the world: 8. Natural gas - imports: 0 cubic meters (2014 est.), country comparison to the world: 140. [Source: CIA World Factbook =]
Proved reserves of natural gas in 2014: 265 trillion cubic feet, 6th in the world. Exports of dry natural gas in 2011: 1,628, billion cubic feet, 7th in the world. Dry natural gas production in 2011: 2,338 billion cubic feet, 12th in the world. [Source: U.S. Energy Information Administration (EIA) <=>]
The Galkynysh Natural Gas Field is the world's second largest gas field. In September 2013, Turkmenistan announced the start of commercial production at Galkynysh, which will produce more than 1 trillion cubic feet are after phase 1, with a future second phase adding 1 trillion cubic feet a year. The Dauketabad-Donmez field holds more than 2.83 trillion cubic meters (100 trillion cubic feet). [Source: U.S. Energy Information Administration (EIA) <=>]
Turkmenistan is believed to hold huge deposits of natural gas that haven’t been found yet. Much of its capacity has been unexplored due to difficulties faced by the foreign energy companies that attempted to develop them in the 1990s. The hydrocarbon-rich country lacks sufficient pipeline infrastructure to export greater volumes of hydrocarbons. To increase exports, Turkmenistan and foreign partners are investing in pipelines to transport the gas. <=>
Turkmenistan produced more than 2.5 trillion cubic feet of dry natural gas in 2014. The country has several of the world's largest natural gas fields, including 10 with over 3.5 trillion cubic feet of reserves located primarily in the Amu Darya basin in the southeast, the Murgab Basin in the south, and the South Caspian basin in the western part of the country. Turkmenistan is developing its gas-based chemical industry, and the government hopes to export products such as ammonia and synthetic gasoline, according to IHS Energy. <=>
Natural Gas Exports from Turkmenistan
Turkmenistan exports about 45 to 50 billion cubic meters of natural gas a year. It could easily produce three times that amount of it access to pipelines to deliver it.
Russia was previously the country's main market for gas exports, but with falling exports to Russia, China became the primary importer of Turkmenistan's gas in 2011 once imports through the recently-built Central Asia-China Gas Pipeline increased. In order to secure more passages for gas exports, Turkmenistan will need to build new infrastructure to transport its product. [Source: U.S. Energy Information Administration (EIA) <=>]
Among the Caspian and Central Asian countries, Turkmenistan has become a leading natural gas exporter. Turkmenistan exported 1.5 trillion cubic feet via pipeline in 2014. Over half of exports went to China, with Russia and Iran also importing volumes of Turkmenistan gas. Turkmenistan has signed several natural gas contracts with China, most recently in September 2013, and is slated to supply 2.3 trillion cubic feet (Tcf) of natural gas to China by 2020 through a network of parallel gas pipelines running through Central Asia. <=>
In April 2006, China and Turkmenistan signed a deal in which Turkmenistan would sell natural gas to China and China would help Turkmenistan build a pipeline to deliver it. The European Union has signed an interim trade agreement with Turkmenistan, but a broader partnership agreement that would send significant amounts of Turkmenistan natural gas to Europe has been repeatedly stalled because of human rights issues. In 1996, Turkmenistan agreed to give Gazprom 49 percent of its export earning for use of Gazprom pipelines. A year later the gas still was not flowing.
Natural Gas Income
Turkmenistan exports about two thirds of all of its natural gas. It earns a large a portion of Turkmenistan’s gross national product (GNP) year from its natural gas. It could earn a lot more with good pipelines and hard-currency-paying customers. Much Turkmenistan’s natural gas goes to the Ukraine and other former Soviet countries that have difficulty paying their bills.
Until the late 1990s, Turkmenistan pumped about 40 billion cubic feet of natural into Russia’s pipelines to Europe. Moscow sold the gas and passed on $1.4 billion to the Turkmenistan government. Then Gazprom — the Russian natural gas and pipeline monopoly — insisted that the gas would be sent to the Ukraine and the Caucasus area, which had little hard cash to pay for the gas. Turkmenistan has contracts to sell natural gas to the Ukraine and Iran but has stopped delivery to customers who don't pay their bills.
Under Saparmurat Niyazov, the President of Turkmenistan from 1991 to his death in 2006, the Turkmenistan government refused to sign up for pipelines that would help it export natural gas without Russian help. Many blamed Niyazov who seemed unable to grasp the complexity of modern contacts and was suspicious of Westerners and Western companies.
In 2006, Niyazov announced he would provide citizens with natural gas and power free of charge through 2030. Money from production-sharing agreements went directly into Niyazov’s foreign exchange fund. Much of the money earned from natural gas under Niyazov was ploughed into the construction of palaces and statues and vanity projects that outwardly defined his personality cult, or into the pockets and off-shore accounts of the regime. It presumed that much the same is happening under the present Turkmenistan president Gurbanguly Berdymukhammedov.
Turkmenistan’s Natural Gas and International Politics
Access to Turkmenistan’s natural gas has been a foreign policy aim of Russia, the West and China, but development of the sector has been hampered by poor management and lack of transparency. The European Union has sought a deal to commence gas exports from Turkmenistan, to reduce its reliance on Russia. China secured a deal to build a new pipeline in return for billions of cubic yards of natural gas annually over 30 years.
Peter Finn wrote in the Washington Post: “For the outside world, the direction Turkmenistan takes will carry profound implications for energy security. The former Soviet republic is becoming the focus of competition among Russia, China and the West as they vie for its natural gas resources. Most of Turkmenistan's gas is now exported through Russian pipelines. The supply could become vital to the ability of Gazprom, the Russian energy giant, to meet rising demand...But Western governments would like to see construction of new export routes that bypass Russia and diversify the supply chain, something Niyazov had resisted. [Source: Peter Finn, Washington Post, February 4, 2007 <|>]
Fyodor Lukyanov, editor of Russia in World Affairs, a leading Moscow foreign policy journal, told the Christian Science Monitor in 2006: "Until now, Russia has locked up Turkmen gas resources, but with Niyazov's death, the situation has changed and we may now see a big struggle for access to them. This game will be very important for Russia and it may not turn out to be a very pleasant one." [Source: Fred Weir, Christian Science Monitor. December 22, 2006]
Peter Finn wrote in the Washington Post: “The United States has lobbied Turkmenistan, so far unsuccessfully, to build a pipeline across the Caspian Sea that would bypass Russian territory to deliver gas to the outside world. European countries have quietly supported the idea, which would reduce their dependence on Russia for supplies of natural gas. [Source: Peter Finn, Washington Post, December 22, 2006]
“Russian President Vladimir Putin has embraced Berdymukhammedov. At a news conference Putin mused favorably on the idea of an OPEC-like organization for natural gas, although he stressed, "We are not going to set up a cartel." The United States and the European Union have stepped up contacts with Turkmenistan's new leadership. The opposition-in-exile has expressed frustration at what it sees as muted statements from those countries about the need for real democratic change. <|>
In January 2006, Gazprom temporarily prevented supplies reaching Europe after a dispute with Ukraine over pricing. The standoff was eventually resolved through a murky deal that routed cheap Turkmen natural gas to Ukraine and resupplied the Ukrainian pipeline carrying Russian natural gas to the West.
Turkmenistan’s Natural Gas, Russia and Gazprom
Russia's state-run gas monopoly, Gazprom, has been the main customer for Turkmen gas, which it purchases at prices far below world market rates. Until fairly recently most of Turkmenistan's gas was exported through Russian pipelines controlled by Gazprom. Turkmengaz — the Turkmenistan natural gas company — was for a time an important component of Gazprom's ability to meet customer demand at home and abroad. Gazprom's imports of Turkmen peaked in 2008 when it bought more than 40 billion cubic meters of the fuel. In 2009-2014, Russia's annual gas imports from Turkmenistan stood at 10-11 billion cubic meters.
Bruce Pannier of Radio Free Europe wrote: “Russia remained the biggest purchaser of Turkmen gas until a suspicious explosion along the pipeline connecting the two countries occurred in April 2009, amid tense negotiations between the two over the price for Turkmen gas. The ruptured pipeline cut off gas flows entirely for months. Supplies of Turkmen gas to Russia were eventually renewed, but in greatly diminished volumes, leaving Iran the No. 2 customer for Turkmen gas, after China. Iran then became for a brief time the main buyer of Turkmen gas, until the new pipeline from Turkmenistan to China started operation at the end of 2009. [Source: Bruce Pannier, Radio Free Europe, August 14, 2014 *+*]
Catherine Putz wrote in The Diplomat, While Gazprom is the world’s largest natural gas exporter, it imports gas from Turkmenistan either for use in Russia or resale to Europe. Over the last year however, the amount Russia imports from Turkmenistan has plummeted. In 2008, Gazprom purchased more than 40 billion cubic meters (bcm) of gas from Turkmenistan. By 2014 imports had fallen to around 11 billion cubic meters and in December 2014, Gazprom notified Turkmenistan that it would limit its purchase in 2015 to 4 bcm. [Source: Catherine Putz, The Diplomat, July 28, 2015 *|*]
Forbes said that under a 2010 contract Gazprom paid Turkmengaz $240 per 1,000 cubic meters. According to Radio Free Europe...using data from various European countries and statistics agencies, Gazprom’s prices across Europe are distinctly higher than the price it pays to Turkmengaz. Belarus, a close Russian partner, paid the least in 2013 at $166 per 1,000 cubic meters. Poland paid the most, at $526. *|*
A Russian professor of international law, Dmitry Labin, was quoted by Ukraine Today as saying that “In most cases Stockholm arbitration takes a plaintiff’s side, if a defendant does not agree to revision of the pricing policy, despite the relevant clause in the contract.” But he went on to note that because Turkmnegaz is a state-owned company the Turkmen government may choose to ignore the ruling and extend immunity to the company. *|*
Gazprom Sues Turkmenistan After It Accused Russia's Gazprom for Not Paying for Gas
Turkmenistan, irritated by falling natural gas exports to Russia, accused Gazprom of not paying for gas purchased from Turkmenistan in the first half of 2015. "Since the beginning of 2015, OAO Gazprom has not paid for its debts to state concern Turkmengas for the shipped volumes of Turkmen natural gas," Turkmenistan's Oil and Gas Ministry said. [Source: Reuters, July 8, 2015 ||||]
According to Reuters: the ministry “did not say how much Gazprom owed Turkmenistan, nor did it say how much Turkmen gas had been shipped to Russia to date. "Russian company Gazprom has become insolvent on its natural gas purchase-and-sale contracts due to the continued global economic crisis and economic sanctions imposed by Western nations on Russia," the ministry's statement said. Its criticism is likely to escalate a war of words with Gazprom which flared up at the end of last year after the Russian company announced it would cap its purchase of Turkmen natural gas by 4 billion cubic metres (bcm) this year, way below its imports of around 11 billion cubic meters in 2014. Gazprom says that its progress in natural gas exploration elsewhere has made the purchase of gas from Turkmenistan unprofitable. With insignificant exports to neighbouring Iran, a sharp fall in gas exports to Russia leaves Turkmenistan virtually dependent on natural gas exports to China. ||||
Later Gazprom filed a case against Turkmengaz, Turkmenistan’s state gas company, at the international arbitration court in Stockholm, Sweden demanding “a revision of prices.” Russia’s TASS, attributed Gazprom’s payment problem to the “continued global economic crisis and economic sanctions imposed by Western countries against Russia.” Notably, the TASS report didn’t mention Russia’s announcement that it would only be importing 4 billion cubic meters from Turkmenistan this year. [Source: Catherine Putz, The Diplomat, July 28, 2015 *|*]
Turkmenistan, China and Natural Gas
China, the world's biggest energy consumer, buys around 30 billion cubic meters of Turkmen gas annually and plans to double that volume by 2020. According to Bloomberg, China pays Turkmenistan $350 per 1,000 cubic meters.The Central Asia-China pipeline opened in late 2009, a second line was added in 2010 and a third began construction in 2012. China has invested billions of dollars into Turkmenistan and fully financed the construction of the Turkmenistan-China gas pipeline. [Source: Catherine Putz, The Diplomat, July 28, 2015 *|*]
According to Natural Gas Europe: “Turkmenistan delivered 125 billion cubic meters of natural gas to China from 2009 to August 2015. The Ministry of Oil and Mineral Resources of Turkmenistan issued a statement saying that, leading among other gas suppliers, Turkmenistan has become a strategic partner for China.[Source: Natural Gas Europe, September 28, 2015 ^^]
“Chinese CNPC also develops Turkmenistan's Bagtyyarlyk gas field on the bank of the Amu Darya. CNPC announced last week that she put the Tan-401D gas well into production located in Block B of the Bagtyiarlyk based on a production sharing agreement. The well produces natural gas at a daily rate of 300,000 cubic meters. Currently, the gas produced is being transmitted to the Turkmenistan-China gas pipeline, after being treated at the No. 2 Gas Processing Plant of the Amu Darya project, CNPC said. This indicates the successful commissioning of the Bota, Tangiguyi and Uzyngyi gas fields, the Chinese firm added. Construction of the three gas fields commenced in September 2014, with a designed annual capacity of 1 billion cubic meters. ^^
“Currently, the Turkmenistan-China gas pipeline system consists of three branches with a total capacity of 55 billion cubic meters a year to transfer Turkmen as well as gas from other Central Asian states. According to China’s Custom report released on January 26th, China received 25.9 billion cubic meters of Turkmen gas in 2014, less than the 30 billion cubic meters a year agreed between state-owned companies Turkmengaz and China National Petroleum Corp. The two companies also agreed to boost China's imports of Turkmen gas to 40 billion cubic meters a year in 2015.
China’s Future Plans for Turkmenistan’s Natural Gas
In 2014, China unveiled plans to pour billions into Turkmenistan's energy sector to boost its own gas supplies. Beijing is planning to increase its gas imports from Central Asia, importing 65 billion cubic meters of gas from Turkmenistan every year by 2020. In order to deliver such large volumes it is expanding the existing pipeline network, and by 2016 the fourth branch of the China-Central Asia pipeline will be completed - raising the export capacity level to 85 billion cubic meters a year. [Source: Abdujalil Abdurasulov BBC News, November 20, 2014 ==]
Abdujalil Abdurasulov of the BBC News wrote: “This energy expansion fits China's recently announced "Silk Road economic belt" policy, which focuses on a single transport infrastructure to "break the connectivity bottleneck" in the region. And this month president Xi Jinping announced that China would set up a $40 billion Silk Road Fund. Part of that money will go to infrastructure projects in Central Asia. China has been investing billions of dollars into Turkmenistan's energy sector. Just on the first phase of the Galkynysh field's development it spent more than $8 billion. ==
“But some energy specialists warn that Turkmenistan is becoming too dependent on China. "Development of these fields is very expensive and not only requires Chinese capital but has also required Turkmenistan to borrow money from China to meet its share of the development costs," says John Roberts, energy security specialist. "So in effect you've already got Turkmenistan being a debtor nation to China - and that puts the Chinese in a very strong position." This could seriously affect negotiations on the gas price. At the moment the Turkmen government is trying to diversify its energy supply routes to decrease its dependency on China, and is pushing forward with two main projects.” ==
Turkmenistan, Iran and Natural Gas
A $190-million, 200-kilometer (125 mile) pipeline between Turkmenistan and northeast Iran was launched in 1997. Iran has huge oil and natural gas reserves but none of them in northeast region, where many people live. The pipeline can deliver the relatively modest amount of 8 billion cubic meters a year. The pipeline is regarded as the first link of much longer pipeline that will help Turkmenistan get its natural gas out to the rest of the world. The pipeline runs between the Iranian town of Kurd Kui and the world’s largest untapped gas reserves, in Korpedshe, Turkmenistan. The pipline freed Turkmenistan from Russian pipeline domination.
In 2009, when a suspicious explosion along the pipeline connecting Russia and Turkmenistan cut off supplies between those two countries for months, Iran became for a brief time the main buyer of Turkmen gas. Iran’s No. 1 position lasted only a few months until the new pipeline from Turkmenistan to China started operation at the end of 2009. Supplies of Turkmen gas to Russia were eventually renewed, but in greatly diminished volumes, leaving Iran the No. 2 customer for Turkmen gas, after China. [Source:Bruce Pannier, Radio Free Europe, August 14, 2014 *+*]
Bruce Pannier of Radio Free Europe wrote: “In early 2010 a new, second pipeline bringing Turkmen gas to Iran was launched. At that time leaders in the two countries spoke about gas imports to Iran reaching up to 20 billion cubic meters (bcm) annually. A new gas-compressor station started operation in western Turkmenistan in December 2013, built specifically to export more gas to Iran. *+*
“International sanctions on Iran have hindered the country from developing its gas sector and from constructing an infrastructure to distribute gas for domestic use. Iran has the second-largest proven gas reserves in the world (Russia has the most) but again, due to sanctions there has been little opportunity to take advantage of that resource. As talks progress between Tehran and major world powers about Iran's nuclear program, and sanctions are slowly eased, there are new prospects on the horizon for Iran and gas exports are a big part of that.” *+*
Turkmenistan Losing Iran As A Gas Customer as Caspian Sea Pipeline Plan Revived?
In 2014, Bruce Pannier of Radio Free Europe wrote: “It appears Turkmenistan is about to lose its second-best customer for natural gas, Iran. Iranian Oil Minister Bijan Namdar Zanganeh said that his country no longer needed gas from Turkmenistan. Zanganeh went so far as to say, "Iran is importing Turkmen gas just because it is important to promote political and economic relations with Turkmenistan." The oil minister's comments could be bargaining tactics, as Iran has frequently sought to convince Turkmenistan to lower the price for its gas, or it could reflect a potential shift in Iran's role in the international gas market.[Source: Bruce Pannier, Radio Free Europe, August 14, 2014 *+*]
“Zanganeh said that with Iran about to boost domestic gas production by some 200 million additional cubic meters starting in March next year, the country could "abandon completely gas imports from Turkmenistan." This contrasts with his statements in May that Iran would continue to import Turkmen gas at existing levels. *+*
“The same day Zanganeh spoke of the end of Turkmen gas imports, the deputy oil minister in charge of international affairs, Ali Majedi, told journalists Iran was ready to supply Europe with gas via the Nabucco pipeline project. Nabucco was recently shelved after more than a decade of shareholders trying to get potential gas suppliers to sign contracts for supplies, which gas suppliers were hesitant to do since it was unclear how soon, or even if, Nabucco would be built. *+*
“Nabucco was originally envisioned to bring gas from Caspian Basin countries -- Azerbaijan and Turkmenistan, possibly Kazakhstan and Uzbekistan -- and also possibly from Iraq to Europe by way of a 3,300-kilometer pipeline. Nabucco was all but scrapped after Azerbaijan opted last year to use the Trans-Anatolian gas pipeline to feed into the Trans-Adriatic pipeline across Southern Europe. Majedi claimed two European countries had already shown interest in reviving the Nabucco scheme and that "Iran with its major gas fields could supply gas to Europe via Nabucco." And Nabucco's map of its proposed route envisioned the possible inclusion of Iran, so the route is already set. In such a scenario Turkmenistan changes from Iran's gas supplier into Iran's competitor for a space in a pipeline across northern Iran into Turkey and on, eventually, to Austria. *=*
Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, U.S. government, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.
© 2008 Jeffrey Hays
Last updated April 2016