Pipeline to China Would Give Turkmenistan Options

11-May-07

Constructing a gas pipeline to China will help Turkmenistan diversify its export options and place it in a stronger position to dictate it sells its gas at, NBCentralAsia analysts say.

On May 7, Kazakstan’s energy and mineral resources minister, Baktykoja Izmukhambetov, announced that his country is both interested in building the Turkmen-Chinese pipeline, which would go through its territory, and the technology to do so.

A precise route is still being discussed, but according to current plans, it will run through Uzbekistan and then Kazakstan, supplying China with around 30 billion cubic metres of gas each year.

At the beginning of May, China reached agreement with Uzbekistan on building the section of the pipeline through that country.

Turkmenistan and Uzbekistan are the largest exporters of gas in Central Asia. The Turkmen extracts over 65 billion cu m of gas a year, 40 billion of which is exported via a pipeline controlled by the Russian gas giant Gazprom. Uzbekistan produces around 60 billion cu m, exporting 10 to Russia.

The debate on laying a gas route to China coincided with talks between the Turkmen, Russian and Kazak presidents at an energy summit in Ashgabat this week, at which the top agenda item was a planned pipeline route from Turkmenistan via Kazakstan’s Caspian coastline to Russia.

Analysts say that if the Chinese pipeline project goes ahead, it will consolidate Turkmenistan’s position and give it the confidence to be firmer about insisting on gas prices when it talks to Russia.

“There is no doubt that Turkmenistan is unhappy with the price Gazprom currently pays. President [Gurbanguly] Berdymuhammedov now has competitive alternative for taking Turkmen gas to market. There’s a choice between the Caspian pipeline [to Russia] and the Chinese one,” said an NBCentralAsia energy expert based in Turkmenistan.

Gazprom buys Turkmen gas at 100 US dollars per 1,000 cu m, and sells on to Europe at double the price.

There are several projects on the go to build pipelines to export Turkmen gas – the Transcaspian Gas Pipeline which the European Union is lobbying for, the Caspian line via Kazakstan to Russia, and another one which would go via Iran and Pakistan to India.

NBCentralAsia Kazak analyst Petr Svoik says the China line will help Turkmenistan reduce its dependence on Gazprom and win more advantageous export deals. China is a good bet as it is now a leading consumer of energy resources.

“The volumes and productivity of Turkmenistan’s gas sector are very big, but they aren’t limitless. If China becomes a consumer, Gazprom will get less, so there’s going to be a very tough competition,” Svoik said.

According to some estimates, Turkmenistan has gas reserves of nine trillion cu m.

Rovshan Ibrahimov, another expert on Caspian energy, acknowledges that the Chinese pipeline might mean Turkmenistan loses the option of selling gas to Europe at a large profit in the future. At the same time, he doubts that Chinese purchase will pose a serious threat to long-term Turkmen-Russian contracts. Turkmenistan is contracted to increase sales to Russia from 50 to 90 billion cu m a year by 2028.

(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)