Turkmenistan Gas Pipelines Still Possible

Turkmenistan Gas Pipelines Still Possible



May 2007 - The agreement reached by the 
presidents of Russia, Turkmenistan and Kazakhstan earlier this month to 
build a gas pipeline from the Caspian shore to Russia has been hailed by 
the international media as a Russian victory over the West. 
The excitement generated by the trilateral deal, which presidents Vladimir 
Putin of Russia, Kazakstan's Nursultan Nazarbaev and Gurbanguly 
Berdymuhammedov of Turkmenistan signed at a May 2007 - . 
"Russia registers victory in Caspian basin energy game," declared 
EurasiaNet, while the Washington Times referred to the deal reached in the 
city of Turkmenbashi as "a victory for Moscow over US and European plans 
for the region." 
Reacting to the deal on May 14, U.S. Energy Secretary Samuel Bodman said 
the deal was "not good" for Europe, which needs to diversify its sources 
of energy. 
But several analysts are downplaying the importance of the pipeline deal. 
They say it does not necessarily rule out the Trans-Caspian Gas Pipeline, 
or indeed any of the other pipelines that might be built to bypass Russia. 

Currently, all Central Asian gas shipped to Europe comes through Russia. 
Gazprom, the country's giant gas producer, owns and operates the 
Soviet-era Central Asia-Centre, CAC, pipeline which carries the gas. 
Gazprom has a deal in place that commits Turkmenistan to increase exports 
to reach 90 billion cubic meters by 2028. At the moment, Russia takes 50 
billion cubic meters of Turkmenistan's annual production of 65 billion 
cubic meters. 
The May 12 agreement will provide greater capacity for getting the extra 
gas out. It will initially entail the reconstruction of an existing 
western branch of the CAC running along the shore of the Caspian Sea, 
taking Turkmen gas via Kazakstan to Russia. 
President Putin said this would carry 10 billion cubic meters a year, and 
a parallel, new pipeline would be laid alongside it to boost overall 
capacity. Putin said a full agreement would be signed by July. 
For Europe, the importance of alternatives to Russian energy supplies was 
underlined in January 2006, when deliveries of Russian gas to large parts 
of western Europe were disrupted due to a pricing conflict between Moscow 
and Ukraine – a development which created some concern in Europe about 
Russia's reliability. 

The Trans-Caspian Gas Pipeline would be an extension of the South Caucasus 
Pipeline, here shown under construction. 
Planning for the TCGP, which would go west rather than north, began back 
in 1998 when the United States funded a feasibility study for the project, 
but last year's supply worries have reinvigorated the plan. 
If constructed, the TCGP pipeline would take Turkmen and possibly Kazak 
gas across the Caspian to feed into existing transit routes to Turkey. 
In addition to the TCGP, however, there are a number of other projects on 
the drawing board for pipelines that would get Turkmen gas to market 
without involving Russia. 
One reason why the late Turkmen President Saparmurat Niazov and his 
successor Berdymuhammedov might harbor an interest in alternative routes 
is gas pricing. 
Last year, Turkmenistan succeeded in getting Gazprom to agree to a price 
hike to US$100 per 1,000 cubic meter – but the Russian firm still sells 
the gas on at a markup of around 100 percent, and there is little the 
Turkmen can do about it. 
In April 2006, President Niazov signed an agreement to construct a 
pipeline to China that carried an obligation to sell 30 billion cubic 
meters annually once it is up and running. 
Other proposals exist – one for a pipeline going through Afghanistan to 
Pakistan and on to India, and another that would circumvent Afghan 
territory by running through Iran to Pakistan. The former is an unlikely 
prospect as long as Afghanistan remains unstable, while U.S. opposition is 
likely to block the Iranian option for the foreseeable future. 
Oksana Antonenko of the London-based International Institute for Strategic 
Studies says that for Europe, weaning itself off its reliance on Russian 
oil and gas remains a priority. 
"Europe is concerned that Russia may use its energy resources for 
political purposes [against Europe]," she said. 
But the TCGP project itself faces a number of hurdles, says Annette Bohr, 
an expert on Turkmenistan and an associate fellow of the Royal Institute 
of International Affairs, also in London. These include strong opposition 
from Russia, uncertainty about the size of the gas reserves and the 
production capacity needed to make the pipeline viable, and the 
environmental concerns associated with undersea construction. 
Bohr points out that the new deal has not yet been backed by a contract 
containing the fine details, and so it is a long way from implementation. 
John Roberts, an energy security specialist with Platts Energy Services, 
agrees with this view, saying that while the Russian-Kazak-Turkmen 
agreement is an important development, it does not signal the end of other 
proposed pipelines. 
Map of existing and proposed natural gas pipelines in the Caspian Sea 
region (Map courtesy EIA)
Roberts explains that the gas transported via this pipeline is unlikely to 
come from the mainstream Turkmen reserves that all the big players are 
fighting for. He said that the gas will not come from the major fields in 
southeast Turkmenistan or indeed other parts of the country. 
Instead, he said, the gas for this pipeline will be produced from fields 
operated by foreign companies like Dragon Oil, Petronas Carigali and 
Burren Energy. Roberts says these companies have a prior arrangement with 
the Turkmen government to send their gas to Russia. 
The initial capacity of the reconstructed line will only be 10 billion 
cubic meters a year, not much compared with the 50 billion cubic meters 
the Turkmen now sell to Russia and the 30 billion cubic meters promised to 
China. 
Jonathan Stern, director of gas research at the Oxford Institute for 
Energy Studies, agrees that the TCGP's prospects are not seriously 
affected by this deal, but he argues that there are other obstacles 
standing in its way. 
"The TCGP is not more or less realistic than it was prior to this 
announcement," he said. "What it needs are gas supplies, gas buyers and 
finance – it is not clear that the project currently has any of these." 

President of Kazakstan Nursultan Nazarbaev, left, and Russian President 
Vladimir Putin hold a meeting on the sidelines of the G8 summit in St. 
Petersburg, Russia. July 2006.
While the new agreement means only that Turkmenistan will be more able to 
meet its obligations to Moscow, analysts recognize that it is of 
considerable symbolic importance as a demonstration that Russia is still 
the closest ally of the energy-rich Central Asian states. 
But the Turkmen authorities – who presumably would wish to reduce the 
Russian stranglehold on gas exports and pricing – have indicated that the 
construction of alternative routes remains feasible. 
A week before the trilateral agreement on the pipeline was made, the head 
of the state-owned Turkmengas company, Yashygeldy Kakaev, said the country 
was interested in diversifying its export routes, and cited the TCGP as 
one possible option. 
At a press conference held after the trilateral summit in Turkmenbashi, 
President Berdymuhammedov also said the TCGP is still on the agenda. 
"Diversification of gas distribution is taking place throughout the entire 
world, so this matter could still be examined," he said. 
Stern said that the proposed pipeline to China in particular is "highly 
realistic," provided the Chinese cover the costs of building it and 
producing the gas to feed it. This, he said, "they seem inclined to do." 
Stern added that while the project would not come cheap, China's growing 
economy is devouring energy at such a rate that it is keen to get access 
to Turkmen gas, whatever the cost. 
"Under international economic viability criteria, this project is not 
realistic, but the Chinese do not view projects in these terms," he said. 
In order to implement all these projects, Turkmenistan must increase its 
gas production, which it has indicated it will do. 
Turkmen ambitions have been spurred by the recent discovery of vast 
reserves at the South Yolotan field, which the government says contains 
seven trillion cubic meters. 
If the promised production increases are realized, and export routes are 
diversified to reach new markets, Turkmenistan is likely to see a 
sustained rise in export revenues. 
But as Erika Dailey, director of the Open Society Institute's Turkmenistan 
Project, pointed out, it remains doubtful that the money will trickle down 
to the average citizen. 
"Corrupt governments force their citizens into silence," she said, "so 
that the country's natural wealth can be siphoned into the off-budget 
accounts of the elites rather than into social programs." 
   

       
      

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