Alternative Gas Routes Move up Turkmen Agenda

Now that Russia has announced cuts in natural gas purchases from Turkmenistan, other export options have become more of a live issue than ever.

Moscow’s decision to maintain gas imports at a reduced level came out during President Dmitry Medvedev’s visit to Turkmenistan in late October. The reasoning is economic – Russia is itself facing sluggish demand in its European markets.

"We are going to find it difficult to increase exports to Europe in coming years," Russian deputy prime minister Victor Sechin told the Moscow newspaper Kommersant.

Total purchases by Russian energy giant Gazprom in 2010 are likely to amount to ten billion cubic metres of Turkmen gas, compared with the 40 to 50 it purchased in past years. The decision to cut imports dates from April 2009, and was prompted by falling demand for Russian gas exports.

The drop in pressure was blamed for an explosion on the Central Asia-Centre pipeline which halted supplies completely. But even when the pipeline was repaired nine months later, the Russians continued to take only a limited amount.

Another result of the decline in demand is that work on a planned pipeline from Turkmenistan to Russia skirting the Caspian Sea seems to have ground to a halt. Russian sources say the pipeline’s future will depend on market conditions.

Rovshan Ibrahimov, head of Energy Research Centre in Azerbaijan, said this pipeline was conceived primarily for publicity purposes, as a way of stymieing alternative plans to transport Turkmen gas across the Caspian to join up with a future route from Azerbaijan and joining up to the Nabucco pipeline which would go through Turkey to Europe, avoiding Russia altogether.

"This project was designed for its implications rather than to be implemented,” Ibrahimov said.

He described Turkmen president Gurbanguly Berdymuhammedov’s approach to rival pipeline routes as “pragmatic", in that “he does not want open conflict with Russia”, and is seeking greater assurances from potential western energy partners.

Other analysts say the current climate offers Turkmenistan a chance to break free from Russia’s traditional grip on its gas exports and to give serious consideration to other routes.

Although there has been much talk of a trans-Caspian undersea pipeline to feed into the Nabucco pipeline, Turkmenistan could get a head start by shipping liquefied or pressurised natural gas across the sea by tanker.

One important piece of infrastructure is already being built – the East-West Pipeline, a domestic route allowing gas from deposits in the east of the country to go to export terminals on the Caspian.

"When the situation becomes clearer, this pipeline can easily used for westward [exports]," an industry specialist from the state oil and gas concern Turkmenneftegaz said.

Assuming that Turkmenistan found ways of exporting to the West, it would face other hurdles, such as accounting for where its gas revenues go. At the moment, this information is kept under wraps apart from reports that some of the money has since 2008 been held in an economic stabilisation fund.

"If large-scale energy projects got under way, western partners, particularly the European Union and the United States, would always look at and demand financial transparency," Annadurdy Khajiev, a Turkmen economic analyst based in Bulgaria, said.

Khajiev said the EU was drafting proposals for transparent budgeting and would make it a condition that all gas revenues from exports to Europe went to the state treasury. t.

In early October, two international watchdogs, the Revenue Watch Institute and Transparency International, published their Revenue Watch Index in which Turkmenistan received the lowest ranking of 41 resource-rich countries.

This article was produced as part of IWPR’s News Briefing Central Asia output, funded by the National Endowment for Democracy.