Turkmen Seek to Dictate Gas Price
Turkmen Seek to Dictate Gas Price
The Turkmen government is on a mission to raise the price it can charge foreign buyers for its natural gas exports, and is discussing alternative export routes as part of this strategy.
Some NBCentralAsia analysts doubt whether Turkmenistan is in a position to dictate prices, especially if they are unrealistic.
Turkmen officials are attending a meeting on possible new gas pipelines to Europe on May 8.
The talks, which will focus on the Nabucco pipeline project, are part of a meeting involving leaders from six former Soviet states which is being hosted in Prague by the European Union. Dubbed “Eastern Partnership”, the summit seeks to create greater EU collaboration with eastern neighbours Moldova, Ukraine and Belarus and the Caucasian states Armenia, Azerbaijan and Georgia.
The Nabucco project would bring natural gas from the south Caucasus via Turkey to Europe, thus avoiding Russian territory. It would link up with another planned pipeline running under the Caspian Sea to Turkmenistan. Nabucco’s viability depends on a supply of Turkmen as well as Azerbaijani gas. The Prague meeting agenda also includes the rival South Stream project, which envisages a pipeline running under the Black Sea direct from Russia to Bulgaria.
Sources close to the Turkmen government say its delegation plans to lobby an initiative by President Gurbanguly Berdymuhammedov to create a new pricing structure independently of intermediaries – in this case, Russia.
At a conference on secure energy transport held in Ashgabat in late April, the Turkmen leader suggested that gas-producing countries should have a right to set gas prices independently, on the basis of their own production costs.
What Berdymuhammedov meant was that export prices should take into account factors like climatic conditions and the depth of gas deposits which affect costs at source.
The current method used for calculating the price of Turkmen gas is regard as a commercial secret, but in general, gas is priced at ten per cent of the current oil price.
Moscow buys most Turkmen gas – a small percentage goes to Iran – and is reluctant to relax the hold which its monopoly control of the major export pipelines gives it. Turkmenistan exports around three quarters of the 80 billion cubic metres it produces annually, and is largely reliant on the revenues it earns.
“One way or another, we are forced to come to terms with conditions set by Moscow, and we sell gas to Russia at a discount,” said a Turkmen official, speaking on condition of anonymity.
Berdymuhammedov is clearly chafing at this constraint, and has increasingly been trying to position his country as a more independent player in the market.
This mood intensified after April 9, when the Russian energy giant Gazprom reduced the flow of Turkmen gas, blaming an explosion in the pipeline. However, the cut followed a fall in gas prices and the Turkmen foreign ministry accused the Kremlin of deliberately constricting the Central Asian state’s gas exports, and said this actually caused the blast.
Last autumn, Berdymuhammedov caused a stir in the the Kremlin by announcing that Turkmenistan would sell gas at world prices starting from 2009.
Although there has been no official announcement about what price was agreed for this year, it is known to be considerably more than in 2008.
Sources in the state corporation Turkmengaz say that Gazprom is now paying around 320 US dollars per 1,000 cubic metres of Turkmen gas, which it sells on to European consumers at higher prices.
Official data from Gazprom’s export division indicate that it has been selling gas in Europe at between 250 and 300 dollars per 1,000 cu m this year. International prices are over 400 per 1,000 cu m.
Earlier this year, Russian officials held several rounds of talks with their Turkmen counterparts in an attempt to drive the price down.
This may explain Berdymuhammedov’s renewed interest in alternative methods of getting gas to market.
At the same time, NBCentralAsia commentators say the Russian position is understandable given current sluggish demand for gas.
“Prices are set by the middlemen,” said Rovshan Ibrahimov, head of the international relations department at Qafqaz University in Baku. “This does inhibit the sovereign rights of producer states to an extent.”
NBCentral Asia analysts say Berdymuhammedov’s proposal has some merit, since gas prices are generally set on a contract-by-contract basis by suppliers and purchasers.
“Turkmenistan wants an opportunity to pursue an independent energy policy,” said one local energy expert.
However, Annadurdy Khajiyev, a Turkmen economic analyst based in Bulgaria, believes Berdymuhammedov’s plan is unrealistic since Turkmenistan could undercut its own position vis-à-vis other sellers on the world market if it set prices arbitrarily.
“Berdymuhammedov has decided to trade in gas as he was at the bazaar,” said Khajiyev. “But no one is going to buy Turkmen gas if the producer sets the price higher than the global standard”.
Ibrahimov disagrees with this view, saying it makes perfect sense for Ashgabat to try to shake off Russian domination.
“Berdymuhammedov wants an independent strategy for selling national resources, and he’s identified the inability of producer nations to sell at the prices they want,” he said.
(NBCentralAsia is an IWPR-funded project to create a multilingual news analysis and comment service for Central Asia, drawing on the expertise of a broad range of political observers across the region. The project ran from August 2006 to September 2007, covering all five regional states. With new funding, the service has resumed, covering Uzbekistan and Turkmenistan.)
Some NBCentralAsia analysts doubt whether Turkmenistan is in a position to dictate prices, especially if they are unrealistic.
Turkmen officials are attending a meeting on possible new gas pipelines to Europe on May 8.
The talks, which will focus on the Nabucco pipeline project, are part of a meeting involving leaders from six former Soviet states which is being hosted in Prague by the European Union. Dubbed “Eastern Partnership”, the summit seeks to create greater EU collaboration with eastern neighbours Moldova, Ukraine and Belarus and the Caucasian states Armenia, Azerbaijan and Georgia.
The Nabucco project would bring natural gas from the south Caucasus via Turkey to Europe, thus avoiding Russian territory. It would link up with another planned pipeline running under the Caspian Sea to Turkmenistan. Nabucco’s viability depends on a supply of Turkmen as well as Azerbaijani gas. The Prague meeting agenda also includes the rival South Stream project, which envisages a pipeline running under the Black Sea direct from Russia to Bulgaria.
Sources close to the Turkmen government say its delegation plans to lobby an initiative by President Gurbanguly Berdymuhammedov to create a new pricing structure independently of intermediaries – in this case, Russia.
At a conference on secure energy transport held in Ashgabat in late April, the Turkmen leader suggested that gas-producing countries should have a right to set gas prices independently, on the basis of their own production costs.
What Berdymuhammedov meant was that export prices should take into account factors like climatic conditions and the depth of gas deposits which affect costs at source.
The current method used for calculating the price of Turkmen gas is regard as a commercial secret, but in general, gas is priced at ten per cent of the current oil price.
Moscow buys most Turkmen gas – a small percentage goes to Iran – and is reluctant to relax the hold which its monopoly control of the major export pipelines gives it. Turkmenistan exports around three quarters of the 80 billion cubic metres it produces annually, and is largely reliant on the revenues it earns.
“One way or another, we are forced to come to terms with conditions set by Moscow, and we sell gas to Russia at a discount,” said a Turkmen official, speaking on condition of anonymity.
Berdymuhammedov is clearly chafing at this constraint, and has increasingly been trying to position his country as a more independent player in the market.
This mood intensified after April 9, when the Russian energy giant Gazprom reduced the flow of Turkmen gas, blaming an explosion in the pipeline. However, the cut followed a fall in gas prices and the Turkmen foreign ministry accused the Kremlin of deliberately constricting the Central Asian state’s gas exports, and said this actually caused the blast.
Last autumn, Berdymuhammedov caused a stir in the the Kremlin by announcing that Turkmenistan would sell gas at world prices starting from 2009.
Although there has been no official announcement about what price was agreed for this year, it is known to be considerably more than in 2008.
Sources in the state corporation Turkmengaz say that Gazprom is now paying around 320 US dollars per 1,000 cubic metres of Turkmen gas, which it sells on to European consumers at higher prices.
Official data from Gazprom’s export division indicate that it has been selling gas in Europe at between 250 and 300 dollars per 1,000 cu m this year. International prices are over 400 per 1,000 cu m.
Earlier this year, Russian officials held several rounds of talks with their Turkmen counterparts in an attempt to drive the price down.
This may explain Berdymuhammedov’s renewed interest in alternative methods of getting gas to market.
At the same time, NBCentralAsia commentators say the Russian position is understandable given current sluggish demand for gas.
“Prices are set by the middlemen,” said Rovshan Ibrahimov, head of the international relations department at Qafqaz University in Baku. “This does inhibit the sovereign rights of producer states to an extent.”
NBCentral Asia analysts say Berdymuhammedov’s proposal has some merit, since gas prices are generally set on a contract-by-contract basis by suppliers and purchasers.
“Turkmenistan wants an opportunity to pursue an independent energy policy,” said one local energy expert.
However, Annadurdy Khajiyev, a Turkmen economic analyst based in Bulgaria, believes Berdymuhammedov’s plan is unrealistic since Turkmenistan could undercut its own position vis-à-vis other sellers on the world market if it set prices arbitrarily.
“Berdymuhammedov has decided to trade in gas as he was at the bazaar,” said Khajiyev. “But no one is going to buy Turkmen gas if the producer sets the price higher than the global standard”.
Ibrahimov disagrees with this view, saying it makes perfect sense for Ashgabat to try to shake off Russian domination.
“Berdymuhammedov wants an independent strategy for selling national resources, and he’s identified the inability of producer nations to sell at the prices they want,” he said.
(NBCentralAsia is an IWPR-funded project to create a multilingual news analysis and comment service for Central Asia, drawing on the expertise of a broad range of political observers across the region. The project ran from August 2006 to September 2007, covering all five regional states. With new funding, the service has resumed, covering Uzbekistan and Turkmenistan.)
