Natural Gas Asia

Tuesday, September 30, 2014

Many Callers for Turkmen Gas

As Turkmenistan tries to open the door to Western Europe when it comes to exporting natural gas, its neighbour to the east is knocking on the door.

Since the Turkmenistan-Uzbekistan-Kazakhstan-China (TUKC) pipeline opened in December 2009, Turkmenistan has supplied gas to China, and in 2010 negotiations over the TAPI (Turkmenistan-Afghanistan-Pakistan-India) gas pipeline project regained life after years of dormancy.

China has made inroads in that respect, but it offers a broader market, a Turkmengaz company analyst, requesting anonymity, said.

“The latest developments indicate China will become the major gas market for Turkmenistan as of 2012,” Azerbaijan Oil Research Centre head Ilkham Shaban said.

Turkmenistan and China are drafting an agreement to send China an additional 20 billion cu. m of gas annually, he said. Turkmen and Chinese officials discussed the idea in Beijing February 28, and shortly afterward Turkmen TV reported that the two countries plan to sign the agreement during President Gurbanguly Berdymukhamedov’s expected visit to China later this year.

Since the TUKC pipeline began operation, China has received, according to different estimates, 4-6 billion cu. m of Turkmen gas. Last year, Turkmenistan exported 10.5 billion cu. m to Russia and 7-8.2 billion cu. m to Iran. Its overall gas exports in 2010 reached 20–24.5 billion cu. m, a sharp plunge from 47 billion cu. m in 2008. In 2009, Turkmen TV said gas exports had decreased because of declining foreign demand. Annual domestic consumption amounted to 14 billion cu. m.

“Naturally, Turkmen authorities have realised they should not rely on Gazprom and that gas exports to Russia may never exceed 15 billion cu. m annually again,” Shaban said. “That’s why they are looking for new gas markets so actively.”

China, with its surging economic growth rates, may be attractive to Turkmen officials seeking a reliable customer.

China probably could replace Russia as a market for Turkmen gas, said Mark Katz, political scientist at George Mason University.

“But I don't think Turkmenistan wants to switch from Russia buying almost all its gas to China,” Katz said via email. “It would much prefer to sell to both, and so keep them competing with each other over the terms that they offer Turkmenistan.”

China not only can replace Russia as a market, but is a better market for Turkmenistan to focus on, “particularly so if Ashgabat can work with Baku to sell some of its gas across the Caspian directly to Europe via the proposed Southern gas corridor,” said Borut Grgic, a senior fellow at the Atlantic Council's Dinu Patriciu Eurasia Center.

“Russia doesn't really need Turkmen gas for domestic consumption — it needs it to help it fulfill its [European] export quotas,” he said. “Turkmen gas can never reflect market price value if sold to Russia. … For a producer it is always ideal to have relations with the end user. One such end user of Turkmen gas is definitely China.”

China won't replace Russia as a Turkmen gas buyer in the short and medium term, said Jan Sir, author of “Dismantling Totalitarianism? Turkmenistan under Berdymukhamedov.” “It's rather supplementing it for the moment. Still, it is clear that China is Turkmenistan's single most (promising) new energy market.”

Turkmenistan shouldn’t expect to make much money from China soon, predicted a Turkmengaz engineer working in Lebap Province, who identified himself only as Victor I. China lent Turkmenistan US $3 billion in 2009 to help exploit the South Yolotan-Osman gas field, he said. “The Chinese aren’t going to pay a penny (for gas) until they get that money back,” he said.

Source: CentralAsiaOnline

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