Eurasia Daily Monitor
Thursday, January 7, 2010-Volume 7, Issue 4
IRAN AND TURKMENISTAN INAUGURATE GAS PIPELINE
by Vladimir Socor
On January 6 in Dauletabad, Presidents Gurbanguly Berdimuhammedov
and Mahmoud Ahmadinejad inaugurated a pipeline that runs from that giant
Turkmen gas field to Iran. The government of Turkey is also interested
in that project; and Turkish Energy Minister Taner Yildiz attending the
event conferred with the Turkmen and Iranian presidents and energy
officials on gas supplies.
The pipeline’s inauguration was the centerpiece but not
the only event during Ahmadinejad’s two-day visit (January 5 and
6) in Turkmenistan. An agreement was also signed to start work on the
Turkmen section of a planned railroad from Kazakhstan to Iran. The
Iranian president had arrived in Turkmenistan directly from Tajikistan,
where his visit underscored Dushanbe’s and Tehran’s
mutual interest in close neighborly relations. Tajikistan’s
President Emomali Rahmon hailed those relations as did his counterpart
Berdimuhammedov in Ashgabat (Tajik TV, January 4; Turkmen TV, January 5,
6).
In both visits, Ahmadinejad toned down or refrained altogether
from anti-Western rhetoric; the internationally monitored Turkmen and
Tajik state media reported no such rhetoric from the Iranian president.
The new pipeline, Dauletabad-Sarahs-Khangiran, with a throughput
capacity of 12 billion cubic meters (bcm) annually, will operate at 6
bcm in 2010 and should reach full capacity the following year. This
pipeline from southeastern Turkmenistan complements the Korpeje-Kurt Kui
line (laid in 1997) that runs from southwestern Turkmenistan to Iran,
with 8 bcm in annual capacity. Thus, Turkmenistan and Iran should
henceforth be able to trade 20 bcm of gas annually.
Iran’s purchase price for Turkmen gas is not disclosed
officially. On one occasion in 2008 Ashgabat halted deliveries amid
disagreements over the price, during a cold-weather snap in Iran. That
brief halt caused Iran to reduce its gas deliveries to Turkey at peak
consumption time.
Turkmenistan’s Dauletabad field traditionally supplied the
lion’s share of Turkmen gas deliveries to Russia, until Moscow
stopped all its imports of Turkmen gas in April 2009. Russia is resuming
imports this month at a level of only 10 bcm for 2010, down from the
previous annual average of 45 bcm (see EDM, December 15, 16, 18, 2008;
January 4, 2009).
Ashgabat and Tehran responded promptly to that situation. They
agreed in July 2009 to build the Dauletabad-Sarahs-Khangiran pipeline
and completed it in only six months. The pipeline runs for 182
kilometers, including some 30 km in Turkmenistan and approximately 150
km. in Iran. This transmission line connects with Iran’s
internal supply network at the Khangiran gas processing plant and
distribution center in Iran’s Khorasan province.
Iran uses Turkmen gas partly for supplying northern Iranian
provinces and partly for swapping gas to Turkey. Meager volumes that
Iran supplies to Armenia are also imported or swapped from Turkmenistan.
Ankara is keen to see Turkmen gas reaching Iran in growing
volumes. Turkey is interested in receiving more Turkmen gas via Iran, or
Iranian gas freed up by Turkmen deliveries. As Minister Yildiz told
Berdimuhamedov and Ahmadinejad during this event, Turkey can use those
added volumes partly for its own consumption and also for the Nabucco
pipeline project to Europe. Yagshigeldi Kakayev, the head of
Turkmenistan’s State Agency for Management and Use of Natural
Resources, told Yildiz that `Turkmen gas will reach Turkey as
alternative routes develop’ (Anatolia news agency, January 5, 6;
Trend, January 7).
Turkish Prime Minister Recep Tayyip Erdogan had discussed these
issues during his October 2009 visit to Tehran while also reaching out
politically to Ahmadinejad. Agreements of intent signed on that occasion
include exploration, production, and transportation of Iranian natural
gas, notwithstanding US sanctions in that sector (see EDM, December 11,
2009). Turkey is interested in receiving future Turkmen gas production
volumes via Iran irrespective of the situation with trans-Caspian
transportation, and potentially to that project’s detriment.
An agreement was also signed in Ashgabat on January 6 for
construction of the Turkmen section of the planned
Kazakhstan-Turkmenistan-Iran railroad. Under this agreement, the Islamic
Development Bank shall provide funding for initial work on the
Bereket-Etrek line. The overall project envisages building a railroad
from Uzgen in Kazakhstan, via Gyzylgaya-Bereket-Etrek in Turkmenistan,
to Gorgan in Iran (Turkmen government website, IRNA, January 6).
Links between Turkmenistan and Iran are multiplying. The
Tejen-Sarahs-Mashhad railway line is operating between the two
countries, as is the Dostluk water reservoir in the border area. On
December 9 the two governments also inaugurated a jointly built gas
storage and transportation terminal at Gylanly on Turkmenistan’s
Caspian coast (Turkmen TV, December 10, 2009, January 5, 2010).
–Vladimir Socor
Monday, January 4, 2010-Volume 7, Issue 1
RUSSIA RESUMING GAS IMPORTS FROM TURKMENISTAN ON A SMALL SCALE
by Vladimir Socor
On December 22 in Ashgabat, Presidents Dmitry Medvedev of Russia
and Gurbanguly Berdimuhammedov of Turkmenistan witnessed the signing of
documents on the bilateral gas trade and transportation. The documents
mark the end of Russia’s punitive, nine-month halt of gas
imports from Turkmenistan. The halt inflicted severe losses on
Turkmenistan’s revenues.
However, Russia’s monopsony is now lost thanks to the
opening of Turkmenistan-China and Turkmenistan-Iran pipelines (see EDM,
December 15, 16, 18). Russia is returning in a diminished role to an
intensifying contest for Turkmen gas.
Gazprom’s Vice-President Aleksandr Medvedev and Turkmengaz
Chairman Nury Muhammedov signed the sale-and-purchase agreement in the
presence of the two heads of state (Interfax, December 22, 23).
According to a subsequent announcement by Gazprom spokesman Sergey
Kupryanov, deliveries would start on January 9, rather than January 1
(Interfax, December 31).
Under the agreement, Turkmenistan would deliver `up
to’ 30 billion cubic meters (bcm) annually to Russia from 2010
onward. However, the agreement does not specify the delivery volume for
2010, let alone subsequent years. Nor does the agreement envisage any
time-frame for reaching the nominal 30 bcm target. According to Russian
business press reports, Gazprom’s 2010 budget has earmarked
funds for purchasing only 10.5 bcm of Turkmen gas this year (Vedomosti,
December 23).
Gazprom’s purchase price for Turkmen gas is not disclosed
officially. The new agreement pegs that price to the oil-products
basket, potentially approximating European netback prices for Russian
gas. According to unofficial reports, Gazprom’s purchase price
is anticipated to range from $220 to $250 per one thousand cubic meters
of Turkmen gas during 2010 (Vedomosti, Vremya Novostei, December 23).
President Medvedev claimed at the signing ceremony that this
agreement is not a new one, but merely updates the 2003 Russian-Turkmen
agreement on the gas trade for the period 2004-2028. Gazprom’s
official announcements follow the same line and the document itself is
billed as `amendments and addenda to the basic contract’
of 2003. Such claims seek to maintain the illusion that Russia retains
some kind of priority claim on Turkmenistan’s future gas
production.
That 25-year agreement of intent had been misrepresented as a
`contract’ by Gazprom to discourage European involvement
with Turkmenistan. It had envisaged Turkmen gas deliveries to Russia
rising from some 40 bcm in 2004 to 90 bcm annually from 2010 onward.
Russia, however, proved unable to implement that agreement, thereby
implicitly invalidating it. Gazprom imported some 45 bcm of Turkmen gas
per year on average, downscaled that to 42 bcm in the binding annual
contract for 2009, and stopped unilaterally the import of Turkmen gas in
early April 2009 due to falling demand in Russia and Europe.
Consequently, Russia imported only 11.3 bcm of Turkmen gas in 2009, all
of it until early April (ITAR-TASS, December 22; Vedomosti, December
23).
Furthermore, the arrangements for 2010 reduce Russia’s
intake of Turkmen gas to a fraction of what it was, without stating an
intention to revert to the former volumes, let alone the former
projections. Those projections at 90 bcm per year far exceed pipeline
capacities currently at Gazprom’s disposal in Central Asia. For
all these reasons, Gazprom would have been in massive breach of contract
with Turkmenistan, had the 2003 framework agreement been a
`contract’ as claimed.
Also on December 22, Presidents Medvedev and Berdimuhammedov
witnessed the signing of a document of intent on joint pipeline
construction projects. One project, the Caspian coastal pipeline, would
run from western Turkmenistan’s gas fields via Kazakhstan to
Russia. The other project, the East-West pipeline, would connect eastern
Turkmenistan’s gas fields with western Turkmenistan. There are
no specifics about throughput capacities, companies involved, investment
costs, or ultimate export destinations for either project (Interfax,
December 22, 23).
The Caspian coastal pipeline forms the subject of an earlier
agreement of intent and an inter-governmental agreement, each of them
signed during 2007 by Russia with Turkmenistan and Kazakhstan. Projected
at 30 to 40 bcm annually, that line was to increase dramatically the
overall capacity of the old Central Asia-Center pipeline system,
enabling Russia to maximize its intake of Turkmen gas in the future
(though well behind the schedule of the 2003 agreement of intent).
Russia has been unable to move that project off the ground since 2007.
If built, the Caspian coastal pipeline could absorb the gas production
of international companies from the Caspian offshore and send that
production to Russia, instead of the planned trans-Caspian route to
Azerbaijan and southern corridor to Europe.
The East-West pipeline across Turkmenistan would carry future gas
production from the country’s giant, as yet undeveloped fields
to the Caspian shore. Depending on who would finance and build it, that
line could plug either into the Caspian coastal pipeline bound for
Russia, or into a trans-Caspian pipeline bound for Europe. The Kremlin
had initiated the cross-Turkmenistan pipeline project on its own terms
and proposed it to Berdimuhammedov. The Turkmen president, however,
announced in April 2009 an international tender for bids to construct
that pipeline. Many bids are said to have been registered since then.
Russia’s continuing quest for Turkmen gas–and apparent
readiness to pay realistic prices for it–reflects Moscow’s
anticipation of shortfalls in Russian gas production in the post-crisis
recovery period. Those shortfalls would affect Gazprom’s
capacity to meet export commitments, requiring a substantial offset
through imports from Turkmenistan. In the short term, Russia is content
with importing relatively small volumes of Turkmen gas at 10 bcm this
year, while leaving open the possibility of importing `up
to’ 30 bcm when European demand rebounds. However, China and
even Iran are vying with Russia for the existing and future volumes of
Turkmen gas exports, while international companies such as the German
RWE proceed with development offshore.
–Vladimir Socor