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TURKMENISTAN AFTER NIYAZOV: PERSPECTIVES AND CHALLENGES
ROVSHAN IBRAHIMOV,
Head of the International Relations Department, Gafgaz University, Baku
Turkmenistan’s future after the death of its leader Saparmurat Niyazov (Turkmenbashi) is one of the key issues of concern to many specialists in international relations.
One of the major exporters of gas in Eurasia, Turkmenistan under Turkmenbashi has concluded long-term contracts on supply of natural gas to its target markets. In particular, it has signed a 25-year contract with Russia and a 30-year contract with China.
It is quite natural that these countries are concerned about the plans of the new Turkmen authorities in terms of fulfillment of the former government’s obligations.
European countries are also interested in gas supplies. EU has been increasingly lobbying the NABUCCO pipeline project, and the almost forgotten Transcaspian pipeline project.
Here comes the question: who will be the principal purchaser of the Turkmen gas? To get the answer we need to canvas the main features of the industry as for today and its perspectives.
The Turkmen gas industry was built in 1960s. The high quality of the gas produced in Turkmenistan, in which there was virtually no sulphur or carbon dioxide, has been particularly attractive for industrial and commercial areas of the Soviet economy.
Since its independence, Turkmenistan has provided gas production in its territory by its own capabilities. Mainly the state-owned companies, such as “Turkmengeologia”, “Turkmenneft” and “Turkmengaz” have been working in gas exploration and production. The latter covers about 80% of the total gas production in the state.
There are also large hydrocarbon deposits in the south-east in Mary province. These gas reserves could be exploited within 15-25 years. There are deposits of gas in the western part of Turkmenistan. Some oil and gas fields are available in the Turkmen sector of the Caspian Sea. According to official sources, today Turkmenistan may supply gas up to 220 million cubic meters per day. But there is no exact data, as it is impossible to hold monitoring by independent experts.
Besides domestic consumption Turkmenistan exports its gas to Iran, and through Kazakhstan to Russia. In 2005, it signed an agreement with Russia on the supply of the Turkmen gas in the country within 25 years.
Another agreement was reached on the construction of a gas pipeline to China, which over a period of 30 years would allow export of 30 billion cubic meters annually. It is planned that the pipeline will take gas from the recently discovered field Iolotani, where according to the Turkmen sources, reserves reach 1.7 million cubic meters. Negotiations are under way for the signing of a similar agreement with India.
It is also planned to construct the Turkmenistan-Afghanistan-Pakistan pipeline the capacity of which is said to reach 33 billion cubic meters.
The main consumers of natural gas are Iran, Russia and Ukraine. In 2006 the markets of these states have consumed 45.5 billion cubic meters of Turkmen gas. Most of part of this gas has been supplied to Ukraine via Russian pipeline, the remainder was supplied to Russia (by “Gazprom”) and Iran.
Volume of gas imports from Turkmenistan continues to grow. Only in the direction of Iran it is planned to export up to 14 billion cubic meters of gas in 2007. Talks are held between “Gazprom” and Turkmenistan on the delivery to Russia of 50 billion cubic meters annually within three years.
There is also a capability for the production of LNG, the demand for which in world markets has never stopped growing. Thus, the Turkmenbashi KNPZ and the Naip gas refinery set produce, on the average, 400,000 tons of liquefied gas. It is expected that by 2020, LNG production will reach 2 million tons per year.
Today, LNG is exported to Iran, Afghanistan and other countries in the region by rail. It is planned to export to the Far East through sea transportation route. With this view in the Kiyanly port construction of a terminal for the storage and shipment of LNG in the Caspian seaside states, and further to Europe, have been launched.
However, implementation of all these projects demands the supplies of natural gas. Experts are skeptical that Turkmenistan will be able to perform obligations under all the treaties.
The main reason is that it is difficult at this time to estimate the growth in gas production in the country. Thus, some experts believe that in 2010, gas production will remain at current levels, though Turkmenistan will have to export much more gas than it does today.
Anticipating this, Russia has already taken some steps to secure supplies of the Turkmen gas to the country: during his February visit to Ashgabat Russian Premier Mikhail Fradkov was assured by the new Turkmen leader Gurbanguly Berdymuhammedov. If the expectation about lack of necessary volume of gas is confirmed there would be nothing left for Turkmenistan to export to China. In this case, Russia will be a double winner, as a country that has access to Turkmen gas and as the only gas exporter to China.
The solution to this problem may lie in China and Europe’s direct investment in the Turkmen gas industry. They seek to provide an alternative route bypassing Russia through Transcaspian pipeline and by the NABUCCO pipeline with exemplary Asia-Azerbaijan-Georgia-Turkey-EU route to import Turkmen gas.
Currently, the share of foreign companies in recovering Turkmen gas has not exceeded 10%. However, after the death of Turkmenbashi, the new government may revise its policy and open the country’s economy to foreign capital, that, possibly, will increase gas production to the levels required to fulfill all obligations on export.
However, there is another problem, which could impede the implementation of these projects. So far, there is no accurate information on actual gas deposits in Turkmenistan. Some experts believe that gas reserves in Turkmenistan are much lower than the official sources want the exporters to think.
This means that the multi-line initiatives (Turkmenistan-China, Turkmenistan-Afghanistan-Pakistan, the Transcaspian and NABUCCO pipelines) may prove costly, risky and fruitless undertakings. To minimize investment risks, it is in the interest of Turkmenistan to allow independent experts to audit its deposits to identify the unknown reserves of natural gas.
If large amount of resources is proved, Turkmenistan should find ways to break the economic isolation and declare favourable treatment of foreign investment.
Otherwise, the country may be in the very near future the main source of instability and a threat to security within the country and the region as a whole.
March 28, 2007
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