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Discussion of gas supplies across the Caspian from Turkmenistan to the EU has reached a new level

Обсуждение поставок газа через Каспий из Туркменистана в ЕС вышло на новый уровень

The world Bank wants to discuss with Turkmenistan to supply natural gas to Europe. This was announced by chief expert on oil and gas, world Bank Alexander Huurdeman in the framework of the international conference “Oil and gas of Turkmenistan-2019” 22 Oct.

Huurdeman noted that Turkmenistan’s position on the natural gas reserves fourth largest in the world. Now the main part of the produced gas the country supplies to China. In addition, in April 2019 Turkmenistan resumed deliveries of natural gas to Russia after a three year break. As noted in the statement, “the deliveries were resumed in the framework of the existing 25-year contract in 2003 after commercial breaks, which was taken by “Gazprom” in early 2016″.

Purchase of Turkmen gas to Russia were discontinued in 2015 against the background of the dispute in arbitration of Stockholm at a price for the supply of “blue fuel”. But in November 2018, the parties decided to conclude an amicable agreement on the dispute. In July 2019 Turkmenistan has concluded with Gazprom the contract for the supply of 5 billion cubic meters of gas.

Huurdeman stressed that the supply of Turkmen gas to Europe was discussed many times, but never carried out. According to officials of the world Bank, with the signing of the Convention on the legal status of the Caspian sea and completion of works on creation in 2020, southern gas corridor supplies become close to reality.

Currently, Turkmenistan is focused on the implementation of the main gas pipeline (MGP) Turkmenistan-Afghanistan-Pakistan-India (TAPI), a throughput capacity of 33 billion cubic meters a year. It is expected that delivery of gas it will start in 2022, but experts say more real time 2024-2025 years.

It also discusses the construction of the fourth line of MGP Central Asia — China. To fill these pipelines, the country will have to significantly increase its gas production. In terms of gas production, Turkmenistan is 13th place in the world and third in Europe and CIS. At the same time, in terms of proven natural gas reserves country in fourth place in the world after Russia, Iran and Qatar.

In the first half of 2019 in Turkmenistan produced 35.6 billion cubic meters of gas. Foreign consumers have delivered more than 18.3 billion cubic meters For comparison, Gazprom’s supplies to Europe in 2018 amounted to 201.9 million billion cubic meters of gas. Approximately 81% of supplies from Russia had on the countries of Western Europe (including Turkey), 19% — Central European States.

As for connections to the “southern gas corridor”, it is not clear how realistic this prospect. SGC is a system with a length of 3,5 thousand km, which will supply Europe with gas from the Caspian sea. An integral part of the “southern gas corridor” — the South Caucasus pipeline, TANAP (Azerbaijan-Georgia-Turkey) and TAP (Greece-Albania-Italy).

In February 2019, Azerbaijan and the EU proposed Turkmenistan to join the SGC project. Despite the ambitiousness of the project, is that experts do not perceive it as a serious competitor of “Gazprom” in Europe. Delivery in the early stages can be no more than 10 billion cubic meters per year, which will create competition only in selected countries of southern Europe and can easily be compensated in other areas. The annual consumption of Europe is more than 500 billion cubic meters, about 35% of them supplying “Gazprom”.

Furthermore, Azerbaijan began a noticeable problem with the resource base, and to execute contracts Baku tries to bring Turkmen and Kazakh gas.

To connect Turkmenistan to the southern gas corridor, it is necessary to build TRANS-Caspian pipeline that would go under the Caspian sea to Azerbaijan. Earlier, Russia and Iran were against such projects, however, in August 2018 five Caspian States signed the Convention on the legal status of the Caspian sea. Its 14th article permits to build in the Caspian sea underwater pipelines “subject to their compliance with project environmental requirements and standards enshrined in international treaties to which they are party”. After this intensified the efforts of the EU and Azerbaijan to attract Turkmen gas.

However, experts say, is not yet so clear. The Convention does not eliminate all the issues of the Caspian. For example, some States may never ratify the document in Iran, he was perceived very ambiguous. In addition, Turkmenistan, Azerbaijan and Iran still have not agreed on the delimitation of the seabed in the southern part of the Caspian sea. And, then, with the pipeline route can cause problems.

Finally, the Convention says that each of the Caspian States to participate in the evaluation of the impact of the project on the ecology of the Caspian sea. But this process can take years, as the example of Denmark, tightening the issuance of permits for the construction of “Nord stream-2”.

Some analysts believe that Moscow will not interfere with the construction of TRANS-Caspian gas pipeline. But Iran may well begin to put the project spoke in the wheel, especially as relations with Ashgabat had in recent times are not simple.

As for Turkey, it is unlikely it will prevent potential accession of Turkmenistan to the SGC. The TANAP gas pipeline is an important energy project for the country, despite good relations with Russia and the construction of “Turkish stream”. From January to September of 2019 through the TRANS-Anatolian gas pipeline transported approximately 1.7 billion cubic meters of gas. The plans to bring the pipe to a capacity of 16 billion cubic meters, of which 6 will remain in Turkey, and the rest to go to Europe.

Deputy Director General for gas problems national energy security Fund Alexei Grivach believes that despite the promotion of the SGC, to the accession of Turkmenistan is very far away.

— Project of supply of Turkmen gas is being discussed for over 25 years. But he is faced with many constraints — geopolitical, resource, marketing, legal. The willingness of the international financial institutions to discuss participation in the project of construction of the pipeline is just a political gesture that changes nothing in the General situation. While the idea has not even reached the preliminary stage and no breakthrough in this direction is not visible.

Director of the energy development Fund Sergey Pikin agrees that while this hypothetical reasoning, although he recognizes that Europe is interested in diversifying its energy sources.

— The question of Turkmen gas is discussed for years, but there are no transport routes for delivery to Europe. Initially this was in the zero years, then considered the accession of Turkmenistan to the gas TAP-TANAP. But for now too many questions about how these supplies to organize.

Of course, theoretically, could be to arrange deliveries across Russia, for example, through swap contracts, but hardly “Gazprom” will go for it.

“SP”: — And if Turkmen gas went to Europe, what volumes we could talk?

— Capacities from Turkmenistan have enough reserves they have extensive. In contrast to that of Azerbaijan. The construction of the TRANS-Caspian pipeline is discussed for so long because now there is no confidence that the resource base of Azerbaijan will allow it to load. So are other partners who can give the “blue fuel”. Including Turkmenistan.

At this stage, questions on the status of the Caspian sea close to resolution. At least there is some understanding of how to work in this direction. Because this was a direct ban on the construction of gas pipelines on the seabed, was nothing to talk about. Now there is a vision of how this system might look like.

But so far everything is at a very early stage of discussion. You can dream, but the project is very far from realization. And it is unclear whether demand for it? Europe has consistently said that it plans to reduce gas consumption.

On the other hand, the supply from Turkmenistan at the SGC for the EU is an important topic of diversification of energy sources. They want to avoid a Gazprom supplied gas to them. Although this is so, because the share of our company on the European market of about 35%.

So if you argue from the point of view of diversification, Europe is interested in Turkmen gas. The question is, who all is going to pay, and also the timing of the implementation of this project, which is still only in the plans.

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