EurasiaNet Business & Economics - Turkmenistan: Can Ashgabat Keep All of Its Energy Export Promises?

BUSINESS & ECONOMICS

TURKMENISTAN: CAN ASHGABAT KEEP ALL OF ITS ENERGY EXPORT PROMISES?
Aisha Berdyeva 12/04/07

When it comes to energy-related deals, Turkmenistan’s leader, Gurbanguly Berdymukhamedov, is picking up where his predecessor, the megalomaniacal Saparmurat Niyazov, left off; making promises that the Central Asian state may or may not be able to ultimately fulfill. Despite the uncertainty, foreign governments and conglomerates still feel compelled to keep dealing with Ashgabat.

Turkmenistan is believed to be one of the top five nations in the world, in terms of natural gas reserves. The problem is no one, except perhaps Berdymukhamedov and his inner circle, knows the precise amount. Results of an independent audit of Turkmenistan’s reserves have never been released. According to some estimates, the country could be sitting on top of as much as 9 trillion cubic meters of gas, or as little as 2 trillion cubic meters.

Berdymukhamedov, who assumed power following Niyazov’s sudden death in late 2006, is certainly acting like the high-end estimate is accurate. In recent months, he has taken steps to open up Turkmenistan’s economy, especially the energy sector. As a result, a virtual conga-line of energy executives has been passing through Ashgabat. The most recent energy honcho to pay respects in Ashgabat was Arnaud Breuillac, who oversees Central Asia operations for the French energy giant Total. Like other executives who arrived before him, Breuillac expressed a keen desire to get in on the energy-development action in Turkmenistan, the state news agency TDH reported December 4.

Over the last year, Turkmenistan has shown interest in three major pipeline projects; the Prikaspiisky route that would vastly expand Turkmen exports via Russia; the Western-controlled trans-Caspian route to Azerbaijan; and an Eastern connection with China. Berdymukhamedov in late November signaled a desire to hasten the expansion of the Prikaspiisky pipeline. [For background see the Eurasia Insight archive].

Many experts believe that completion of the Prikaspiisky project, now expected in 2012, would enable Russia to prolong its dominance over Turkmen gas exports. Berdymukhamedov, however, continues to indicate that Turkmenistan possesses enough gas not only to fulfill a deal already signed with China, [See the Eurasia Insight archive] but to also have enough left over to make construction of a trans-Caspian pipeline economically viable. [For background see the Eurasia Insight].

Since this spring, Berdymukhamedov has touted the supposed recent discovery of a vast gas reserve, dubbed the Osman field. With no ability to independently verify the information, foreign experts are cautious about accepting Turkmen official announcement at face value. In 2005, Niyazov is said to have commissioned an independent audit of Turkmenistan’s reserves. The findings were never publicly released.

If Berdymukhamedov is bluffing, none of the corporations or governments engaged with Ashgabat seems willing to call it. Companies remain eager for opportunities to enter the Turkmen market. On December 3, construction began on a $4-billion development project that would transform the western city of Turkmenbashi into a tourist destination. One of the chief investors in the project is the Russian energy company Itera.

Also on December 3, the chief of the Kazakhstani energy company KazMunaiGaz, Uzakbai Karabalin, met with Berdymukhamedov and expressed interest in the entity’s involvement in tourism-related projects, according to a report distributed by the Turkmenistan.ru website.

An indicator of the tremendous leverage now wielded by Berdymukhamedov was the late November agreement by the Russian conglomerate Gazprom to a phased-in 50 percent increase in the price it pays for Turkmen gas. [For background see the Eurasia Insight archive]. Turkmen gas currently costs Gazprom $100 per thousand cubic meters (tcm). The price by the second half of 2008 will reach $150/tcm.

Russia has shrugged off the price hike, with government officials saying the increased costs would be passed along to energy importers, specifically Ukraine. On December 4, Gazprom issued a statement announcing that Ukraine had agreed to a new gas import price of $179.5/tcm.

Gazprom’s agreement to meet Turkmenistan’s gas price seemed linked to Ashgabat’s commitment to an acceleration of the Prikaspiisky project timeline. Russian political analysts nevertheless voiced unease over Turkmenistan’s behavior. One commentary posted December 4 on the Novaya Politika news website suggested that Berdymukhamedov had explored export options with US and European Union officials merely to drive up the price for Russia. "Turkmenistan’s strategy has apparently paid off," the commentary said.

Economic analyst Sergei Sklyarov, writing in the Nezavisimaya Gazeta newspaper, wondered whether Moscow’s economic influence was on the ebb in Central Asia.

"Russia, for the first time in post-Soviet history, found itself in a situation that a decade ago would be described as �the tail wagging the dog," Sklyarov wrote. "Two countries, Turkmenistan and Uzbekistan, just recently seen by Russia as Russian satellites if not zones of absolute influence, have refused to sell natural gas to Gazprom at low prices.

"The Turkmen used to be happy when they managed to negotiate an increase of a few dollars per tcm," the commentary continued. "The situation changed fundamentally after Ashgabat agreed with China and the European Union about two alternative pipelines � the [trans-Caspian route] and one to China via Kazakhstan."

Editor�s Note: Aisha Berdyeva is a pseudonym for a Turkmen reporter who specializes in political and economic developments.

The Central Eurasia Project aims, through its website, meetings, papers, and grants, to foster a more informed debate about the social, political and economic developments of the Caucasus and Central Asia. It is a program of the Open Society Institute-New York. The Open Society Institute-New York is a private operating and grantmaking foundation that promotes the development of open societies around the world by supporting educational, social, and legal reform, and by encouraging alternative approaches to complex and controversial issues.

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