Moscow’s sanctions-struck energy giant Gazprom has announced it is no longer interested in buying Central Asian gas, leaving Turkmenistan and Uzbekistan dependent on exports to China.
Contractually, Gazprom officials have noted they are locked into obligations to buy from Ashgabat and Tashkent for the short term. But Gazprom is “working to annul these contracts,” Vsevolod Cherepanov, head of Gazprom’s Department for Gas Production, said at the St Petersburg International Gas Forum on October 7. Cherepanov did not explain the reasons for cutting back on purchases in Central Asia, but noted that Gazprom’s domestic production is expected to increase in the coming years.
According to Gazprom’s website, the official line remains that the production and import of “natural gas from Central Asia and the Transcaucasian region is an important element in the formation of [Gazprom’s] resource base, meeting the demands of Russia’s internal market, CIS countries and beyond. The business strategy of Gazprom in Central Asia rests on a strengthening of its position in this region. This will maintain and increase the share of Russian gas provided to its traditional markets in Europe.”
Gazprom’s exit will leave purchases of Central Asian gas an increasingly Chinese pursuit. In the two years prior to the opening of the China-Turkmenistan pipeline, which went into operation in late 2009, Gazprom imported an average of 63.4 billion cubic meters of gas (bcm) from Central Asia annually, over two-thirds of which came from Turkmenistan. In the years since, the company says, the volume going to Russia has shrunk to an average 34.1 bcm annually, less than a third of which is sourced in Turkmenistan.
The dip in trade between Ashgabat and Moscow didn’t occur directly as a result of the new China pipeline. After a mysterious pipeline explosion in April 2009, the two sides conspicuously failed to ramp up gas flow to previous levels—evidence, said experts, of a dispute over the low prices Moscow traditionally pays for Central Asian gas. Moreover, the new Beijing-built, China-bound line rapidly weaned Ashgabat off dependence on Russian infrastructure, and strengthened its hand in bilateral negotiations. Turkmenistan expects to export 60 billion cubic meters to China annually once the fourth line of the China-Turkmenistan link is operational in 2016.
Tashkent has not been counting on Russia, either. It hopes to increase gas exports to China by 60 percent in the next seven years, reaching 10 bcm by 2021. Not content with only transiting Turkmen gas, Kazakhstan has talked up plans to build a new pipeline to sell its own gas to China in the coming years as well.