Russia’s energy behemoth Gazprom has revealed the amount it is paying in a mid-term deal for the delivery of natural gas from Uzbekistan, and it is not very much.
RIA-Novosti reported on April 12 that Gazprom Export, an affiliate of the Moscow-based company, said its five-year contract to supply 4 billion cubic meters of gas annually from 2018 is worth a total of $2.5 billion. That translates into $125 per 1,000 cubic meters delivered.
The deal struck at the start of April has been cast as historic for how long it runs before expiring — long enough to ensure some certainty of cash transfers in economically uncertain times, but not so long as to make the hedge feel semi-permanent. Gazprom has historically favored calculating gas supply agreements in Central Asia in decades rather than single years.
Despite that spin, the deal evidently signals a noteworthy withdrawal by Russia from the Central Asian market. Gazprom bought 6.2 billion cubic meters of gas from Uzbekistan in 2016 and is buying only 5 billion cubic meters this year, so the five-year deal represents another drop.
And Gazprom has recently reiterated that it has no intention of resuming gas supplies from Turkmenistan.
As to the question of why Gazprom is buying the gas when it has more than enough of its own, the explanation is offered succinctly by Mikhail Krutikhin, an analyst with RusEnergy, writing in Russian weekly magazine New Times.
Turkmen President Gurbanguly Berdymukhamedov meets with Qatari emir Sheikh Tamim bin Hamad al-Thani in Doha on March 15, 2017. (Photo: Turkmenistan State News Agency)
The president of Turkmenistan embarked on a two-day trip to Qatar this week in the hope of drumming up vital investment, although he does not seem to have come back any with any visible results.
Aside from meeting with Qatari emir Sheikh Tamim bin Hamad al-Thani and attending a banquet of honor, Gurbanguly Berdymukhamedov spent the day in Doha on March 15 holding talks with purse-string holders, like the chief executive of the Qatar Investment Authority. But the only firm outcome of the visit came with the signing of a spate of memoranda of understanding on cooperation in areas like energy, aviation, education and wildlife conservation.
Hopeful talk on energy was naturally at the forefront of Berdymukhamedov’s thoughts.
“Qatari companies have been invited to participate in the building of gas processing plants, and petrochemical and gas chemical plants in Turkmenistan, and to develop [energy] projects on the Turkmen shelf of the Caspian Sea,” the state news agency report on the visit stated.
Another would-be opportunity touted by Berdymukhamedov was for Qatar to sink money into the Turkmenistan-Afghanistan-Pakistan-India natural gas pipeline (TAPI), which will be indispensable if Turkmenistan is ever to loosen China’s near-monopoly grip on its energy exports.
Turkmenistan has looked at fellow gas-rich nation Qatar’s recent extravagant forays into foreign investments — which include Qatar Investment Authority’s recent joint purchase of a big chunk of Russian oil giant Rosneft — and must be hoping to get in on the act.
This plan has flaws that will be obvious to seasoned Turkmenistan watchers.
The ill-fated fourth strand of the Central Asia-China gas pipeline has again been put on hold amid apparent sagging demand for the fuel from Beijing, Russian media outlets have reported.
A Tashkent-datelined RIA-Novosti news agency report on March 2 cited unidentified sources as saying China National Petroleum Corporation and state-owned oil and gas company Uzbekneftegaz have agreed on an indefinite postponement on work to the Uzbek section of the route.
The projected 1,000-kilometer Line D is designed to start in Turkmenistan, cross Uzbekistan, Tajikistan, Kyrgyzstan and end in western China, and will, if ever completed, boost the overall annual transportation capacity of the Central Asia-China pipeline network to 85 billion cubic meters. This strand constituted a shorter but diplomatically far more complicated route than the already functioning Lines A, B and C, which also rise in Turkmenistan but cross only Uzbekistan and Kazakhstan.
The three completed strands of the Central Asia-China pipeline currently allow for the export of around 55 billion cubic meters of gas annually — an amount equivalent to one-fifth of China’s consumption. According to a breakdown of existing contracts and capacity outlined by CNPC, Lines A and B are able to carry 13 billion cubic meters of gas from the Chinese-run Amu Darya Project at Turkmenistan’s Bagtyyarlyk field and another 17 billion cubic meters of gas sourced by Turkmengaz itself. Line C is intended to supply a mix of gas from Turkmenistan (10 billion cubic meters), Uzbekistan (10 billion cubic meters) and Kazakhstan (5 billion cubic meters).
The president of Turkmenistan is due visit Moscow on November 1 for talks with Russian President Vladimir Putin against the backdrop of a worsening domestic economic crisis.
Turkmenistan’s Foreign Ministry announced the trip in an uninformative one-line statement, so there is no immediate insight into what the focus of the encounter will be. The Kremlin’s own statement on the meeting was not much more helpful.
“Key areas in bilateral cooperation will be the main subject of discussion at the talks. The two presidents are also expected to exchange views on current regional issues,” the Kremlin said.
That cryptic statement suggests there is every chance that Turkmen leader Gurbanguly Berdymukhamedov will be seeking to whet Russia’s appetite for resuming its purchases of Turkmen gas.
The countries have over the years signed more than 100 bilateral agreements covering a range of areas of cooperation. A key document was the April 23, 2002, Friendship and Cooperation Treaty.
Russian business are actively involved on the Turkmen market in sectors such as auto and industrial machinery, telecommunications, and in the oil and gas business. Around 190 companies working with Russian capital operate in Turkmenistan. In 2009, Russia’s ATERI, previously operating under the ITERA brand, signed a production sharing agreement with Turkmenistan over an offshore sector of the Caspian Sea.
But nothing ever quite superseded direct gas sales for importance.
Russia bought 45 billion cubic meters of gas from Turkmenistan in 2008, but that has through a series of commercial and diplomatic vicissitudes dwindled to nothing. Russian gas behemoth Gazprom definitively ceased its gas supply agreement earlier this year.
Internet connections have been down in large parts of Turkmenistan following a reported fatal explosion at an oil refinery in the western city of Turkmenbashi.
Alternative News of Turkmenistan cited unnamed sources in a report on June 25 as saying that the blast occurred at fuel reservoir and may have killed seven people.
ANT linked the reported explosion with possible poor maintenance work on the fuel tank ventilation system.
On the day of the claimed explosion, ANT reported the internet being cut off in several places in the Balkan region, where Turkmenbashi is situated. Mobile users elsewhere in the country could not be reached on June 27, suggesting that the government has put an information blackout in place.
Chronicles of Turkmenistan, another foreign-based news and advocacy website, reported that some online messaging services have become unavailable. The Line messaging app has been performing poorly since June 26, but issues with Skype seems to have predated the reported blast by a couple of weeks.
“It is not clear if the connection problems are related to technical faults or if the block on messaging services has been implemented purposely to control the flow of information in the country,” the website said.
Information blackouts are standard procedure in Turkmenistan and state media has made no references to any incident in Turkmenbashi.
The president of Turkmenistan has in candid remarks admitted to the pervasive corruption hobbling the country’s energy sector, but his solutions appear so far limited mainly to the usual threats and targeted dismissals.
Gurbanguly Berdymukhamedov said during a Cabinet meeting broadcast on television on March 5 that state auditors and prosecutors have recently been running checks on energy enterprises and uncovered irregularities “causing the government serious losses.”
Corruption has become a recurring theme in Turkmenistan as authorities seek to explain away the economic malaise gripping the country.
Berdymukhamedov said that former deputy prime minister Baymyrat Hojamuhammedov, who was dismissed from his role overseeing the energy sector for health reasons in November 2015, was directly involved in the corruption.
“After the investigations, he returned $1.5 million that he received in bribes from various people,” Berdymukhamedov said.
Also on March 5, the president fired the head of the State Statistics Committee, Akmyrat Mamedov, who stands accused of fiddling the figures to enable graft.
Anybody who has ever in good conscience scrutinised the sparse statistical information made available online by Turkmenistan’s authorities will have questioned their reliability years ago. And yet those are the same figures that international financial organisation invariably rely upon when formulating their rosy economic forecasts, which should probably raise some questions about their practices.
Mamedov has been in his job since March 2010.
Dismissals among senior economic officials have been coming fast and furious of late.
In February, Berdymukhamedov removed one of his key aides, Palvan Taganov, from his post, again for suspected wrongdoings in the oil and gas sector.
Turkmenistan has fired the starting pistol on the ambitious TAPI natural gas pipeline, a 1,735-kilometer route intended to supply markets in Afghanistan, Pakistan and India.
To the applause of ministers, President Gurbanguly Berdymukhamedov announced he had ordered the beginning to construction on November 6 during the weekly Cabinet meeting.
The work on the Turkmen section will be done by state-run gas company Turkmengaz, which was named project consortium leader for TAPI Pipeline Company Limited in August, and energy infrastructure construction division Turkmenneftegazstroi.
The pipeline is designed to transport 33 billion cubic meters of gas annually for a period of three decades. Work is formally due to start in December, according to the government decree signed by Berdymukhamedov, but substantial construction is not expected to get underway until next year. The completion date has been set for December 2018.
Turkmenistan currently exports gas to China, Russia and Iran. But relations between Turkmenistan and Russia, which this year reduced the volume of its gas purchases to 4 billion cubic meters, took a turn for the worse after Ashgabat in July accused Russia's Gazprom of failing to pay for fuel supplied this year.
It was not all good news on the energy front at the Cabinet meeting though.
The long-serving minister for oil and gas, Baymurad Khodjamukhamedov, asked Berdymukhamedov if he could step down for reasons of ill-health, in effect a resignation, which was promptly accepted by the president.
Khodjamukhamedov, who had occupied his post since 2009, will be replaced by Yagshigeldy Kakayev, who is now the head of the presidential State Agency for the Management and Use of Hydrocarbon Resources. Kakayev will continue to perform his current job on top of taking on ministerial duties.
Pakistani Prime Minister Nawaz Sharif rounded off an energy-themed jaunt across Central Asia on May 22 in Bishkek, where he spoke about electricity exports to his energy-starved nation two days after visiting Turkmenistan to discuss a troubled gas-pipeline project.
The trip demonstrated Pakistan’s limited leverage in its dealings with Central Asia and, publicly at least, did not produce much of substance.
In Ashgabat, Sharif called on partners to “intensify work” on the long-stalled Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline. In his meeting with Turkmenistan President Gurbanguly Berdymukhamedov on May 20, Sharif called TAPI a “project that would bring benefits to the entire region.”
But the pipeline, which would traverse Afghanistan and has been on the drawing board since the mid-1990s, may cost over $10 billion. With no commercial investor so far, initiative rests with both Turkmenistan, the would-be-supplier, and the main export market, India. Delhi must decide if its own energy deficit warrants pushing a link that many see as risky and expensive.
Neither president mentioned either the hoped-for 2017 TAPI completion date, or the more pessimistic projection of 2020 mentioned in late April by Afghan President Ashraf Ghani. (Many say both timelines are still pipedreams.)
Azerbaijan’s status in a prominent international transparency organization has been downgraded. Representatives of the group cited Baku’s ongoing crackdown on individual liberties as the reason for the demotion.
Azerbaijan had been a member of the Extractive Industries Transparency Initiative, or EITI, since 2003. The organization comprises companies, governments and civil-society groups and is dedicated to promoting greater transparency about state revenues earned from energy extraction and mining operations. Also inherent in membership is a commitment by member states to uphold basic liberties, in particular freedom of the press and broad access to information.
On April 14, EITI’s board deemed Azerbaijan was falling short in fulfilling the group’s obligations and downgraded the country from full member to candidate. To have its membership restored, Baku needs to “ensure that civil society in Azerbaijan can participate in the EITI in a meaningful way,” the Norway-based group’s chairperson, Clare Short, said.
Azerbaijan’s troubles with the EITI date back to 2013, when some organization representatives expressed concern about a crackdown on government critics, and launched a probe into the country’s commitment to the transparency standard.
Proponents of a controversial plan to build a high-voltage electricity export line from Tajikistan to South Asia argue that the connection – known as CASA-1000 – will not be used in winter, when the country’s own citizens suffer debilitating electricity shortages.
But a senior Tajik official has undermined that promise, arguing that no matter how little it has for itself, Tajikistan must export electricity year-round lest any transmission equipment be looted.
Most regions of Tajikistan are currently receiving about 12 hours of electricity per day; some areas get less than 10 hours and, as anyone in remote areas can attest, the current is often so weak that it cannot charge a cell phone.
Despite these extended blackouts, Tajikistan increased its electricity exports to Afghanistan through existing lines from 30 million kWh in January 2014 to 55 million kWh last month, Asia-Plus reported on February 17, citing the State Statistics Agency.
Many ask the obvious question: Shouldn’t a country’s resources first serve its own people?
After years of speculation, now we have the answer. The head of the state electricity monopoly, Barki Tajik, says that the company must export in winter because it cannot risk allowing existing infrastructure to stand idle. “We keep the voltage in these lines because there is a high probability of equipment theft,” the Asia-Plus article quoted Rustam Rakhmatzoda as saying.
That confession should impact CASA-1000, which has been on the drawing board since 2007.