Iran, it seems, was calling Turkmenistan’s bluff earlier this summer when Tehran said it no longer needs gas from its northern neighbor. Now a top official says Tehran will keep buying.
That is good news for Turkmenistan, which is so dependent on its main gas customer, China, that it is starting to look like a client state.
Iran is committed to increasing its own domestic gas production to up to a billion cubic meters per day by 2017, a target one industry analyst thinks is possible but unlikely within such a tight timeframe. But supplying Iran’s northern regions with domestic gas is complicated by its lack of infrastructure. So, since 1997, Iran has bought gas from Turkmenistan to service its north, and sold its own gas abroad.
Deputy Oil Minister Hamid Reza Araqi said this week that his boss and Turkmen President Gurbanguly Berdymukhamedov had met in Ashgabat this month to hammer out a new purchase agreement. According to regional news agency AKIpress, the meeting happened November 7.
“The deal makes it possible to raise the amount imported from Turkmenistan in cold months of the winter; starting in the beginning of the current year, Turkmenistan has exported 24-25 million cubic meters of natural gas to Iran [daily],” said Araqi, in comments carried in English by Iran’s Mehr news agency on November 19.
The agreement contains a provision to increase this to 30 million cubic meters daily, he added.
Turkmenistan has the world’s fourth-largest natural gas reserves and exports billions of dollars worth of gas every year. But its copious reserves are apparently not enough to ensure a stable supply for residents of this isolated, totalitarian country.
Shortages in northern villages prompted a rare protest on October 28, reports the Chronicles of Turkmenistan, a news website run by exiles. Several dozen women blocked a highway to draw officials’ attention to the shortages, which come with the onset of autumn and are affecting residents’ ability to heat their homes and cook. The shortages, says Chronicles, have even hit Dashoguz, a town of about 200,000 people:
Residents have repeatedly called on gas providers [for help], but the latter complain that very little gas is being delivered; moreover, the pipes and equipment are very run-down, while specialists capable of maintaining all this in working order are simply nowhere to be found. The authorities are not providing either the funds or the pipes to repair gas mains.
Dushanbe and Beijing have launched construction of a key gas pipeline that will turn Tajikistan into a transit country for Central Asian gas supplies to neighboring China, the world’s largest energy consumer.
The pipeline will lock Tajikistan into an energy partnership with its powerful neighbor from which the former Soviet Union’s poorest country will reap millions of dollars every year in transit fees.
The project has “immense political, economic, and historical significance,” Tajik President Emomali Rakhmon said at the groundbreaking ceremony on September 13. His visiting Chinese counterpart, Xi Jinping, described the pipeline as a “symbol of China-Tajikistan friendship.”
The link will supplement the existing Central Asia pipeline running from Turkmenistan to China via Uzbekistan and Kazakhstan. The new section bypassing Kazakhstan and passing through Kyrgyzstan and Tajikistan, known as Line D, will increase the pipeline’s overall annual capacity by 30 billion cubic meters, to around 85 billion. Like the other lines, it will also pass through Uzbekistan.
Tajikistan will host the longest section of the new 1,000-kilometer spur, with 400 kilometers passing through its territory. China will pick up the $3.2 billion price tag for that leg.
Beijing is already ramping up gas supplies through the existing Central Asia pipelines. A third line known as Line C started pumping from Turkmenistan in May, almost doubling the pipeline’s overall annual capacity to 55 billion cubic meters.
The Darvaza Crater, an infernal pit burning in Turkmenistan’s forbidding Karakum Desert, has long piqued the curiosity of the few tourists who make it into the totalitarian country. Now it turns out that the famous furnace – the product of a search for natural gas gone horribly wrong – could be an untapped store of knowledge for mankind.
Being the product of an accident, the “Door to Hell” is perhaps not what the image-conscious dictator of gas-rich Turkmenistan wants his country to be known for, but it has been getting a lot of attention lately.
Recently it attracted one explorer who likes to live on the edge. According to a July 16 story by National Geographic, last November “explorer and storm chaser” George Kourounis became the first person to descend into the bottom of the 99-foot-deep fiery pit, where he collected soil samples.
The history of the hotspot is somewhat contested, but most agree that the hole was the result of a Soviet gas expedition. As a Turkmen geologist told the AFP last month:
Soviet geologists started drilling a borehole to prospect for gas at this spot in 1971. The boring equipment suddenly drilled through into an underground cavern, and a deep sinkhole formed. The equipment tumbled through but fortunately no one was killed. Fearing that the crater would emit poisonous gases, the scientists took the decision to set it alight, thinking that the gas would burn out quickly and this would cause the flames to go out.
Gazprom was supposed to end Kyrgyzstan’s gas shortages and contract disputes with its neighbors. Instead, since the Russian energy giant took control of Kyrgyzstan’s bankrupt gas company almost two months ago, the country has faced one of its worst gas crises in memory.
The immediate cause of the shortage is Uzbekistan. The Uzbek state gas supplier, Uztransgaz, closed the taps on April 14, leaving an estimated 60,000 households in southern Kyrgyzstan without gas. Kyrgyz leaders are now proposing solutions that are likely to get Uzbekistan’s attention, but could prove risky.
The problem appears to have started on a technicality: Shortly before Kyrgyzgaz handed control of its debt-ridden gas network to Gazprom, its supply contract with Uzbekistan ran out. Uztransgaz agreed to add two more weeks, to April 15, but who were they supposed to negotiate with? The now-defunct Kyrgyzgaz? Gazprom? Gazprom’s new local subsidiary Kyrgyzgazprom?
That question lingers, but after almost two months it sounds like the Uzbeks are not keen to talk.
Deputy Prime Minister Valery Dil says he has tried multiple times to reach his Uzbek counterparts, yet they ignore him. Prime Minister Djoomart Otorbaev has also complained he can't get anyone in Tashkent to take his calls.
Turkmenistan, China’s largest foreign supplier of natural gas, has further expanded production destined for the Asian giant with the launch of a processing plant in Turkmenistan’s eastern desert on May 7.
Seated on a gilded throne, President Gurbanguly Berdymukhamedov – who has built an adoring personality cult around himself – launched the Chinese-built, $600-million facility at the Bagtyyarlyk gas field with a scan of his palm print, Reuters reported.
Turkmenistan already accounts for over half of China's gas imports, exporting 21.3 billion cubic meters (bcm) to China in 2012. Alone the new plant’s capacity is 8.7 bcm annually, which is also slated for China, the state-run TDH news agency reported.
Turkmenistan and China opened the first plant at Bagtyyarlyk in December 2009, when they also launched the first pipeline carrying Turkmen gas to the east, helping the Central Asian nation break its dependence on Russian export routes. Gas at the new plant will also feed the 1,833-kilometer Turkmenistan-Uzbekistan-Kazakhstan-China pipeline, TDH said. Chinese investment at Bagtyyarlyk has totaled $4 billion to date, Berdymukhamedov said.
TDH also reported that Berdymukhamedov would launch the construction of a second processing plant at Galkynysh, the world’s second-largest gas field, on May 8. That will add another 30 bcm annually to Turkmenistan’s production capacity.
Altogether, Turkmenistan is expected to export 65 bcm to China annually by 2020.
Turkmenistan’s copious reserves of natural gas have long afforded residents an unusual luxury: free gas for cooking and heating their homes. But the subsidy encourages waste, which is encapsulated in an anecdote wherein a Turkmen family never bothers turning the gas stove off because it has to pay for matches.
Unsurprisingly, the waste is expensive, perhaps costing the nation of 5 million up to $5 billion a year. So Turkmenistan’s strongman president says homes should be fit with gas meters and consumers will have to start paying.
Speaking at a government meeting on January 17, President Gurbanguly Berdymukhamedov called on local journalists to run a series of television programs and publications on conserving gas, Turkmen state television reported.
"The installation of the meters will allow people to economically consume natural gas, while the maximum payment for using the gas will not create difficulties for the population, for each family," the Associated Press quoted Berdymukhamedov as saying. From AP:
The move comes in the wake of signs that Berdymukhamedov's authoritarian government sees the subsidized domestic energy market as too heavy an economic burden, and is making profitable energy exports a bigger priority. […]
The government has made it clear in recent months the domestic subsidies are too costly. At a conference in October attended by Berdymukhamedov, one delegate publicly announced that free gas to the country's citizens cost Turkmenistan $5 million each year.
Neither Berdymukhamedov nor his government offered any clarification about when the changes would take effect or how much consumers would be charged.
A long-stalled project to deliver Turkmen gas to Europe is again in the spotlight after a European Union official said the idea remains on the table.
Denis Daniilidis, the head of the EU mission in Ashgabat, told an oil and gas conference in the Turkmen capital on November 19 that negotiators are finalizing a deal to construct a pipeline from Turkmenistan to Azerbaijan across the Caspian Sea, bypassing Russia, Russia's RIA Novosti news agency reported.
According to the diplomat, negotiators are working on "some outstanding issues,” RIA said. The EU, Turkmenistan and Azerbaijan will sign an agreement on related environmental issues this year, he added.
The trans-Caspian pipeline project is part of the EU-sponsored Southern Corridor that would deliver natural gas from Central Asia, the Caucasus and the Middle East to Europe while easing Europe’s dependence on Russian gas. Russia and Iran oppose the construction of any pipeline across the Caspian Sea, citing the unresolved status of the sea and maritime borders. But both have done little in 22 years since the breakup of the Soviet Union to remedy the issue, and both have been accused of creating obstacles to alternative energy corridors.
Uzbekistan's state-run oil and gas company increased the price it charges domestic customers for natural gas by 8.5 percent on October 1, moving further to close the giant gap between domestic and export prices.
Uzbekneftegaz announced on its website in late September that it will now charge local consumers, including domestic industries, 151,740 sums ($70.70 at the official exchange rate) per thousand cubic meters (tcm) of natural gas. According to calculations by the private Novyy Vek daily, that’s an 8.5-percent rise. The paper notes the domestic tariff also rose 14 percent in April and has risen 45 percent over the past 12 months.
Uzbekistan sells gas at $290 per tcm to Kyrgyzstan, a Kyrgyz official told Kazakhstan's Tengrinews this summer. So the subsidized domestic price is less than a quarter of what Tashkent earns from selling gas abroad.
That might explain widespread shortages of gas and electricity in rural areas each winter, as Tashkent increases exports to neighboring countries and China.
According figures cited by Novyy Vek, domestic consumption stands at around 50 billion cubic meters (bcm) annually. Output fell by 0.2 percent to 62.9 bcm in 2012.
China’s President Xi Jinping has started his first visit to Central Asia in Turkmenistan, where he has sealed a major new deal, securing Beijing’s status as the chief client of the country’s lucrative and expanding gas sector.
Xi and his host, President Gurbanguly Berdymukhamedov, agreed to roughly triple Turkmen gas exports to China by 2020. "Energy cooperation is a highlight in China-Turkmenistan relations, which fully testifies to the high level of political mutual trust between the two sides," Xi said in comments published by Chinese state media. In return, Turkmen state media quoted Berdymukhamedov as saying that China is a priority for Turkmenistan.
On September 4 the two leaders launched processing facilities at the world’s second-largest field, Galkynysh, in eastern Turkmenistan. "The combined capacity of the new facilities is designed to ensure reliable and long-term supplies of Turkmen natural gas to China," Turkmenistan’s TDH state news agency reported.
Turkmenistan is already China's largest foreign gas supplier: It delivered over half of Chinese imports, or 21.4 bcm in 2012, and has been ramping up gas deliveries since China completed a 1,833-kilometer pipeline connecting the two countries in 2009. Before Galkynysh came online, Ashgabat was already contracted to increase exports to 40 bcm by 2020, according to Reuters. A new deal signed during Xi’s visit will see Turkmenistan deliver 65 billion cubic meters (bcm) annually by 2020.