Dr.
Shirin Akiner, London
A senior
fellow of the University of Cambridge
Turkmenistan has huge mineral wealth, including
reserves of natural gas that are estimated to be the fourth largest in the
world.
However, when the country became independent, it
lacked an export infrastructure. The existing gas pipelines formed part of the
Central Asia-Centre network, which ran from Turkmenistan through Uzbekistan and
Kazakhstan to Russia and the other Soviet republics. Consequently, in the early
1990s the main customers for Turkmenistan gas were still former Soviet
republics. Most of these new states, especially Armenia, Georgia and Ukraine,
were in the midst of a severe economic recession and were frequently unable to
meet payments, thereby falling deeply into arrears. By the end of 1995,
Turkmenistan was owed close on US $2 billion.
It was against this background that the Turkmen
Government made plans to create a multi-vectored network of export routes to
Europe, the Middle East and South Asia. It was a bold, ambitious idea. The
distance to world markets and the technical problems of constructing pipelines
across difficult terrain would make such projects inordinately costly.
Moreover, political factors, notably US sanctions against neighboring Iran, and
regional instability, particularly in Afghanistan, would hinder the
transboundary transportation of hydrocarbons. In the face of such obstacles,
many commentators doubted the feasibility of these schemes. Yet the Turkmen
authorities were not deterred: the new pipelines were vital to the country’s
independence and to its economic development.
Moreover, the pipelines were a
form of ‘energy diplomacy’, strengthening ties with regional states and laying
the foundations for strategic partnerships. Thus, despite the frustrations of
protracted negotiations, memoranda of intent and feasibility studies that were
mothballed, and the frequent hiatuses, slowly and determinedly the Turkmens
pursued their objectives. The twists and turns that punctuated this process
mark the course of Turkmenistan’s pipeline strategy, but they also chart the
complexities of regional relationships and the changing priorities of
international actors.
Turkmenistan - Iran Pipeline
This was the first cross-border pipeline project
to be implemented and initially, was the Turkmen Government’s favored option
for an export route. The intention was to construct a pipeline that would run
across Iran to Turkey and thence to Europe (a distance of some 1,400 km.).
Construction of the first segment, from Korpeje in western Turkmenistan to Kord
Koy in northern Iran, commenced in 1994 and the pipe became operational in
December 1997. There were hopes at this time that the US Government was no
longer as vehemently opposed to Iranian involvement in the project as had been
the case previously.
Accordingly, international energy companies such as Royal
Dutch/Shell and the French company Sofregaz bid for the contract to carry out
the next phase of construction. Yet it soon became clear that this was
premature: there were still too many political and commercial obstacles for
Western companies to participate in the project. Undeterred, Turkmenistan and
Iran continued to expand bilateral energy ties. In 2000, a second cross-border
pipeline, from Artyk to Luftabad, was inaugurated and in January 2010, a third,
much larger pipeline was launched, running from Dovletabat in south-eastern
Turkmenistan (a field previously reserved for deliveries to Russia) to
Khangiran. These three pipelines together would, at peak capacity, enable
Turkmenistan to make annual deliveries to Iran of up to 20 billion cubic metres
(bcm).
Turkmenistan-China Pipeline (Trans-Asian)
Another vector of Turkmenistan’s energy export
strategy was the construction of a Trans-Asian gas pipeline. This project got
off to an early start: in 1992 – scarcely a year after independence – Japan’s
Mitsubishi Corporation and the China National Petroleum Company (CNPC)
undertook feasibility studies for a pipeline from the Caspian region to China,
to terminate at a port on the Yellow Sea; from there the gas could be
transported by tanker to Japan and, eventually, the Republic of Korea. In 1997,
the Mitsubishi Group, Exxon and CNPC formed a consortium to develop a pilot
project to connect gas fields in Uzbekistan and Turkmenistan via Kazakhstan to
China’s eastern seaboard – an estimated distance of some of 6,000 km. However,
although the benefits of opening up Central Asian hydrocarbon resources to
Pacific markets were considerable, the cost of such a pipeline was deemed too
high to be commercially viable.
The project languished until April 2006, when
President Niyazov visited Beijing. While there, he signed an agreement with
President Hu on the supply of Turkmenistan gas to China, to be transported via
Uzbekistan and Kazakhstan. Thereafter, progress was rapid. In 2007, President
Gurbanguly Berdimuhamedov, Saparmurad Niyazov’s successor, visited China and
oversaw the signing of a Production Sharing Agreement between CNPC and the
Turkmen authorities to develop the massive Bagtyyarlyk contract territory. Located
on the right bank of the Amu Dar’ya, this previously undeveloped area was known
to contain several large gas fields. The deal was significant not only because
of the territory’s rich reserves, but because it was the first major contract
to be concluded with a foreign company for the development of Turkmenistan’s
on-shore hydrocarbon reserves.
The Chinese partners lost no time in
launching the project: the following year CNPC signed bilateral deals with the
national gas companies of Turkmenistan, Uzbekistan and Kazakhstan, giving them
50 per cent stakes in their respective segments of the pipeline. Work on the
pipe commenced concurrently in all the participating states and, less than two
years later, was completed in record time. On 14 December 2009, in the presence
of the Presidents of Turkmenistan, China, Uzbekistan and Kazakhstan, the formal
valve-opening ceremony was held. It was the first phase of what would become a
major ‘gas corridor’ to the east. Over the following years, additional branches
were constructed. In 2015, the fourth branch, known as ‘D’, was nearing
completion; initial shipments via this new pipeline would total 5 bcm,
increasing annually to reach 25 bcm within five years. Total Turkmen gas
exports to China by 2020 were expected to reach 65 bcm per year.
Turkmenistan-Afghanistan-Pakistan-India Pipeline
(TAPI)
An even more ambitious scheme was the proposal
to construct a pipeline linking Turkmenistan to the Indian sub-continent via
Afghanistan. The first step towards the realization of this project came in May
1997, when the US petroleum company Unocal and its strategic partner, the Saudi
Arabian company Delta Nimir, signed a memorandum of agreement with the
Turkmenistan Government for the construction of oil and gas pipelines from
hydrocarbon deposits in eastern Turkmenistan to Pakistan via Afghanistan.
However, the deteriorating security situation in Afghanistan made the
implementation of this route impractical at that time.
Five years later, following the US-led military
intervention in Afghanistan in October 2001, the outlook was more promising.
Hence, in May 2002 the Presidents of Afghanistan, Pakistan and Turkmenistan
agreed to revive the project. The Asian Development Bank provided funding for a
feasibility study and facilitated negotiations. There was, however, no firm
commitment to the project and little solid progress was made. This changed when
India formally joined the steering committee in April 2008. The route of the
pipeline, now renamed the Turkmenistan–Afghanistan–Pakistan–India pipeline
(TAPI), would extend from Turkmenistan’s giant Galkynysh field (previously
known as South Yolotan-Osman) to Fazilka on the Indo-Pakistan border–a distance
of some 1,800 kilometres. The annual pumping capacity of the pipeline would be
33 bcm, of which 14 million cubic metres of gas a day would be supplied to
Afghanistan and the remainder divided equally between India and Pakistan.
Prospects for the construction of the pipeline
(estimated at $10 billion) were beginning to look promising. It was beginning
to attract interest from regional states such as Bangladesh and China. The
Ashgabat agreement, concluded between the participating states in 2010,
addressed the practicalities of the undertaking. Russia expressed support for
the project. So, too, did the USA – primarily because it regarded TAPI as
preferable to the rival scheme to construct a gas pipeline from Iran to the
Indian sub-continent (the Iran–Pakistan–India pipeline). American interest in
Turkmen energy was underlined by notable visitors such as Neil Bush, head of
the energy company South Oil Texas (and youngest brother of former US President
George W. Bush), who had a meeting with President Gurbanguly Berdimuhamedov in
Ashgabat in February 2010.
International investors, however, were reluctant
to commit to TAPI as the security situation in Afghanistan was still unstable.
Once again, it seemed as though the project would be postponed indefinitely.
Yet the partner states were not only convinced of the commercial viability of
the pipeline, but understood that it would be of immense benefit to local
economies, boosting industrial development and creating employment
opportunities. This would contribute to the creation of a virtuous circle of
increased prosperity and regional security. Consequently, in order to
avoid further delays, the partner states decided to use their own resources to
launch the project. In August 2015, Turkmenistan’s state gas company,
Turkmengas, was selected to lead the TAPI consortium. Work was scheduled to
begin in December, with a provisional completion date in 2018.
Turkmenistan-Azerbaijan Pipeline (Trans-Caspian)
The fourth, and in many ways the most
challenging scheme was the construction of a pipeline under the Caspian Sea.
The objective was to deliver Turkmen gas to Azerbaijan for on-shipment via
Turkey to Europe. The idea was first put forward by US officials in 1996. In
1999, Royal Dutch/Shell became a ‘strategic energy partner’ of Turkmenistan,
with the aim of developing the various gas deposits that would be the main
source of supply for the subsea pipeline. Concurrently, the US conglomerates
General Electric and the Bechtel Group carried out a feasibility study for the
pipeline. The possibility of transporting Turkmen gas to Romania was also being
considered. However, that same year the large Shah Deniz gas field was
discovered in the Azerbaijani sector of the Caspian Sea.
This dramatically
changed the situation. Azerbaijan was still prepared to act as a transit
country for Turkmen gas, but was understandably eager to prioritise its own gas
exports. Hence the terms and conditions that it offered to Turkmenistan were
less favourable than had originally been anticipated. Little progress was made
as negotiations became mired in disagreements over share-holdings and quota
allocations. In 2003, Royal Dutch/Shell decided to reduce its activities in
Turkmenistan and the project was shelved.
By this time, the ‘Nabucco Pipeline’ was
receiving strong support from the European Union (EU) and the USA. This
project, first mooted in 2002, envisaged transporting Caspian gas via Turkey to
Europe, bypassing Russia and Iran. The principal sources for Nabucco were
expected to be Azerbaijan and Turkmenistan, with additional contributions from
Kazakhstan. The optimal route for transporting Turkmen and Kazakh gas to
Azerbaijan would entail the laying of a 300-kilometer gas pipeline on the bed
of the Caspian Sea. However, disagreements between the participating states
(over transit fees etc.) were compounded by the failure of the EU to demonstrate
real commitment to the scheme.
There were some attempts to modify the route,
but in 2013 the Nabucco pipeline was finally rejected. Despite this setback,
however, the EU was already beginning to lobby for a similar, but larger
project – the Southern Gas Corridor (SCG). Like Nabucco, it aimed to enhance
European energy security by diversifying the routes and sources of energy
supply. To this end, it envisaged the transportation of gas from the Caspian
region through Georgia and Turkey to Europe.
Meanwhile, Turkey and Azerbaijan were developing
their own plans to build the Trans-Anatolia Pipeline (TANAP), which would run
via Turkey to the EU border to feed into the proposed SCG. Turkmenistan was
favourably disposed to the idea of a subsea pipeline and was ready to
participate in this undertaking. In November 2014, during the visit of
Turkish President Erdoğan to Ashgabat, a framework agreement was signed between
Turkmengas and the private Turkish firm Atagas for the purchase and sale of
Turkmen gas destined for TANAP. This was an encouraging development, but it was
still too early to predict if, and when, the project would be realised.
Turkmenistan’s East-West Pipeline
Russia had long been Turkmenistan’s main partner
for gas exports, receiving up to 70 per cent of total output. As mentioned
above, this was transported via the Central Asia-Centre (CAC) pipeline network.
In 2003, President Niyazov proposed extending CAC by the construction of a new
pipeline that would traverse Turkmenistan from east to west, then turn north
along the Caspian coast via Kazakhstan to Russia, in parallel to an older CAC
branch. This new pipeline Caspian Coastal branch, to be built by the Russian
company Gazprom, would to carry up to 20 bcm of natural gas per year, with approximately
one-half coming from Turkmenistan and the remainder from Kazakhstan. In 2007,
Russia, Kazakhstan and Turkmenistan signed an intergovernmental agreement to
implement this project.
Negotiations between Turkmenistan and Russia limped
along until early 2009 when, without warning, Russia drastically reduced the
volume of Turkmen gas imports. The abrupt change in pressure caused an
explosion that severely damaged the pipeline infrastructure. Supplies were
suspended while repair work was carried out; accusations of blame were traded
by both sides. The pipeline was eventually fixed, but deliveries to Russia were
not resumed until early 2010; the delay cost Turkmenistan an estimated US$1
billion in monthly losses. Any prospect of implementing this project evaporated
in February 2015, when Gazprom announced that within the year it would decrease
Turkmen gas purchases from 10 bcm to four bcm.
Meanwhile, the Turkmen Government had decided to
finance the construction of its own segment as an internal East-West pipeline
that would link the Shatlyk compressor station in the east of the country to
Belek in the west. Work commenced in 2012, and by autumn 2015 was nearing
completion. It was a timely undertaking. Turkmenistan’s natural gas deposits
are dotted around the country – an area of over 488,000 sq. km. The export
pipelines carry supplies from particular fields to international destinations.
However, to realize the full potential of the country’s gas resources greater
flexibility was required. The new East-West pipeline would unite Turkmenistan’s
main gas fields into a single gas transportation system, thereby significantly
increasing the country’s export capacity. In the future, it could ensure stable
supplies of gas to the proposed Trans-Caspian subsea pipeline.
Conclusions
In the early 1990s, Turkmenistan’s plans for
creating a network of export pipelines seemed fanciful: there were too many
hurdles to be overcome. By 2015, the picture was very different. Turkmenistan
was now recognized as a major source of energy supplies for international
markets. Some large-scale pipeline projects had already been implemented,
others were moving towards the point when engineering works could begin in the
foreseeable future. The most impressive achievement was the launch of the
Trans-Asian gas pipeline from Turkmenistan via Uzbekistan and Kazakhstan to
China.
At the time of writing, it had already been expanded and upgraded
several times. The subsea Trans-Caspian pipeline was still under discussion.
However, the extension of the Turkmen-Iranian pipeline complex was beginning to
appear more feasible. The nuclear agreement concluded between Iran and major
world powers in July 2015 opened the way for the lifting of international
sanctions against Tehran. This in turn meant that the Turkmen-Iranian pipeline
network could be extended to Turkey and beyond, raising the possibility that
Turkmen gas might eventually be transported to Europe overland along this
route. Finally, some eighteen years after the idea of a gas pipeline from Turkmenistan
to the Indian sub-continent had first been proposed, the TAPI project seemed to
be making real progress.
The chief success of Turkmenistan’s pipeline
strategy during these years was to shift the country away from dependency on
the needs and whims of a single customer by developing a diverse range of
export options. This proceeded in step with the development of massive gas
deposits at the Bagtyyarlyk territory, Galkynysh and Dovletabad. The
combination of these two approaches – pipeline construction and exploitation of
hydrocarbon reserves – allowed Turkmenistan to respond more effectively to
regional conditions, to global economic crises, and to shifting patterns of
global consumption.
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