Turkmenistan’s gas exports under pressure

Turkmenistan’s export options are steadily shrinking despite being one of the world’s largest natural gas reserve holders. Geopolitical conflicts, security and financing issues as well as lack of sufficient infrastructure are acting as constraints for market diversification. According to the U.S. government’s Energy Information Agency, Turkmenistan has natural gas reserves of 265 trillion cubic feet, which makes the country the world’s fourth largest gas holder after Russia, Iran and Qatar, in terms of natural gas production it remains among the top 15 countries. For instance, the Galkynysh Natural Gas Field, which is operating since 2013, is the world’s second largest gas field. But its export options are believed to be meeting considerable constraints as its biggest clients Russia and Iran are cutting back on imports of Turkmen gas and China’s purchase is also accompanied with turbulence.

Russia, due to its monopoly during the Soviet times, controls part of Central Asia-Center (SATS) pipeline system and receives gas from Turkmenistan with “buy cheap and sell dear” deal. But the export to Russia has been declining both in volume and price since 2009 owing to the global recession but also damage to some part of the SATS. Recently Turkenistan’s Oil and Gas Ministry said that Gazprom has not paid for its debts since the beginning of 2015. In response, Gazprom announced about its intention to decrease its purchase to 4bcm in comparison to 11bcm in 2014. Iran also plans to end purchases in the new future as it is aiming to ramp up its own production for export.

China has been the most successful investor in Turkmenistan but also threatens diversification by slowly becoming the sole export market for the country. On the other hand, Chinese market is in turbulence as the government recently moved to boost demand for natural gas with pricing cuts that will potentially impact cost of its imports from Turkmenistan. The country’s biggest oil and gas producer PetroChina also announced about selling 50% of its pipeline business as it fails to meet annual profit target. Other alternatives for Turkmenistan include the projects of Trans-Caspian subsea pipeline (TCP) and Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline. But both suffer from financing issues as well as security issues particularly TAPI for its transit in Afghanistan. In response, Turkmenistan is attempting to develop gas-based chemical industry instead, hoping to export such products as ammonia and synthetic gasoline derived from natural gas.

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News Briefs:

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