Another gas export dream: How far is the Turkmen China gas project from realization?

Turkmenistan’s President Sapamurat Niyazov made one of his rare trips outside the country in the first week of April, 2006. The beginning of Niyazov’s six-day visit to China may have been a bit of a disappointment, since he was welcomed only by a lowly deputy Foreign Minister. But the next day was much more successful for the Turkmen President, as Ashgabat and Beijing took preliminary steps toward the construction of a pipeline linking the two states

If all goes according to plan, the pipeline will relieve Ashgabat’s dependency on its traditional gas customers, Ukraine and Russia. Under the agreement signed by Niyazov and Chinese President Hu Jintao, Beijing agreed to buy 30 billion cubic meters of Turkmen natural gas annually for a period of more than 30 years, possibly starting in 2009. Niyazov’s view is even more ambitious – he believes the pipeline could be in operation one year earlier, delivering 50 billion cubic meters of gas by 2010, and carrying Turkmen gas as far as the Chinese port city of Shanghai.
All is not signed and sealed yet. Both countries have to give their final agreement by the end of this year, and the exact price of the gas has yet to be settled. Other, minor agreements were signed during Niyazov’s visit – in telecommunications, transport and the struggle against terrorism. But the gas deal can be considered the major outcome of this long trip, which the Turkmen delegation mostly spent at Chinese holiday resorts.
Niyazov has great expectations from the deal, but many experts consider it unrealistic: bringing it to fruition would require not only a huge amount of money, but the permission of two other states: Uzbekistan and Kazakhstan.
Since these are both close allies of another gas-rich country, Russia, the gas project is likely to depend more on Moscow’s position than any Sino-Turkmen intentions. Energy-rich Russia’s growing interest in the Chinese market has to be taken into account – Moscow would likely not be happy by this agreement, since it will allow China to have direct links with Central Asian countries, which is one of the main source for Russian energy purchases.
Turkmenistan’s agreement with China is not just a gas deal, either, as China is increasing its political presence in Central Asia. This also may bring it into confrontation with Russia, as Moscow moves to safeguard its own interest in the region.
Regardless of how the project turns out, many western experts believe the main purpose of the agreement is to increase the two states’ leverage in their respective gas trade talks with Russia. But from a Turkmen point of view, the realization of this project may be more important than any secret game. The lack of any alternative energy gateway means Turkmenistan so far has been completely reliant on Russian pipelines. This in turn means Turkmenistan has been unable to choose its own costumers, let alone demand the price it wants.
In 2005, for instance, Russian gas exports to Western Europe were priced at over $200 per 1,000 cubic meters, while Turkmen exports were in the $55-60 range. And Ashgabat’s traditional customers, Russia and Ukraine, do not always pay this full price in cash. In this situation, Turkmenistan may simply ignore Moscow’s position in its eagerness to have an overland route to a large, liquid market like China.
From a Chinese point of view, meanwhile, Beijing also wants to secure gas supplies to feed its growing energy needs. Turkmen gas may help China reduce its dependency on coal, which so far has been one of the important sources of energy for its economy. The deal is hence important for both countries’ economies. Still, outside observers are skeptical, raising doubts not only about the huge investments needed, but also about Turkmenistan’s ability to meet additional export commitments and the project’s overall feasibility.
For many years, international investors and countries interested in Turkmen gas have spoken of the need for an international and independent assessment of Turkmen gas reserves. But the Turkmen regime long refused, and most international companies are now wary of investing in Turkmenistan’s gas fields and in expensive pipelines. Plans to build a pipeline linking Turkmenistan with Afghanistan and Pakistan have been held up for years, and many experts believe the unreliable assessment of Turkmen gas reserves is partly to blame. A pending survey may nevertheless address this issue.
It’s not just Russia’s position and the uncertainty of reserve estimates that cast doubts on the Turkmen-China project. The pipeline’s projected length, at 4,000 kilometers (2,500 miles), also raises questions about its economic feasibility. Russia’s press has already started to speculate on this potential obstacle, saying that Niyazov would use his visit to China try to convince Beijing to finance the project.
But according to Roland Goetz, an energy expert with Germany’s Institute for International and Security Affairs, political and military factors might outweigh economic considerations for China. In an interview with the Turkmen opposition web site Gundogar, he also argued that Ashgabat would do everything possible to bring the project to completion, because the new pipeline would give Turkmenistan a measure of independence from Russia.

Published in :- Central Asia and Caucasus Analyst [Washington-US]