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The magazine is registered by the Federal Service for Supervision of Compliance with Legislation Governing Mass Communications and Protection of Cultural Heritage, certificate of registration Ō» Ļ ‘—77-21265 of 08.06.2005
2006 †N7-8(16-17)
PIPELINE GEOGRAPHY
TURKMEN GAS AS A FACTOR OF GLOBAL ENERGY SECURITY

From the early days of independence ensuring multiple pipelines network has been Turkmenistan's energy strategy. Inviting all states and companies interested in implementing projects Ashgabat has been declaring the absence of any political preferences in choosing partners. The government of Turkmenistan defines dependability, cost effectiveness and equivalent benefit as the main criteria in this area.

Saparmurat Niyazov has been constantly calling upon the international financial institutions and businessmen worldwide to collaborate actively in supplying Turkmen "blue fuel" to world markets. He considers that "creating favorable conditions for Turkmen energy supply is of paramount importance for energy consumers and the world economy as a whole. In this context, the Turkmen President urged to concert efforts, increase investments in energy sector and be concerned about improving trade and economic relations, meeting consumer demand and providing energy producers with the reliable markets".

THE NORTHERN VECTOR
This year, the Russian Gazprom has become the largest consumer of Turkmen natural gas that contracted 30 billion cub m of fuel at US$ 65 per 1,000 cubic meters. Thus, one can say, Russia and Turkmenistan go ahead of schedule in contracting supply volumes set forth in the Agreement on cooperation in the gas sphere until 2028 signed by the states on April 10, 2003.

According to the agreement Russia is to buy 10 billion cub m in 2006 and 60-70 billion cub m in 2007 from Turkmenistan. However, the problems related to the settlement of mutual payments have led to the actual freezing of Turkmen gas exports to Ukraine this year and, as a consequence Gazprom bought the released amount of gas.
According to the Ministry of Oil and Gas Industry and Mineral Resources of Turkmenistan, the Turkmenistan-Gazprom gas supply contract is to be implemented until October, and the remaining amount of Turkmen gas can be exported in the northern direction till the end of the year.

In the meantime, quite often the mass media interpret the relations within the Turkmenistan-Russia-Ukraine gas triangle' as well as the provisions of the interstate agreement between Ashgabat and Moscow simplistically. The statements that Gazprom "bought up all available Turkmen natural gas for the nearest 25 years" are frequently made. Although, the document signed in 2003 by its definition could not include the phrase about the total' amount of Turkmen fuel as the proven natural gas reserves are steadily increasing. The agreement specifies some targets in this area, i.e. 10 billion cub m of Turkmen gas to be exported in 2006, 60-70 billion cub m in 2007, 63-73 billion cub m in 2008 and 70-80 billion cub m in 2009-2028.

It is obvious that to achieve these targets is impossible without increasing the capacity of the pipelines running from Turkmenistan in the northern direction. The Turkmen-Russian agreement includes the provision envisaging "joint design, construction, reconstruction of the gas infrastructure including gas pipeline trunk systems and rendering of pipeline maintenance services". During the talks with the Turkmen high-ranking officials the Gazprom representatives repeatedly stated that Russia was ready to modernize the pipeline network laid in the territory of Uzbekistan and Kazakhstan to encourage Turkmen natural gas exports. These include the increase of throughput of the Central Asia-Center gas transportation system from the current 44-45 billion cub m to 50 billion cub m per year and to 80 billion cub m at the second stage. Moreover, Gazprom is considering the opportunity of building an addition pipe through the territory of Uzbekistan and in case of the positive solution the pipe is to be built within two and a half years.

Within the contract period Russian Gazprom shall buy from Turkmenistan 1.8 trillion cub m of natural gas. The Turkmen side will take measures to improve the quality of raw materials, to increase hydrocarbon production and to ensure reliability of pipelining with a view to guarantee supplies of the agreed gas volumes. Meeting its contractual obligations in recent years Turkmenistan has reconstructed the big engineering systems of gas infrastructure and has built the modern units to improve the standards of natural fuel. Over US$ 800 million have been invested in the enterprises of Turkmengaz State Concern for the past four years. The Turkmen government states that Turkmenistan guarantees to fulfill its part under the long-term contract with Russia. Thus, in 2010 Turkmenistan will produce 120 billion cub m of natural gas, and by 2020 the gas production will be doubled.

The head of the Turkmen state proposed his solution to the problem of transporting the increasing amounts of Turkmen gas in the northern direction. He suggested that Moscow and Kiev should collaborate in building a new gas pipeline on the eastern coast of the Caspian Sea which would transport fuel from the Karakum desert to Russia, Ukraine and Europe.

As for the Ukraine, it accepted the suggestion and has prepared the feasibility study of the future gas pipeline that can be built to replace the operating low-capacity (up to 5 billion cubic metres) Turkmenistan (Deryalyk)-Europe pipeline. Moscow represented by the Gazprom leadership considers it economically feasible to reconstruct the Central Asia-Center export pipeline. Such an approach is quite understandable as Gazprom has its long-term interests in Uzbekistan and Kazakhstan; through the territory of these countries Turkmen gas is being transported to Russia. The Russian gas monopoly has adopted the investment program aiming to increase the capacity of the pipeline.

Ashgabat, in its turn, has repeatedly stated that Turkmenistan is ready to build the section of the new pipeline which will run on its territory as well as to carry out necessary preparatory work to increase its export capacity. Putting a modern gas dehydration unit into operation on the Central Asia-Center export pipeline was another step in this direction. The project amounted to over US$ 23 million and was implemented by the consortium of the companies consisting of Pall GmbH (Germany), Sulzer Chemtech (Switzerland) and Enex Process Engineering C.A. (Belgium) within 15 months. The technologies of the leading manufacturing companies were applied in the project. The unit is equipped with the automatic control systems and monitoring instruments produced by the US General Electric and Honeywell and the German KSR K_bler companies. The capacity of the unit is up to 75 billion cub m per year.

The gas infrastructure development project launched in 1997 stipulated for modernizing of the measurement and control system (SCADA) on the Dovletabad-Deryalyk gas trunk pipeline and constructing of a self-supporting measurement unit at the Deryalyk compressor station. In 2002, a gas treatment and compression unit was put into operation in the Dovletabat-Donmez field. Since that moment Turkmenistan's gas pipeline infrastructure has started to operate in compliance with the international standards.

Afterwards, the operations estimated at US$ 180 million on the reconstruction of the Deryalyk and Ilyaly compressor stations designed to provide the high pipeline pressure in the gas export system were carried out. Over US$ 50 million was invested in the projects on the construction of the pipeline junctions on the Dovletabat-Deryalyk and Naip-Deryalyk pipeline networks via the Dostluk (Friendship) collector and construction of the junction on the Dovletabat-Deryalyk pipeline network via the Deryalyk collector (50 km away from the Dostluk).

Thus, today Turkmenistan is creating the real opportunities which will enable the country to meet the contractual obligations to supply natural gas to Russia under the 25-year agreement as well as to Ukraine and other European countries. There is no doubt that Turkmen gas will serve as an important factor of ensuring energy security in the continent that is proved by the increased interest in the Turkmen hydrocarbons of such a powerful state as China.

A SPURT TO THE EAST
During the official visit of the Turkmen leader to the People's Republic of China, Turkmen gas was the main agenda item at all meetings and negotiations. The Chinese side, long before the visit, had expressed the wish to draw up and sign documents on the construction of a pipeline connecting Turkmenistan and China. The deal was not limited to public statements only. The Chinese specialists enjoying long time successful cooperation time with their Turkmen colleagues in the oil and gas sector of Turkmenistan worked on the issue with thoroughness peculiar to them. The joint work at this stage has resulted in the General Agreement on the realization of the Turkmenistan-China gas pipeline project signed by Turkmen President Saparmurat Niyazov and Chinese Chairman Hu Zintao on April 3, 2006.

This document defines the cooperation in the oil and gas sphere a top priority in the relations between the two countries, and calls the construction of the Turkmenistan-China trunk pipeline as meeting the interests of both nations, contributing to the economic development and improving the living standards of the friendly peoples.

China undertook to purchase natural gas "on the border of Turkmenistan in the annual amount of 30 billion cub m during 30 years starting from the commissioning the Turkmenistan-China pipeline in 2009".

In its turn, Ashgabat assumed the obligation to supply gas on the Turkmenistan-China gas pipeline in the set schedules and amounts. The Chinese side shall work out the procedure according to which it will buy natural gas from Turkmenistan.

To provide the raw materials basis for the future pipeline, Turkmenistan and China agreed to conduct joint exploration and development on all the fields and areas of the Amudarya River's right bank on the Production Sharing Agreement terms.

The document specially stipulates that if additional gas supplies are necessary for the Turkmenistan-China pipeline, Ashgabat may guarantee its delivery from the country's other gas fields.
Nowadays, drafting of the following agreements has been under way:

Agreement on the joint exploration and development of gas fields determining the main framework of cooperation with participation of the Chinese organization to provide the raw materials basis for the Turkmenistan-China gas pipeline;

Agreement on the main principles of the Turkmenistan-China gas pipeline construction that establishes basic principles of the Turkmenistan-China gas pipeline construction project to provide the gas pipeline's feasibility study;

Agreement on the sale and purchase of gas fixing concrete volumes of gas to be bought annually and setting forth all organizational, legal, financial and other important terms, which regulate the Turkmen natural gas sales to the People's Republic of China.

At the same time, the Chinese side is holding consultations with governments of transit countries aimed at reaching mutually beneficial agreements of natural gas transit via their territories.

THE AFGHAN FACTOR
The longstanding instability in neighboring Afghanistan is an obstacle to not only this country's domestic economic development. Politics has been involved to delay the plans of Ashgabat to export natural gas via the Afghan territory. It is due to this reason that the trans-Afghan gas pipeline project, being one of the most promising ones among this kind of projects in the world, can't be launched yet, despite the fact that during all this time since the Turkmen leader initiated the project in early 1990-s, there has been a lot of interest in investing in implementation of this project.

Today, one can say about the sharp revival of interest in the Turkmenistan-Afghanistan-Pakistan pipeline project with its possible extension to India, which has been participating in the Steering Committee on the trans-Afghan gas pipeline project realization since recently. The Asian Development Bank has been sponsoring the project since 2002 and has provided possible project and investment scenarios to be offered to investors and financiers. The project's feasibility study has been completed, all necessary surveys have been carried out and basic drafts of Agreements among the governments and other documents have been developed with the ADB participation.

In mid 2005, the ADB submitted the final version of the feasibility study of the trans-Afghan gas pipeline construction to the petroleum ministers of Turkmenistan, Afghanistan, Pakistan and India. It was developed by the British Penspen company. The 56 inch (1420 mm) gas pipeline with the normal pressure of 100 atmospheres has a throughput of 33 billion cub m of gas a year. The project's estimated value is US$ 3.3 billion. The project envisages construction of 6 compressor stations on the 1680 km route of the future gas pipeline running from the Dovletabat field in Turkmenistan to the Indian settlement, Fazilka, on the Pakistani-Indian border.

At the last meeting in Ashgabat, the oil and gas ministers of four countries and representatives of the Asian Development Bank preliminary agreed on the delivery volumes of Turkmen natural gas and came to a number of specific agreements, particularly regarding Turkmen natural gas volumes to be purchased by Pakistan and India, and confirmed the formal invitation to India to join the project. The absolute sufficiency of natural gas reserves in the Dovletabat field necessary to realize the project was declared. The results of the audit conducted by the US DeGoyler & McNotten Company which confirmed the availability of resources were announced.

It is difficult to overestimate the significance of the trans-Afghan gas pipeline for the development of the whole region. The Kabul government hopes to get not only fuel and dividends from transit, but thousands of new jobs. It is not accidental, that the Afghan authorities have declared their readiness to assume all obligations to ensure security for the gas pipeline and its construction. These obligations include protection, mine clearing on the route of the pipe. To ensure the gas pipeline construction, the Afghan Government undertook to redeem all land plots located on the route of the pipeline from the landowners.

The Pakistani authorities, whose country is in acute shortage of energy, also pin their hopes on the successful construction of the pipeline. India, too, scrutinizing all opportunities for natural gas imports from Turkmenistan and Iran and taking into account the regional situation has been more and more inclined towards Ashgabat in recent times. Moreover, in case of successful realization of the Turkmenistan-Afghanistan-Pakistan-India gas pipeline project, laying the oil pipeline along the same route will also become a reality. This pipeline will pump the "black gold" of Turkmenistan and other Central Asian states, and possibly Russia, to the Indian Ocean.

MULTIPLE OPTIONS AS A REALITY
Turkmenistan's hydrocarbon potential is so great that the current aspirations of Ashgabat to develop impressive large scale plans on creating multiple energy export routes system to the world markets seem fully justifiable. The construction of the Turkmen-Iranian Korpedje (Western Turkmenistan) Kurt Kui (Iran) gas pipeline in mid 1990s has served as a first sign in practical realization of these plans.

The National Oil Engineering and Construction Company of Iran acted as a general contractor of the US$ 195 million project implementation. The 200 km long pipeline with 135 km running on the territory of western Turkmenistan has the capacity of 8 billion cub m of gas a year. In the future, the throughput can be increased up to 13-14 billion cub m. The contract signed in 1995 between Turkmenistan and Iran provides for hydrocarbon supplies to the northern provinces of Iran for 25 years. The pipeline was put into operation on December 29, 1997 and the ceremony was attended by the leaders of the two neighboring states. The operational fund of the Korpedje field amounts to 100 oil and gas wells. Turkmen natural gas exports to Iran have been steadily growing from less than 2 billion cub m in 1998 up to over 6 billion cub m in 2005.

On April 11, 2006, Turkmenistan and Iran signed the bilateral agreement on the cooperation in the gas sphere in Ashgabat. According to the document, from February 1, 2006, the price of gas exported to Iran has been set at US$ 65 per 1000 cub m. The deal also provides for increase of gas exports from Turkmenistan to Iran up to 14 billion cub m during 2007.

As the head of the Iranian delegation, Advisor to Director General of the National Gas Company of Iran Muhammed Hasan Mojarrad stressed the agreements between the Presidents of two countries underlay this bilateral document. He expressed confidence that with signing of this contract the cooperation between the two neighboring states in the strategic gas sphere as well as other areas will be successfully continued and its fruits will serve the interests of the Turkmen and Iranian peoples.

...Against a background of problems relating to gas supply to the European countries emerged last winter, much attention has been paid in recent times to the potential supplies of the Turkmen "blue fuel" to the European market. The trans-Caspian route and new pipelines running through Russia and Ukraine are seen as possible options for gas transportation from Turkmenistan to Europe. The European Commission Minister on energy issues, Andris Pibalgs, has recently said to journalists that European counties would like to import part of extracted Central Asian gas, including the Turkmen one, or at least compete with other buyers.

Many independent experts forecast sharp growth of Turkmenistan's role in formation of the gas balance for Russia and Ukraine as well as for the countries of Europe and other states, and of its importance in the international market in the years to come. Ashgabat is ready to address this challenge and has been repeatedly declaring the readiness for the mutually beneficial and honest partnership. As President Saparmurat Niyazov has recently stressed, "we are ready to expand cooperation with our partners not only in issues of gas sale and purchase. We also invite them for the joint development of fields in the Caspian sea and the Amudarya River's right bank, coordination of efforts in creating new outlets for Turkmen gas to the world markets".

Igor SOLOVYOV


©Turkmenistan Analytic magazine, 2005