More than three years after Russia stopped buying gas from Turkmenistan, flows are resuming. In mid-April, Turkmengaz, the state natural gas company, announced that it was once again exporting gas to Russia and Russia’s Gazprom confirmed the news. Circumstances in both Turkmenistan and Russia arguably motivated a return to the trade, although the specifics are closely held.
Up until 2010, when Turkmenistan began exporting gas to China, Russia was the country’s main customer. As China’s share of Turkmen gas exports grew, Russia’s declined — from a high of 40 billion cubic meters (bcm) in 2008 to 10 bcm annually from 2010 to 2015, and then just 4 bcm in 2015.
At present, Turkmenistan exports between 30 and 40 bcm annually to China via the Central Asia-China pipeline that runs from Turkmenistan, through Uzbekistan and Kazakhstan (which both also export smaller volumes through the pipeline) to western China. Radio Free Asia reported last summer that planned volumes surpassed 51 bcm, fast approaching the pipeline’s max capacity of 55 bcm. Later in 2018, Kazakhstan and China agreed to double Kazakh exports of gas to 10 bcm and a week later, PetroChina said the pipeline was operating at max capacity.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
At that time, I poked into the most recently BP Statistical Review of World Energy, the 2018 edition:
…China imported 36.2 bcm of gas via pipeline from Central Asia in 2017. Most of that gas, the report’s statistic show, came from Turkmenistan (31.7 bcm), followed by Uzbekistan (3.4 bcm), and then Kazakhstan (1.1 bcm).
In the previous year, according to BP, China imported an estimated 34.1 bcm of gas from Central Asia via pipeline: 29.4 bcm from Turkmenistan, 4.3 bcm from Uzbekistan and just .4 bcm from Kazakhstan.
While growth is the overall trajectory for gas exports to China from Central Asia, a jump to hitting the ceiling of 55 bcm would be an immense increase. We’ll get a better picture next summer when BP puts out the data on 2018 on how soon Central Asia will hit its present pipeline limits.
There’s an unavoidable discrepancy between the numbers in the BP review and other sources. Beyond the lag in data (this summer we’ll get the 2018 numbers to compare), gas volumes for many of the involved countries are closely held secrets — as are prices paid.
There’s no official statement on the volume or price agreed between Turkmenistan and Russia earlier this month. As Eurasianet noted in their report, a Baku-based energy website cited unnamed sources as claiming that Gazprom pushed for $110 per 1,000 cubic meters. Eurasianet called the price “embarrassingly low.”
According to some sources, what’s been agreed between Turkmenistan and Russia is a short-term contract running through the end of July 2019. Some Russian media reports in mid-April, cited the volume as 1.1 bcm. Relative to Turkmenistan’s gas trade with China, that’s is a mere puff of gas.
Nevertheless, while Turkmenistan is a marginal supplier for Russia, which has its own massive gas business, there was obviously Russian interest in re-starting imports; just as Turkmenistan is desperate to gain another customer, regardless of how tiny the volume or payment.
In October 2018, Gazprom’s chief executive, Alexei Miller, said during a visit to Ashgabat that he was in discussions to resume imports. “We are talking about the resumption of purchases of Turkmen gas by Gazprom in the very near future – from January 1, 2019,” he said in an interview with Turkmen state television. In the ensuing months, Miller made two more trips to Turkmenistan; the business version of shuttle diplomacy at work.
Analysts cited by S&P Global last October, pointed to possible political motivations: an attempt to derail the trans-Caspian pipeline. The trans-Caspian pipeline proposal, envisioned as bringing Turkmen gas to Europe via the Caucasus, received a boost when the five Caspian littoral states finally agreed to the legal status of the sea in August 2018. But the trans-Caspian project remains a matter of discussion and conjecture, far from construction let alone operation. Gazprom could just as well be interested in supplementing its own supply, for domestic consumption in certain areas or for export to Europe.
For the Turkmen side, as Vladimir Socor wrote for the Jamestown Foundation, “Turkmenistan expects to monetize its sales to Russia without delay, unlike its much larger deliveries to China.” Turkmenistan’s exports of gas to China are through a pipeline Beijing financed. Most analysts suspect that Turkmenistan is paying back its Chinese loans with gas (either directly, or plowing the revenue from the trade back into loan repayments). The result is that Ashgabat isn’t pocketing the payments into the national coffers. The aforementioned “embarrassingly low” price starts to make sense: Any sale is a good sale for Turkmenistan.