Crossroads Asia

Turkmenistan and Gazprom Settle 5-Year Gas Deal

Ashgabat is likely happy to have Russia back as a customer, no matter the price.

Turkmenistan and Gazprom Settle 5-Year Gas Deal
Credit: Pixabay

This week, Gazprom signed a 5-year contract with Turkmengaz under which Turkmenistan will supply the Russian gas company with 5.5 billion cubic meters (bcm) per year. The new agreement builds on a short-term contract arrived at in mid-April, which saw Turkmen gas flowing to Russia for the first time in three years. According to Gazprom, from April 15 to June 30, it took in 1.2 bcm of Turkmen gas.

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 in 2008 to 10 bcm annually from 2010 to 2015, and then just 4 bcm in 2015. At the start of 2016, Russia ceased purchasing Turkmen gas entirely, reportedly over price disagreements.

Details on the new agreement, which will cover the trade through July 2024, are thin. Gazprom has provided no information with regard to price. The amount — 5.5 bcm — is vastly less than the height of the gas trade between the two countries a decade ago.

But Turkmenistan will take whatever customers it can get.

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). 

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According to the latest BP Statistical Review of World Energy, in 2018 Turkmenistan exported 33.3 bcm of gas by pipeline to China, up from 31.7 bcm recorded for 2017. Turkmenistan is by far China’s largest gas supplier. While Ashgabat envisions adding Pakistan and India to its export partners list, the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline remains as much a mystery project as ever. Pakistan is apparently planning a groundbreaking for its portion of the pipeline for October, and in February 2018 representatives from Turkmenistan, Afghanistan, Pakistan, and India gathered in Herat to mark the start of work on the Afghan portion of the TAPI pipeline. At the time, estimates claimed that construction would take two years. It’s absolutely unclear what, if any, work has actually been accomplished in war-torn Afghanistan.

In the meantime, Ashgabat is likely happy to have Russia back as a customer, no matter the price. The great speculation about Turkmenistan’s gas trade with China centers on how much, if any, revenue the country is actually taking in. The pipeline to China was built by Chinese companies with Chinese loans. 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 — but it can do so with revenue, however little, derived from selling to Russia.