Growing Importance of Turkmenistan as a Global Gas Market
Turkmenistan, along with the advancement in the country and strengthening economic development model, has taken the lead among other countries in the energy system. The evidence of that performance is the achievements in this field over the past few years. Same growth rate was held in the past year. Considering the initial forecasts summarizing the year 2013 under the leadership of the Esteemed President of Turkmenistan, the economic development rate exceeded the global growth rate several times. Turkmenistan, successfully implementing its energy strategy last year and a high number of reforms has been accomplished. For example, over the last year, Turkmenistan commissioned 57 buildings in the fuel and energy sector with industrial and social values. It successfully put into practice large-scale projects. One of the largest onshore fields, the “Galkinish” gas field was explored within the industrial facilities which enacted complex large factories for the preparation of marketable gas. Prolongation of the construction of the “East–West” gas pipeline, which contributes to the improvement of domestic gas security, creates favorable conditions for the release of the Turkmen “blue gold” to external markets. Consensus was reached on issues laying a new pipeline from Turkmenistan to China, and the sale of natural gas. In addition, progress on agreement was achieved in the implementation of the “Turkmenistan – Afghanistan – Pakistan – India” gas pipeline project.
Focusing on globally significant subjects such as energy to define their role in this system, we should first carry out a short analysis of the global energy market. Detailed description on this field was defined in the International Energy Agency’s report “World Energy Outlook – 2013”, the November edition of the 2013 issue. According to forecasts by the International Energy Agency, it is expected that global energy capacity will increase up to 33% by 2035. Also, the consumption of major energy resources will reach its highest level by 2035. In this case, China will strengthen its position as a major world energy market. In the abovementioned period, the volume of China’s energy market will grow in scope, which has almost doubled compared to the second world energy market: the United States of America.
If China’s energy market has 4 billion 60 million tons of conventional oil in 2035, the U.S. energy market in a given period will have 2 billion 240 million tons of conventional oil. European energy market during this period equals to 1 billion 710 million tons of conventional oil, and long–term indicator of Indian energy market equals to 1 billion 540 million tons of conventional oil. Analyzing the growth rate of energy market by 2020, the main rate of growth will be realized at the expense of China, but for the next period, significance of India will be most acutely felt. It should be noted that both of these ambitions in its scale energy markets indicate great demand for Turkmen natural gas.
Despite the expectation for a reduction in market production from 82% to 76%, explored oil and gas resources in the near future will retain their significance. For the period till 2035, mainly the growth rate of natural gas demand will fall, and the growth rate of the global gas market will increase by half of its current state. Currently, annual global oil production is 4.4 billion tons in the global oil market, which is expected to increase to 5 billion tons.
Recently strengthened its energy status, Turkmenistan acts as one of the main countries that can ensure global energy security. Turkmenistan has oil resources, but there are mainly vast gas resources. Under the leadership of Esteemed President of Turkmenistan, a favorable investment climate was created, a beneficial energy policy was put into practice, and favorable conditions were ensured in the output and exports of energy resources to foreign markets. Today’s Turkmenistan is among the top ten exporting countries of natural gas. As noted by international experts, in a few years Turkmenistan will have great opportunities to reach the top of this list.
The increase in natural gas demand worldwide gives Turkmenistan particularly a significant role in the global gas map. As noted in the International Energy Agency’s report “World Energy Outlook – 2013”, global gas consumption is expected to increase up to 5 trillion cubic meters by 2035. Currently the figure is 3.22 trillion m³.
According to report of the International Gas Service “Global Vision for Gas”, world population will grow and reach 9.3 billion people in 2050, and during this period natural gas consumption will increase to 6.4 trillion cubic meters. As the International Gas Service’s report shows, despite the fact that the estimated amount of production for the future gas resources is 800 trillion m³, currently proven natural gas resources correspond to 200 trillion cubic meters. It should be noted that over the past 120 years, natural gas consumption amounted to 100 trillion cubic meters.
Rapid growth in the world demand for natural gas will increase the countries holding huge gas reserves with high production and export potential. Thanks to wise energy policies implemented under the leadership of Esteemed President, Turkmenistan stands not only as a country strengthening not only its position but also its credibility on a global scale. Since Turkmenistan, which has vast resources of natural gas as well as high production and export potential, implements policies with the aim of using Turkmen “blue gold” for the benefit of mankind. It should be noted that with the initiative of the Turkmen leader, the international concept of establishing a unified legal framework was launched for the industry. As is known, in 2008 at the next plenary meeting of the 63rd session of the United Nations General Assembly, the resolution on the “reliable and stable transit of energy and its role in ensuring sustainable development and international cooperation” was adopted. In May last year at the 67th session of the UN General Assembly, a draft resolution on reliable transit of energy was unanimously adopted. Also at the 67th meeting of the UN General Assembly, there was support for the Government of Turkmenistan to convene an international meeting of experts in early 2014.
In the last quarter of 2009, the pipeline between Turkmenistan and China was launched, which was referred as the “Gas Pipeline of the Century”. Since then, billions of cubic meters of Turkmen “blue gold” goes to China.
Currently a substantial portion of its gas imports to China, which is the main energy market in the world, comes from Turkmenistan. In other words, Turkmenistan has an influence not only on China but also on Asia as a whole by supplying natural gas. As noted above, Turkmenistan has vast natural gas resources and a great export potential, and it is known throughout the world as an immaculate country in terms of it international obligations. Accordingly, transportation of Turkmen natural gas is a rational consideration by markets. The main gas buyers are countries such China, India and Europe. In the near future, China is planning to increase the volume of exports of natural gas from Turkmenistan by 2035, and it is expected to build up to 545 billion m³. As per the initial forecast in 2013, Chinese gas market grew up by 12% in the past year, and it consumed up to 170 billion m³ of natural gas. During this period, China’s volume of imports of natural gas has grown significantly. For example in 2012, China’ s market share of import of natural gas accounted for 29%, and this rate reached 32% last year. China as a major energy market will increase the volume of purchase of natural gas in the near future, and it is reaching a new agreement in this field. China’s visit to Turkmenistan in 2013 was another significant step in strengthening and development of energy cooperation. During that visit a number of agreements were signed and consequently the implementation of new projects has started. Among these projects, the new pipeline from Turkmenistan to China is the most important, through which additional 25 billion m³ of natural gas will be transferred. The new pipeline will pass through Turkmenistan, Uzbekistan, Tajikistan, Kyrgyzstan, and China. In this route, 65 billion m³ of “blue gold” will be transferred from Turkmenistan to China annually.
India has a rapidly growing market of natural gas. It is expected that by 2035, gas production of India will reach 101 billion m³. In addition, import of natural gas is expected to grow more than half of the current consumption by that year. On this basis, the TAPI project (Turkmenistan – Afghanistan – Pakistan – India) which represents Asia will have some impact on the energy security of India.
In the summer of last year, 17th meeting of the Managing Committee of the TAPI gas pipeline project (Turkmenistan – Afghanistan – Pakistan – India) convened in Ashgabat where several agreements were signed. The most striking event was the signing of the agreement on the sales of natural gas between “Turkmengaz” and the Afghan Gas Corporation. On the Caspian coast, the Avaza agreement was signed between “Turkmengaz” and the Afghan Gas Corporation, “(Private) Interstate Gas Systems Limited’’ (Pakistan), as well as between “Turkmengaz” and “Gail Limited” (India). On November 19, 2013 the service agreement was signed with the transactional advisor between “Turkmengaz” and Afghan Gas Corporation “Interstate Gas Systems Limited” (Pakistan), “Gail Limited” (India) and the Asian development Bank for the Turkmenistan Afghanistan – Pakistan – India pipeline.
Taking into consideration the current list of member countries of the European Union, it is estimated that the volume of natural gas consumption will reach 598 billion m³ by 2035. In total, expected gas production will be 93 billion m³ per year for the period. Thus, it is expected that natural gas imports of the European Union in 2020 will reach 400 billion m³ and in 2035 it will reach 505 billion m³. In other words, the European Union imports 85% of its natural gas demand. European Union systematically increases the import of natural gas to meet its energy security and consumption needs, and thus, the interest for Turkmen gas market grows drastically. Since currently purchases of natural gas from one supplier is not enough, supply of natural gas from several countries is of great significance. The main criterion of energy security is to purchase natural gas from a reliable partner–supplier flawlessly performing obligations. In the near future, natural gas consumers such as China, India and Europe are expected to use 1.4 trillion m³ of blue fuel considering that the bulk of the natural gas consumed will be made at the expense of imports in this market. The revival of the Silk Road may be realized at the expense of the “Turkmen Blue gold” taking its origins from Turkmenistan, reaching China, Turkey and other European countries.
This article by Dowran ORAZGYLYJOW, PhD Law originally appeared on Hazar Strateji Enstitusu.