Turkmenistan’s Energy Politics Under Spotlight in Paris

In the Caspian region energy is part and parcel of politics. So it was a little disingenuous to hear Turkmenistan’s Deputy Energy Minister, in Paris last week, rebuffing inquiries about his country’s gas export strategies by protesting “that is a political question which I can’t comment on”.

In fairness officials are expected to stick to the government line, and it was relatively unusual that Annageldi Mametyazov even spoke at the CIS Oil and Gas Summit. Turkmenistan is notoriously cautious about sending diplomats to speak at such events, partly because public discussions of its energy strategy are still rare, and partly because, with Western companies still queuing up to invest, it has little need to go and advertise its resources.

Everybody knows the size and scale of Turkmenistan’s gas reserves and its desire to diversify routes under its independent, ‘multi-vector’ policy: both subjects which Mametyazov covered at length. He was less forthcoming on the specific questions, namely: what is the Turkmen stance on a Trans-Caspian Pipeline, what are the volume and prices for Turkmen exports, and – a question not raised at all – will the government let Western companies have full production-sharing agreements onshore and not just offshore?

As in most speeches by Turkmen energy officials, Mametyazov reiterated the government’s desire to work with international companies, and the fact that it “guarantees rights and capital investments of foreign investors” (despite the opacity and corruption in its bureaucracy). But he gave no indication of when a long-promised round of offshore licences would be awarded.

On a Trans-Caspian Pipeline to Azerbaijan, he dodged the question of Russian opposition and said simply that Turkmenistan regularly negotiates with their Azerbaijan counterparts on the issue. From his speech it seems that things will become clearer once the East-West pipeline, taking gas from the giant Galkynysh field to the Caspian coast, is operational by 2015. And according to European Commission policy adviser Brendan Devlin, the EU is planning to present a full development concept on the pipeline to Ashgabat by the end of the year.

Mametyazov repeated the government’s line of selling gas at the border, and that pricing was just a matter for buying and selling companies to arrange. He was also vague on the exact markets for the supposed 200bcm of gas – about four times the current volume - which Turkmenistan will supposedly export by 2030. Quite aside from producing that much (230bcm in total, with domestic consumption included), it is not clear if there are available markets. 

One place it won’t be going is Bangladesh, which had expressed interest in joining the huge and ambitious Turkmenistan-Afghanistan-Pakistan-India pipeline. Mametyazov said that TAPI negotiations have already been going on for ten years, and “if we involve Bangladesh it will delay the project even further”. Whether there was any progress on building corporate interest for TAPI, he did not say.

Elsewhere at the conference, hosted by the Energy Exchange, there was considerable focus on the southern gas corridor to Europe. With the Shah Deniz consortium set to decide on an export route – between Nabucco West and the Trans-Adriatic Pipeline – within a month, the two competitors set out their stalls again, among the last times they’ll do so. 

But with little left to say before the decision, the focus is already shifting to what lies beyond Shah Deniz Phase Two, which will supply the initial 16bcm/year for the winning pipeline. John Baldwin, BP’s Vice President for the Southern Corridor, pointed out that with all the Azerbaijani gasfields still to come onstream, “the story isn’t over with Shah Deniz Two”. 

EU Ambassador to Azerbaijan Roland Kobia, now sticking to Brussels’ ‘project-neutral’ policy, said that one of the most important things was diversification and security of supply. In particular, he stressed that whatever pipeline should chosen it should not limit flows; both supply and demand are in place, and the key thing was to avoid new energy chokepoints, through the Caucasus, across Turkey or into Europe itself.

This attitude could be a boost for projects like White Stream, the long-running attempt to build a subsea pipeline across the Black Sea from Georgia to Romania. Giorgi Vashakmadze, Director of Corporate Strategy, put forward a slightly different vision of the project than heard before (with a new website to boot), which appeared to link it directly with a Trans-Caspian Pipeline.

Conceivably this could create two branches of the Southern Corridor; one from Azerbaijan across Turkey and into central or southern Europe, one from Turkmenistan across the Caspian, into Georgia and across the Black Sea into eastern Europe. This would make commercial sense, in the long term.

In Vashakmadze’s view, part of the challenge is the need to think big and agree on a sizeable – and commercially worthwhile - volume of Turkmen gas, about 30bcm, far above the 10bcm mulled in the past. So far, nobody has been willing to make a bold commitment. “The idea of critical mass,” he said, “was not understood.” But as Mametyazov’s obfuscation suggested, getting everyone involved to understand it will be difficult.