“We can observe that in ten years Turkmenistan has basically moved from a dependence on gas exports to Russia to a dependence on Chinese outlets”, – notes Fabio Indeo, writing specially for CABAR.asia.
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Turkmenistan’s energy potential Turkmenistan holds the fourth-largest natural gas reserves in the world (19.5 trillion cubic metres, tcm, mainly located in the southeastern part of the country) which could allow this Central Asian republic to profitably ship growing volumes of gas to international markets, obtaining lucrative export revenues to boost the national budget: however, in spite of this energy bonanza, this landlocked country has been not able to develop alternative and concrete corridors to diversify its hydrocarbon exports. After the independence, the isolationism position backed by former President Niyazov substantially hampered the development of alternative routes and national gas exports were completely dependent on the transit into Russian infrastructures, namely the Soviet Central Asia-Center gas pipeline system. The need to find alternative export routes became fundamental in 1997, when Gazprom decided to disrupt the flux of Turkmen gas delivered through its pipelines after Turkmen refusal to accept rising tariffs to export national gas to Ukraine. The realization of the Korpeje-Kurt Kuy gas pipeline with Iran in 1997 represented the first successful attempt of export diversification’ strategy aimed to reduce the dependence on Russia, also considering that this pipeline does not transit in any third country: nevertheless, the limited capacity (only 6 billion cubic metres – bcm – of natural gas per year) frustrated its potential role as alternative corridor of energy exports. The launch of the Central Asia-China Gas Pipeline in 2009 allowed Turkmenistan to break Russian monopoly on the Turkmen exports: until 2009, 90% of Turkmen gas exports were delivered through Russian pipeline, while the remaining 10% was sell to Iran (also considering that in 2010 Turkmenistan opened the Dauletabad–Sarakhs–Khangiran pipeline to nominally ship 10 bcm/year of natural gas to Iran). In 2011 Turkmenistan’s reputation as potential big energy player has been further confirmed following two independent audits – in June and November – undertaken by the British company GCA (Gaffney Cline and Associates) which increased previous estimates (made in 2008) of the Galkynysh giant gas field (which includes South Yolotan e Osman). Galkynysh is considered the second-largest natural gas field in the world (after North Dome, located in Qatar) with estimated gas reserves between 13 and 21 trillion cubic meters. These estimates strengthens Turkmen ambition to develop a multivector energy policy based on the geographic diversification of gas exports, which appears lucrative in economic terms and profitable in geopolitical terms. As a matter of fact, the exploitation of these reserves will allow Turkmenistan to achieve its national target to produce 250 billion cubic meters of natural gas by 2030, allocating huge volumes (180-200 bcm) to supply several projects of new gas pipelines as well as to upgrade the existent ones.
Turkmenistan’s natural gas production (billion cubic meters)
Source: British Petroleum Statistical Review of World Energy 2018
The profitable energy partnership with ChinaChina has heavily invested in order to develop the Turkmen energy sector: in the Chinese energy strategy, Turkmenistan has become a key partner to support Beijing’s strategy of diversification aimed to reduce the dependence on maritime energy routes. At the beginning, the Chinese National Petroleum Company (CNPC) invested 4 billion dollars to develop Bagtyarlyk gas field (with 1,3 tcm of estimated reserves) which is also the main source of supply of the China-Central Asia gas pipeline. Successively China financed the development of Turkmenistan’s giant Galkynysh (Renaissance) gas field, investing 8 billion dollars for the first production phase and an undisclosed sum for the second phase. Chinese investments to exploit Bagtyyarlyk and Galkynysh giant gas fields have increased Turkmen gas production which have been progressively delivered through the Central Asia-China Gas Pipeline: after the completion of the Line D of the CAGP in 2020-2022, Turkmenistan will be able to export 65 bcm/y of gas to China. This pipeline can be defined as the most successful example of regional cooperation in the energy field, due to its inclusive dimension: as a matter of fact, the current three branches of this pipeline also cross Uzbekistan and Kazakhstan (which are also suppliers) before to reach Chinese markets, while Tajikistan and Kyrgyzstan will be also involved as transit countries in the new line D. The implementation of the Central Asia-China Gas Pipeline has allowed Turkmenistan to realize a significant step in its strategy of diversification, opening a new export route: however, its energy security condition appears still vulnerable, because Turkmenistan does not share borders with China and the transit of Turkmen gas exports is dependent on the consent of the other Central Asian republics. Moreover, the positive impact of the sino-turkmen energy partnership was mitigated by the progressive reduction of gas exports to Russia and Iran: in 2009 the Central Asia-Center pipeline (CAC) to Russia delivered 42 bcm of Turkmen gas, which dropped to 10 bcm in 2010 and deliveries were definitely suspended since 2016. Furthermore, in January 2017 Turkmenistan stopped gas deliveries to Iran, due to a combination of economic and geopolitical reasons. Consequently, at present China is the only buyer of Turkmen gas, highlighting a condition of extreme vulnerability of Turkmenistan’s energy security due to the dependence on a single export route: we can observe that in ten years Turkmenistan has basically moved from a dependence on gas exports to Russia to a dependence on Chinese outlets. Moreover, export revenues are used to repay Chinese loans and grants invested to develop the national energy sector and to build CAGP: this situation clearly highlights Turkmenistan’s strategic need to open new energy corridors to achieve its diversification’s policy of energy export routes, balancing the predominant role now conquered by China. Diversification vs geopolitical hindrances However, Turkmenistan’s efforts to implement a diversification strategy of export routes have been regularly hampered by geopolitical and security issues. At present, the development of new export routes has become one of the key priorities in Turkmen energy strategy, allowing to boost the national energy budget with additional energy revenues. As a matter of fact, following the halt of exports to Iran and Russia Ashgabat can benefit of reduced energy revenues (deriving from export to China and most of which are used to repay Beijing’s loans): consequently, national budget has deprived of fundamental economic resources, which are usually committed to finance social programs and public policies, pushing Turkmen authorities to introduce payments for public utilities (natural gas, water, electricity) which since the independence were traditionally used free of charge. The TAPI gas pipeline project – including Turkmenistan, Afghanistan, Pakistan and India – is conceived as alternative eastern corridor of exports (compared to China), which is designed to supply South Asian markets with 33 bcm/y of Turkmen gas. Originally the natural gas field of Dauletabad was indicated as the main source of supply for this project, but the stagnant/declining production of this mature gas field will make it necessary to commit Galkynysh production also. However, the Afghanistan’s permanent condition of instability severely weakens the possibility to realize this energy route crossing the country, also considering that the planned TAPI transport route should cross Southern-Western Afghanistan as well as Pakistani Baluchistan, posing serious threats to the security of gas supply and regular energy transit. The launch of this pipeline has been postponed several times – in February 2018 Afghanistan’s government declared that TAPI will start gas deliveries in 2022 – because of delays of other involved countries in the construction of the respective national segments (only Turkmenistan realized its own) and the difficulty to attract investments. Concerning the westward route of energy exports, after the completion of the domestic East-West pipeline in December 2015 Turkmenistan can deliver 30 bcm/y of natural gas from the Galkynysh giant field to the Caspian coast, waiting for the realization of the so-called “missing link” represented by the Trans-Caspian underwater pipeline. During the last decade Russian opposition to the TCP’s realization has prevented a Turkmen full engagement in the Southern Gas Corridor project in order to implement the westward energy export route, which will be a highly profitable option for Ashgabat and its strategy of diversification. Russia and Iran have always boycotted the realization of underwater pipelines along the Caspian Sea, adducing environmental issues and arguing that the construction of some offshore infrastructures need the consensus of all five countries. On the contrary Azerbaijan and Turkmenistan share the same position since 2010, stressing that the offshore gas pipeline project should be approved only by the interested countries whose waters the pipeline would traverse. However, Russia’s opposition is mainly motivated by geopolitical reasons: Moscow fears to lose its lucrative business and influence represented by the EU dependence on Russian gas imports. However, the positive scenario emerged after the Caspian foreign ministries in December 2017 – the announcement of the Russian foreign minister Lavrov that all five Caspian littoral countries (Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan) agreed to sign a draft document on the Caspian legal status – has arisen new expectations on the realization of the Trans Caspian pipeline. Undoubtedly, a wider cooperation with Azerbaijan represents a key precondition to achieve, aimed to solve existent disputes on the ownership of the Kyapaz/Serdar offshore gas field. At present the cooperation with Azerbaijan is the only way for Ashgabat to implement a westward export route: recently Iran refused the project of a gas-swap deal with Turkmenistan aimed to ship Turkmen gas to Turkey (preferring that these volumes of gas will be delivered to Armenia and Azeerbaijan) through an overland route which will be linked to the Trans Anatolian Gas pipeline and the SGC, so avoiding the transit along the Caspian Sea. The Iranian route was one of the options supported by the European Commission’s Vice President in charge of Energy Union Sefcovic after the Ashgabat Declaration, in order to deliver Turkmen gas to the EU. At the same time the CEO of the Iranian National Oil Company NIOC Araqi has openly invited Turkmenistan to export its gas to Pakistan through the Iranian gas pipelines: for Ashgabat, this option could be highly profitable allowing to obtain energy revenues in the short term (the Iranian domestic trunk of the pipeline is already built), also considering the delays and the security issues which are negatively affecting the realization of TAPI. Moreover, this export route will allow Turkmenistan to successfully diversify its energy strategy, opening a new alternative corridor to reach the markets. In conclusion, Turkmenistan needs to find alternative route to export its natural gas: if the realization of the envisaged projects (eastward and westward routes) fail, President Berdymukhamedov could also decide to restore gas exports to Russia, because this option will be realized in the short time also allowing Turkmen government to benefit of additional energy revenues to preserve national budget as well as to reduce the dependence on Chinese markets. Among all new export projects, the Iranian route to Pakistan market appears the most feasible in short time, compared to TAPI or the Trans Caspian pipeline, allowing Ashgabat to increase its energy revenues also diversifying exports. The potential agreement on a draft convention on the legal status of the Caspian Sea could effectively have a positive impact on the Turkmenistan’s energy strategy, opening the concrete possibility to develop the westward export route to the EU markets: however, it will be necessary to attend the scheduled summit among the five littoral countries of the basin to evaluate potential benefits for Turkmenistan which are also strictly linked to a concrete will of regional actors (Azerbaijan at first) to improve energy cooperation. Literature:  British Petroleum, “British Petroleum Statistical Review 2016,” 26.  Lena Jonson, Russia and Central Asia, a New Web of Relations, (London : The Royal Institute of International Affairs, 1998), 63-64.  Nadia Badykova, “Turkmenistan’s quest for economic stability,” in The Security of the Caspian Sea Region, ed Gennady Chafrin, 238 (Oxford: Oxford University Press, 2001).  Catherine Putz, “Russia’s Gazprom Stops Buying Gas from Turkmenistan,” The Diplomat (2015), < http://thediplomat.com/2016/01/russias-gazprom -stops-buying-gas-fromturkmenistan/> (accessed April 22, 2018).  OIL&GAS JOURNAL, GCA: Turkmenistan’s Iolotan Gas Field is World’s Second-Largest, 13 ottobre 2011, available online: http://www.ogj.com/articles/2011/10/gca-turkmenistans-iolotan-gas-field-is-worlds-second-largest.html  Annette Bohr, Turkmenistan: Power, Politics and Petro-Authoritarianism, (London: The Royal Institute of International Affairs, 2016), pp. 72-73  Fabio Indeo, Independent Turkmenistan in the Reshaped Geopolitical Scenario: Foreign Policy, Energy Strategy and Security Issues, in “Il Politico”, n. 3, 2016, pp.183-184  Fabio Indeo, “A comprehensive strategy to strengthen China’s relations with Central Asia,” in Belt and Road: A game changer in international relations?, ed. Alessia Amighini, 45-47 (Milano: ISPI, 2017).  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Vladimir Socor, “Turkmenistan Demonstrates Commitment To Trans-Caspian Gas Pipeline”, Eurasia Daily Monitor, 8 Issue: 46 (March 8, 2011), https://jamestown.org/program/turkmenistan-demonstrates-commitment-to-trans-caspian-gas-pipeline/.  “Turkmenistan: Natural Gas Could Reach Europe Through Iran,” Stratfor, May 1, 2015, https://www.stratfor.com/situation-report/turkmenistan-natural-gas-could-reach-europe-through-iran.  Bruce Pannier, “Iran Offers Turkmenistan New Gas-Swap Deal To Pakistan”, Qishloq Ovozi, Radio Free Europe/Radio Liberty, April 30, 2018, https://www.rferl.org/a/iran-offers-turkmenistan-new-gas-swap-deal-to-pakistan-tapi/29201086.html Author: Fabio Indeo, analyst on Central Asia Security, NATO Defence College Foundation (Rome, Italy) The opinions expressed in this article are the author’s own and do not necessarily reflect the view of CABAR.asia This article was prepared as part of the Giving Voice, Driving Change – from the Borderland to the Steppes Project implemented with the financial support of the Foreign Ministry of Norway.