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Trans-Caspian Gas Pipeline: Is There A Future After All?

Trans-Caspian Gas Pipeline: Is There A Future After All?by Marika Karayianni*

Turkmenistan ranks fourth globally in terms of asserted natural gas reserves, with around 50 trillion cubic meters/tcm, according to the latest announcements of the state-owned energy company Turkmengaz

Background

Turkmenistan ranks fourth globally in terms of asserted natural gas reserves, with around 50 trillion cubic meters/tcm, according to the latest announcements of the state-owned energy company Turkmengaz. Although these reserves are not fully developed, current production is more than 75 bcm/ year, with plans to increase this to 230 bcm by 2030. The majority of is destined for export. China remains Turkmenistan’s first and most important client, though Ashgabat has long aspired to export natural gas to Europe, via the construction of a subsea pipeline in the Caspian Sea (the Trans-Caspian gas pipeline project). However, Russia and Iran are both opposed to this subsea pipeline.

Analysis

An assessment by the British accounting com­pany Gaffney, Cline & Associates indicates that Turkmenistan’s largest gas field (Galkynysh, for­mer South Iolotan) holds over 24 tcm.

This makes it the second largest field in the world after Ghawar in Saudi Arabia. Two other fields, Yashlar-Minara and Bagtyarlik, are reported to hold 1.45-5 tcm and 1.3 tcm of natural gas respective­ly. Ashgabat has opted to develop these giant fields not via the popu­lar Production Sharing Agreement model (PSA), but rather by granting concessions and service contracts to certain companies, namely Petrofac, LG International, CNPC and Hyun­dai Engineering and Construction Co.Ltd, for a specific time frame.

Despite the fact that Turkmenistan’s main client for natural gas is China, Ashgabat has long been interest­ed in exporting its gas resources to the European market, as discussed during the Turkmenistan president Gurbanguly Berdimuhamedov’s the recent visit to Azerbaijan.

The Trans-Caspian gas pipeline entails the construction of a 300 km pipeline along the bottom of the Caspian Sea to the coast of Azerbaijan, and is seen as the optimal solution for the delivery of Turkmen energy resources to Europe. Further along the way, Turkmen gas can be transported through the existing and under construction pipelines to Turkey and through Greece to the rest of South East and Central Eu­rope. In theory, the project can be implemented as a part of the Southern Gas Cor­ridor (SGC), designed to transport gas from the Caspian region to Europe through the joint systems of South Caucasus Pipeline (SCP), TANAP, and TAP. 

There are three key elements in relation to the construction of the Trans-Caspian pipeline:

1. Commercial production of natural gas, in order to justify the construction and operation of the pipeline;

2. Sufficient demand to support stable sales on commercially attractive terms for the government of Turkmenistan and the companies involved in production;

3. Commercial champion(s) interested in developing infrastructure that will deliver the Turkmen gas to Europe.

The first element is in place; Turkmenistan has the reserves. The second component needs to be secured, to enable the third ...

This analysis was first published in "CCEE Policy Brief", September 2017, No.33 - for the full text, click here.

(source: Caspian Center for Energy and Environmentwww.ccee.ada.edu.az, www.ada.edu.az)

*Marika Karayianni is a Caspian energy expert based in Athens, Greece.

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