Turkmenistan’s natural gas reserves are the fourth largest in the world according to energy giant BP, behind Russia, Iran and Qatar. The reclusive Central Asian nation is far from alone, however, in hoping to capitalize on this fact. Numerous outsiders including, but not limited to Russia, India, Pakistan, Turkey, China, the US all hold interests in the nation’s vast hydrocarbon stores. Some seek direct access to the reserves for energy purposes, while others’ interests are more subtle and strategic. We’re going to try to break down these competing interests into country-specific narratives to flesh out the importance and complexity of the game developing in and around Turkmenistan.
First, here’s an intro to Turkmenistan’s resources and the state of play. Its precarious location bordering Iran to the south and Afghanistan to the southeast hardly positions it for easy piping to its thirsty Asian neighbors to the east. Nonetheless, that’s precisely the aim of the Turkmenistan-Afghanistan-Pakistan-India Natural Gas Pipeline (TAPI). The Asian Development Bank has agreed to $1.5 million in financing to help attract private contractors to survey and develop proposals for the ambitious project, but will likely provide further assistance in the future. The pipeline will have the capacity to carry 90 million standard cubic meters per day (mmscmd) and is expected to operate for 30 years starting in 2018. According to the Economic Times, India and Pakistan would get 38 mmscmd each, while the remaining 14 mmscmd will be supplied to Afghanistan. The pipe would feed from the Iolotan field in Mary province (one of the five largest in the world) or the Dauletabad field in Amu-Darya Basin of Ahal province. The TAPI pipeline is a direct competitor of the Iran-Pakistan-India (IPI) pipeline. The helpful map below is provided from Eurasia Energy Analysis.
Turkmenistan says its portion of the Caspian Sea holds an estimated 11 billion tonnes of oil and 13.1 to 21.2 trillion cubic meters (tcm) of gas, with 32 licensed blocks are up for tender. Those familiar with Turkmenistan understand that most statistics coming from its government are uncorroborated at best. Often stats announced by President Berdymukhamedov are taken for gospel as few if any sources for info on Turkmenistan exist. On September 13th, it announced it would soon up annual production to 250 billion cubic meters by 2030.
So what does this inflammable bonanza mean for Turkmenistan, its neighbors and stakeholders in the region?
Recent growth and plans for rapid expansion are due, in no small part, to the projected cash flows from Turkmenistan’s vast reserves. The nation is engaged in a series of multi-billion dollar construction projects in the next few years including a $5 billion Olympic village complex, development of new gas fields in the east of the country, construction of a new east-west gas pipeline to tap into the Trans-Caspian Gas Pipeline to Azerbaijan; the development of Turkmenbashi seaport; the development of the Avaza tourism economic zone; and the construction of Ashgabat International Airport.
Russia currently buys about 12 billion cubic meters a year in natural gas from Turkmenistan. According to James Coyle of Eurasia Energy Analysis, “The Russian National Energy Institute has recommended the Russian government should avoid investing in TAPI because of security concerns and questions over the viability of the project.”
With exports planned for both eastern and western markets, Russia may continue to try to stymie efforts for expansion. Turkmenistan’s gas could grow to rival Russia’s own exports to China impinging on its market power with China and either forcing Russian prices down or gradually eroding its market share – both unsavory outcomes for Gazprom and Russia.
Russia’s “sphere of influence” strategy demands, however, that it remain involved in the region so it will no doubt keep a keen eye on how Turkmenistan chooses to develop and market its reserves.
The US is backing the TAPI pipeline as preferable to the IPI line because it would choke Tehran financially and, it hopes, delay its suspected nuclear weapon program.
It also views Southeast Asia-South Asia and Central Asia as the regions that should play a crucial role in stabilization and peace in the Asian Continent. In this broad connectivity scheme, Afghanistan stands out as the tenuous bridge between Eurasia and the South and South East Asia. That is why Washington encourages the installing gas pipeline from Turkmenistan to India via Afghanistan. The more nations with vested economic interests in making Afghanistan a stable, viable transit country, the less resources the US will have to devote to its military and drone campaigns.
Turning to the economic front, on September 14th Turkmenistan offered U.S. energy majors their first access to the Central Asian state. As Reuters reported in August,
State television named Chevron Corp (CVX.N), ConocoPhillips (COP.N), Houston-based TXOil Ltd and Abu Dhabi-based Mubadala Oil and Gas as the preferred bidders for two offshore oil blocks within Turkmenistan’s portion of the Caspian Sea.
ExxomMobile, Shell, Chevron, Petronas and Temasek of Malaysia were all present at the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline roadshow which began on September 17th. After the road show, the delegation moved to Ashgabat on September 22-23 for the Technical Working Group (TWG) and Steering Committee (SC) meetings of the project.
ConocoPhillips and Mubadala had bid together for access to the Caspian. The two companies are already working on an offshore oil joint venture in Kazakhstan’s portion of the sea.
India has arrived late to the New Great Game and is looking to strengthen its claim to influence and treasure in the region. The TAPI pipeline would not only improve its resource supply chains (assuming a relatively stable flow of natural gas through Afghanistan which, admittedly, may be a tall order), but would also give India a reason to join discussion of geopolitical importance for the region. With its only foreign military base located in Tajikistan, clearly India is attempting to rally and cast its own shadow over Central Eurasia.
As noted above in our discussion of the TAPI pipeline, India stands to gain a share of the 38 mmscmd’s of natural gas – essential and relatively inexpensive fuel for future economic growth.
One of the planned pipelines is set to run across the Caspian Sea to Azerbaijan and further to the European Union, where it could ease the bloc’s dependence on Russian gas. Turkey intends to import and transport Turkmenistan’s gas through the proposed trans-Caspian and TANAP pipelines. From there, gas could be loaded onto the Nabucco pipeline and carried on to Eastern Europe.
EU and US interests diverge to some extent when it comes to the TAPI pipeline. The EU wants to see the trans-Caspian, TANAP and Nabucco pipelines materialize soon and many fear that TAPI will act as a distraction to this project. Berdimuhamedov voiced his commitment to providing gas to Europe as a large part of Turkmenistan’s diversification strategy; however, Europe has yet to commit in writing to purchase contracts.
China has experience piping gas from Turkmenistan through the region and across its own borders. The Turkmenistan-China Pipeline which opening in late 2009 and is one of the longest in the world is standing proof of China’s ability to negotiate with its neighbors and effectively execute massive politically charged gas transit projects.
Turkmenistan is also rumored to be pursuing a $4.1 billion gas-for-cash loan from China to develop new gas fields and ship the fuel east.
By intensifying trade and economic relations with Central Asia, Beijing intends to develop its own periphery – its western provinces including Xinjiang – and extend and tie them to the wider region’s economies.
Stepping back, there’s an incredible amount of interest in the new hydrocarbon beauty queen of Central Eurasia. With popularity come competing demands and tough choices, however, so the true test will be for Turkmenistan’s authorities to successfully navigate the dramatically changing playing field.