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Turkmenistan's future in the gas industry

Turkmenistan's large natural gas supply has put it in a favourable position when it comes to exporting the resource. Its geographical location has also been a boon in this regard, as it has been able to supply Russia with gas relatively easily as well as having access to the Chinese and Iranian markets.

However, this all has the potential to change soon. The changing political and economic situation around the world, particularly in Russia, means that Turkmenistan is having to look for new markets to supply with its gas. Failure to do so could potentially have serious consequences for the nation's economy

Luckily, the country's gas industry has several options. With the Trans-Caspian pipeline looking more likely, it seems that Europe could become the next market for Turkmenistan. However, this depends on negotiations with Turkey and Azerbaijan.


Moving away from Russia

Turkmenistan's main export markets for natural gas are China, Iran and Russia. However, the latter is rapidly decreasing the amount of gas it buys from the central Asian nation. Russian imports of Turkmen gas have fallen by an astonishing amount in the last few years, from around 45 billion cubic metres (bcm) in 2008 to predicted levels of just four bcm in 2015.

Russia's natural gas imports from Turkmenistan now total just over eight per cent of the amount it previously purchased. This meteoric drop is largely caused by Russian relations with Europe, which are becoming strained due to the conflict in Ukraine.

Gazprom, Russia's state-run gas export company, bought Turkmen gas primarily because it was cheap and could be re-sold at a profit to Europe. However, European sanctions have led Russian imports to falter, and the nation is looking elsewhere for natural gas markets. As such, it no longer needs the large amount it used to import from Turkmenistan.

This has caused relations to sour between the two countries, with an article published on the website of Turkmenistan's oil and gas ministry calling Russia "an unreliable partner". While it makes economic sense for Russia, it means Turkmenistan needs to look elsewhere to export its gas.


Turkmenistan's options

Turkmen gas is currently exported mainly to China. The Asian market is very lucrative and looks set to grow in the near future. Turkmenistan currently exports 35 bcm each year to China, but this figure looks set to grow to around 65 bcm by 2020.

Meanwhile, Turkmenistan also exports to Iran. However, this is not as large a market as China or Russia. Only around ten bcm of Turkmen gas ends up in Iran. Instead, Turkmenistan is looking towards Europe as a potential market for its gas.


The European market

The loss of Russia could neatly lead into Turkmenistan breaking into the European oil and gas market. The EU has attempted to enforce sanctions on Russia, but even countries happy to trade with Gazprom are worried about the unstable nature of Russian imports coming in through Ukraine.

However, Turkmenistan does not currently have an easy method of supplying Europe with the resources it needs. This is an obstacle it is more than capable of clearing, however, as it is looking towards the construction of the Trans-Caspian pipeline to provide the EU with all the gas it needs.

A statement made by the Ministry of Petroleum and Mineral Resources of Turkmenistan on Monday (March 2nd) outlined this. It talked about the "huge resource base of hydrocarbons onshore and offshore" Turkmenistan has access to, as well as the desire to export them "in the eastern and the European directions".


The Trans-Caspian pipeline

This pipeline project, which would travel under the Caspian Sea to Azerbaijan, would allow Turkmen gas to reach Europe via the planned Trans-Anatolian Natural Gas Pipeline (TANAP). The future of this project is uncertain, but recent developments have made it seem more and more likely.

First of all, a recent meeting between Recep Tayyip Erdogan, president of Turkey, and Turkmen president Gurbanguli Berdimuhamedov led to an important decision. The heads of state agreed to form a trilateral mechanism on energy issues, with Azerbaijan as the third partner.

Mr Erdogan said that Turkmenistan plays a vital role in the transportation of central Asian gas to other countries, particularly Europe, and added that the possibility of transporting Turkmen gas through Turkey had been discussed. While it wasn't mentioned specifically, this makes the creation of the Trans-Caspian pipeline project more likely.

There is some concern that construction of this pipeline would cause environmental damage. Undersea work can potentially harm species of fish and other aquatic life, as well as affecting the surrounding water and air quality.

However, studies carried out by RSK Environment Ltd have already determined that the pipeline is safe from an environmental point of view, so there is a good chance construction can begin soon. This would have the potential to carry up to 16 bcm of gas to Europe, opening up this market for Turkmenistan.

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