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Is Turkmenistan looking east for its gas exports?

The Central Asian countries have always been linked with Russia to a certain extent. As the dominant economic power in the region, Russia has bought and sold the resources of countries like Turkmenistan, Kazakhstan and Uzbekistan for a long time. However, this balance of power seems to be shifting.

Turkmenistan is the latest country to display signs of this. The nation has for a long time exported the vast majority of its natural gas to Russia, but it seems to be looking elsewhere. While the nation remains relatively isolated from Europe, it is more than able to look east for its exports; specifically to India and China.

Of the two, China seems to be the larger market by far. However, both represent a growing independence for Turkmenistan as it creates more options for itself in the world of natural gas exports. This could bode very well for the nation and its future as an oil and gas producer.

However, with this new business comes new obstacles that need to be overcome. Turkmenistan will need to act carefully in order to maximise its profits from these new ventures.

Moving into India

The fact that Turkmenistan is aiming to export its natural gas to India is not breaking news; it is well-known that the nations are working on the Turkmenistan-Afghanistan- Pakistan-India (TAPI) pipeline together. However, the $10 billion project may be facing issues that would prevent it from coming to fruition.

The four countries involved in the pipeline recognise that it is in their best economic interests to complete the project. However, tensions between India and Pakistan - as well as potential threats from the Taliban in Afghanistan - make that difficult. As such, the nations have attempted to find an international consortium to lead the project.

India has now called for Turkmenistan to change its domestic laws, which are preventing such a consortium from investing in the pipeline project. Current regulations do not provide foreign firms with an equity stake in upstream gas field projects, causing major organisations to be put off investing.

However, India is still committed to the project. The nation's oil minister, Dharmendra Pradhan, emphasised "India's commitment to source natural gas from Turkmenistan through TAPI natural gas pipeline project" in a recent speech. As such, all that is needed is a relaxation of certain laws to enable Turkmenistan to profit from this potentially lucrative deal.

Exporting to China

In total, Turkmenistan is estimated to have exported around 45.1 billion cubic metres of natural gas in 2014, according to Business Monitor. Some of this went to Russia, some to Iran and some to various other Central Asian countries. However, the vast majority is now thought to go to China.

Turkmenistan is now exporting gas to China at a rate of 35 billion cubic metres a year and aims to increase this to 40 billion cubic metres this year. This means in 2015 the Asian superpower will account for almost 82 per cent of Turkmenistan's natural gas exports.

This is the right step for Turkmenistan to take, but it is not without risks. On one hand, Iran - previously one of Turkmenistan's main export markets - is increasing the amount of natural gas it produces itself. Russia is also importing less gas. Focusing on the new market of China, therefore, makes good economic sense.

However, Turkmenistan must take care not to become too over-reliant on a single nation. The TAPI pipeline project suggests this will not be the case, as it is looking to other markets to export its gas to. This is positive news for a country with a gas industry in the midst of major change.

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