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Turkmenistan's rising gas production and international exports: A guide

Turkmenistan's already strong natural gas industry is set to expand even more in the near future. The most recent statistics from the country's Ministry of Oil and Gas Industry and Mineral Resources show that gas production and exportation is increasing within the nation. In the first quarter of 2015, natural gas production rose by five per cent compared to the same period of 2014.

An increasingly large portion of this gas is traded internationally, with exports in Q1 2015 rising by 6.5 per cent year-on-year. In 2014, Turkmenistan produced over 76 billion cubic metres (bcm) of gas and exported roughly 60 per cent of it, with between 45 and 48 bcm going to other countries. By 2030, it is expected that the nation will produce as much as 230 bcm per year.

So where is all this gas going? With the fourth-largest natural gas reserves in the world, Turkmenistan's exports are certainly not going to slow down any time soon. However, the nation has not made as large an impact on the international market as might be expected. This looks likely to change in the near future.

In previous years, Turkmenistan largely exported to Russia, China and Iran. However, this balance is changing. Here are Turkmenistan's plans for exporting its major gas reserves:

 

China and Russia

Since 2009, Turkmenistan has exported its natural gas less to Russia and more to China. In 2014, it is estimated that Russia bought 11 bcm of Turkmen gas, compared to China's 30 bcm. However, there are clear signs that Turkmenistan is not looking to continue with this move towards China.

The reduction in exports to Russia has been as a result of reduced demand, and Turkmenistan does not want to end up in a similar position should China decide it no longer needs as much natural gas. As such, diversification is Turkmenistan's current strategy rather than a further increase in exports to China.

A recent report from the Centre for Eastern Studies - a Polish think-tank - said: "Ashgabad’s concerns about Russia and its reluctance to increase its dependence on China (its dominant trading partner) are now the main drivers of change in Turkmenistan’s foreign policy."

 

Iran

The third importer of Turkmen gas is Iran. However, with larger gas reserves than Turkmenistan it is becoming more and more like a competitor rather than a trade partner. This can be seen in the recent announcement that China will be investing around $2 billion in constructing the Pakistani portion of a pipeline directly between Iran and Pakistan.

This will potentially run in direct competition to the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, which will supply Pakistan with Turkmen gas once complete. In theory, Pakistan's needs are large enough that it will continue to need both pipelines, but it is still clear that Iran and Turkmenistan are in competition in this area.

 

India

However, the TAPI pipeline is one of the ways in which Turkmenistan's gas exports are set to diversify. The project has taken a step forward recently with the announcement (on April 8th) that India and Turkmenistan will be working together to fast-track the $10 billion project, in addition to other forms of collaboration.

India's external affairs minister Sushma Swaraj said that India was willing to build a fertiliser plant in Turkmenistan. This would use Turkmen gas to make fertilisers to help with Indian agriculture, in a move that Ms Swaraj said "will be value addition to their gas reserves".

She added: "Our energy needs are rising. Our needs in the agriculture sector and want for fertilisers are also rising. In both these areas, Turkmenistan can be our partner." This could provide an additional use for Turkmen gas, making India an even larger market for the resource.

 

Europe

Finally, there is plenty of evidence to suggest that Turkmenistan is looking west for additional markets for its gas. The EU is on the lookout for gas suppliers other than Russia, and Turkmenistan hopes to fill that role.

According to Malena Mard, EU ambassador to Azerbaijan, the EU plans to import Turkmen gas through the Trans Caspian pipeline project. Turkmen president Gurbanguly Berdymuhammadov said on April 8th: "Regarding issues on the Caspian Sea, we are continuing negotiations with Azerbaijan and Turkey on construction of a transboundary gas pipeline. I believe that we’ll agree."

Representatives of Turkmenistan have also recently been to the UK to talk about expansion of bilateral cooperation between the two countries in order to import Turkmen gas. Currently, British companies such as Shell work in Turkmenistan, and relations between the nations are good.


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