Why Gazprom Just Resumed Purchases Of Turkmen Gas

  • Apr 16, 2019
  • Oil Price

Gazprom has begun buying natural gas from Turkmenistan after a three-year pause, under a 25-year contract signed in 2003 and suspended in 2016.

Until 2010, Russia’s gas giant was the biggest buyer of Turkmen gas, Reuters recalls in its report on the story, adding that this was the year when Turkmenistan began exporting gas to China. This must not have sat well with Gazprom, for whom China is a major target market, so the company began reducing its intake of Turkmen gas.

However, the exports to China were not the biggest problem. In 2015, Turkmengaz, Gazprom’s counterpart in Turkmenistan, accused the Russian company of owing payments for gas deliveries. It even declared Gazprom insolvent, to which the Russian major responded with a lawsuit, in which it insisted that the prices it paid for Turkmen gas be reviewed. It also demanded a compensation of US$5 billion alleging it had overpaid for the gas.

A year later, Gazprom completely stopped buying Turkmen gas and switched to Uzbekistan as gas supplier instead.

As of 2010, Gazprom imported between 40 and 50 billion cubic meters of gas from Turkmenistan. To date, the Central Asian country produces around 70 billion cubic meters, of which 40 billion cubic meters are exported to China.

Turkmenistan has natural gas reserves estimated at 265 trillion cu ft, according to the U.S. Energy Information Administration. This makes it the sixth-largest gas reserves holder globally. However, Turkmenistan has yet to reap the full benefits of its oil wealth. The country lacks the transport infrastructure that would make it a player to reckon with on international markets.

Still, investments are on the rise and besides the Turkmenistan-China gas pipeline, which is the largest gas export pipeline in Central Asia, the country is also part of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project. The pipeline is scheduled to start operating next year at a rate of 33 billion cubic meters annually.

By Irina Slav for Oilprice.com