Heinrich Schultz: "The export of Turkmen gas to Europe is unlikely in the short term"

Executive Director of the German-Turkmen forum on the challenges faced by the gas policy of Ashgabat Heinrich Schultz discussed the possibilities of deliveries of gas from Central Asia to Europe, as well as the challenges faced by the gas policy of Turkmenistan in an interview with Vestnik Kavkaza.

- It is known that Turkmenistan seeks to diversify buyers of its natural gas. Does Ashgabat manage to cope with this task?

- According to British Petroleum, Turkmenistan ranks fourth in the world by volumes of gas reserves. However, the country faces obstacles, which prevent its impressive volumes of gas from reaching the world market. Since the beginning of 2016 Russia completely stopped importing Turkmen gas, and the restoration of gas supplies to the Russian Federation is unlikely. Russia has no need in importing significant volumes of gas from Central Asia - in particular because in recent years gas production is carried by Russian enterprises alternative to Gazprom more and more. Turkmenistan also supplies relatively small amounts of gas to Iran. And there is also a question of how long these supplies will continue. After the lifting of sanctions, it can be assumed that active development of gas production in Iran itself will continue, so it is likely that there will be no need in Turkmen gas in the northern regions of Iran. 

- So the country should look for alternative export destinations?

- In this situation, the export of Turkmen natural gas is almost limited to China, which, on the other hand, really increased its activity in Turkmenistan in recent years. Turkmenistan began exporting gas to China in 2009 and has increased the volume of supplies gas to 28 billion cubic meters (in 2015) since then. It is expected that the volume of exported gas will reach 65 billion cubic meters in the following years. So it seems that Turkmenistan has already ensured the normalization of gas exports to China for the foreseeable future. However, this way Turkmenistan is driving itself into almost complete dependence on Chinese partners, which leads to various risks. On the one hand, China can use its privileged position of the exclusive importer in order to get better conditions - lower prices, for example. On the other hand, it is possible that in the future China will be in an economic crisis, which can seriously reduce its need in gas.

In this regard, Turkmenistan should continue its efforts on diversification, as well as consider the prospects of starting to export gas to Europe. In the framework of Turkmen President Berdimuhamedov's working visit to Berlin in August of this year, during which he met with Chancellor Angela Merkel, they discussed the issue of supplies to the EU among other topics. Turkmen President noted Turkmenistan's interest in exporting natural gas to the EU. In the past, the European Commission has also repeatedly expressed its interest in supplies from Turkmenistan. 

- Is Ashgabat able to deliver its gas to Europe? 

- The export of Turkmen gas to Europe will have a number of problems. For example, there are some obstacles in terms of transport infrastructure. Russia is still against the construction of the Trans-Caspian pipeline. Iran, although it can become a transit country and help to deliver Turkmen gas after the lifting of sanctions, but it will obviously want to supply its own gas, rather than creating an opportunity for Turkmen competitors. 

In addition, it is necessary to take the situation on the European gas market into account. It is still oversaturated. Due to this consumers prefer more convenient and flexible conditions of spot markets. The importers are not interested in accepting long-term commitments to purchase large volumes of gas, because there is a risk that these commitments will become a burden in the future. Meanwhile, long-term contracts are a prerequisite for the investments in the establishment of necessary transport infrastructure for the delivery of gas to Europe (the construction of pipelines, for example). So the export of Turkmen gas to Europe is unlikely. Turkmen government should focus on alternative projects. Turkmenistan's plans to develop the petro chemical industry can be highlighted. Further processing of energy commodities contributes to the expansion of the value chain and diversification of the economy. Besides these products can be exported relatively easy.