The meteoric rise of Turkmenistan into the top echelons of the coveted list of global energy suppliers has been nothing short of a spectacular phenomenon.
Within a couple of decades, the fortunes of the sleepy nation have been resurrected, owing to a mix of serendipity and ever-growing global gas requirements.
Lying on the famous Silk Road, the Central Asian nation has managed to grab headlines owing to the revised estimates wherein it ranks only behind Iran, Russia and Qatar in terms of gas reserves.
Now it is considered a key source in satiating the thirst for energy across booming economies of Asia and the world. Being a landlocked country, Turkmenistan has focused on exporting gas to willing customers through ambitious pipeline networks – with many more in the offing. In the process, it has emerged as an important player in the global gas geopolitics as well.
Turkmenistan initially began supplying gas to the other parts of the former Soviet Union during the 1960s, when the first phase of the Central Asia-Center gas transmission system was brought into operation. Russia has been the chief beneficiary even after the breakup of the Soviet Union because it resupplies Turkmen gas to Europe, thus enriching itself economically and also placing itself on a firm footing politically.
Turkmenistan has also been supplying gas to Iran since 2010 through the Daulatebad-Sarakhs-Khangiran pipeline. Gas also flows to Iran through the 200-kilometer-long Korpeje-Kordkuy pipeline, helping to meet the fuel requirements of industries in Iran’s northern tier. The two pipelines have a combined capacity of 20 billion cubic meters (BCM) per year.
Recent geopolitical dynamics have strengthened Turkmenistan’s hand in the global gas trade. Asghabat’s importance in the global gas dynamics has increased exponentially in the aftermath of Russia’s decision to cut back gas supplies through Ukraine. With Europe being highly dependent on gas supplies from Russia, Turkmenistan remains the most viable supplier to fulfil the ever-growing requirements of the gas-starved continent. Turkey’s recent signing of the framework agreement to supply gas to the proposed Trans-Anatolian Natural Gas Pipeline Project (TANAP) marks an important step toward the goal of shipping Turkmen gas to Europe.
The $20 billion project is scheduled to be completed by the end of 2018 and gas delivery is expected to start by 2019. The pipeline is expected to transport approximately 16 BCM of gas from Azerbaijan’s Shah Deniz II field in the Caspian Sea, currently being developed by a BP-led consortium. The capacity can further be increased up to 31 BCM by 2026.
Turkmenistan has also started working on the East-West pipeline project to further enhance its network. The East-West pipeline would have the capacity to carry up to 30 BCM annually. The 800-km line would bring gas from southeast part of the country to the coast of the Caspian Sea, thus readying the country to feed the proposed Trans-Caspian Gas Pipeline.
The 300-km-long Trans Caspian subsea pipeline, with an annual capacity exceeding 30 BCM, will run from the Turkmen coast of the Caspian Sea to Azerbaijan, where it will connect to the Southern Gas Corridor.
Perhaps the most important project from Ashgabat’s perspective is the China-Central Asia Pipeline, which is expected to fulfill more than 40 percent of Chinese gas requirements by 2020, amounting to 80 BCM annually. Notably, the first two lines became operational by 2010, while the third line was commissioned in June 2014. The fourth section is expected to go into operation by 2016. The increased gas deliveries to China would free Turkmenistan from dependence on Russia and help it to significantly diversify its export portfolio.
Then there is the Turkmenistan-Afghanistan-Pakistan-India pipeline, which is currently under the planning stage. The long-delayed project with an expected cost of $7.6 billion is expected to fulfil the booming energy needs of the South Asian nations, further enriching Ashgabat’s coffers.
DIVERSIFICATION IN OFFERINGS
Apart from the booming natural gas trade, Turkmenistan is also keen to diversify its offerings to the world. It recently inked a $1.7 billion deal with a Turkish-Japanese consortium to convert natural gas into gasoline – a novel way to make up for the lack of oil resources in the country. The agreement follows another deal Turkmenistan signed with a separate Turkish-Japanese group to produce carbamide, or urea, from natural gas. Earlier in June, the government led by Turkmen President Gurbanguly Berdimuhamedov government had concluded two big-ticket agreements with South Korean firms LG International Corp. and Hyundai Engineering to build two gas-to-liquids plants totalling up to $4 billion.
In the refining segment, Turkmenistan plans to increase its refining capacity up to 20 MMTPA by 2020 and to 30 MMTPA by 2030, aiming to turn the country into a sizeable exporter of refined products as well.
OPPORTUNITIES AND THREATS
There are opportunities galore for gas-rich Turkmenistan, but Ashgabat will have to play a careful balancing act without getting embroiled in regional geopolitical turmoil. Turkmenistan is surrounded by unstable regions, particularly Afghanistan where Taliban terrorists are regaining control.
With NATO forces expected to withdraw in 2015, the threat from the Taliban would increase in future as would the threat from another terrorist group lurking in the shadows: ISIS. ISIS, which has global ambitions, has already become a cause of concern for Turkmenistan despite being mollified by an extensive recent operation of coalition forces.
Turkmenistan is already cooperating with China to counter the menace of extremism, which encroaches upon the sphere of trade and commerce. The proposed Silk Road Economic Belt, in which Turkmenistan is expected to be an important player, is expected to bring greater prosperity across the region. China has committed a massive $40 billion for this project.
In the regional geopolitics, Ashgabat would be keen to maintain its long-standing tradition of not being allied to either Russia or China. With Chinese investments soaring, and Turkmenistan keen on breaking free from its overdependence on gas exports to Russia, it will be interesting to see how the stance of Berdimuhamedov’s government evolves.
NEED FOR REFORMS AND THE WAY AHEAD
Although Ashgabat has passed on some benefits of Turkmenistan’s continually swelling coffers to its populace with the government providing free gas, electricity and water to all citizens, the Berdimuhamedov regime’s performance in other spheres has been less than impressive.
The country’s human rights record is far from palatable and has been criticized by global organizations. Repeated calls to ease restrictions on press freedom in the country have been largely ignored.
Turkmenistan will eventually need to address these pressing issues in order to bolster its growing profile in international trade and commerce. With a growing economy and a population of approximately 5.5 million, the Central Asian country stands at the cusp of being a regional economic powerhouse and a major global energy player. How well it can live up to this potential remains to be seen.
