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    EU Revisits Turkmen Gas Question


Legal problems remain as other Caspian states can veto a subsea pipeline. project.

by: Dalga Khatinoglu and Ilham Shaban

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EU Revisits Turkmen Gas Question

European Union and Turkmenistan officials are working on a framework agreement on gas supplies to Europe, an EU  liaison officer in Ashgabat told national press. 

The five states bordering the Caspian signed August 12 last year a convention giving the sea a ‘special legal status’ that could allow a subsea pipeline to link gas resources in Turkmenistan to pipelines in the Azeri section. However, the other littoral states – Iran, Russia and Kazakhstan – have the right to veto on environmental safety grounds, making the agreement more of a formality than a starting-signal.

And Turkmenistan’s major gas reserves are some 600-700 km distant from Caspian shores, making it hardly compatible with other rivals for the EU market, such as LNG suppliers, as well as Russian and Azeri gas.

A source told NGW earlier that Turkmenistan is selling gas to Russia at about $110/'000 m3. Its neighbour Uzbekistan also announced earlier that it sells gas to Russia at $125/'ooo m³. 

The EU’s decision to elevate its presence in the country to a fully-fledged representative office in 2019 marks the culmination of bilateral relations, demonstrating the EU’s interest in strengthening co-operation with Turkmenistan, the liaison officer said. 

Azerbaijan has already welcomed in principle Turkmen gas transit via Southern Gas Corridor to EU. Recently the operator of the final section, the TransAdriatic Pipeline (TAP) launched a market test to allow shippers to make non-binding bids for new, long-term capacity in the line. These bids could then progress into binding contracts that would allow the financing of new capacity.

Vugar Veysalov, TAP's head of external affairs, told NGW that TAP is designed for a total capacity of 20bn m3/yr. The first phase (10bn m3/yr), now nearing completion, was exempted from third party access with long term capacity allocated to shippers of Azeri Shah Deniz gas, whereas potential expansion capacity of up to a further 10bn m3/yr is not exempted from third party access. “Expansion capacity is available on equal terms to any supplier, including the holders of the initial capacity,” he said.

There is no minimum capacity cap/requirements for a certain number of gas suppliers. “However, cumulatively, the binding capacity requests will need to pass an economic viability test before an investment decision is made. The larger the incremental capacity, the more cost effective an expansion project can be expected to be.”

Alongside China and Russia, Turkmenistan is also eyeing gas export via Turkmenistan-Afghanistan-Pakistan-India pipeline (Tapi).

The idea of a trans-Caspian pipeline has been discussed for some time, with one project, between Anglo-Dutch Shell and US Bechtel, in the news in the late 1990s. Apart from the now-settled legal dispute over the status of the Caspian Sea that made negotiations impractical, there was another problem of EU competition law. No one company could buy enough to justify a new pipeline, meaning a consortium would have to get together to buy gas as a single entity, but the EU bans cartels.