[GGP] Turkmenistan: Iran, Saudis Dangle Exits from Energy Cul-de-Sac

The statements, opinions and data contained in the content published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the publisher and the editor(s) of Natural Gas World.  

This article was originally published by EurasiaNet.org on November 13, 2017.

In these lean times, Turkmenistan has been seeking out potential clients and partners for its energy industry, only for two to present themselves at the same time. Sort of. As chance would have it, they are sworn rivals Iran and Saudi Arabia.

The overture from the Saudis was admittedly very noncommittal and came during last week’s Turkmen-Saudi Joint Committee for Economic and Trade Cooperation, which was convening for its fifth session. 

Turkmen deputy prime minister Maksat Babayev led a 40-person team to Saudi Arabia for a five-day trip intended, in part, to build on agreements finalized during President Gurbanguly Berdymukhamedov’s own visit in May 2016.

At the time, Berdymukhamedov suggested in a meeting with King Salman bin Abdulaziz Al Saud that Saudi companies consider investing in the trans-Afghanistan gas pipeline — TAPI for short, as in Turkmenistan, Afghanistan, Pakistan and India. This “energy route will bring warmth to homes of brother-neighbor nations and provide them with great opportunities for further economic development, increase their people’s wellbeing and create jobs,” Berdymukhamedov said.

The pipeline is designed to transport 33 billion cubic meters of gas annually for a period of three decades. 

So far, the most notable development to emerge from Berdymukhamedov’s sales pitch has been the announcement in October of a $700 million loan, repayable in 15 years, from the Saudi Arabian-run Islamic Development Bank toward construction of TAPI. That will only go a little of the way toward covering the entire $10 billion bill.

The rude reality is that while Turkmenistan claims to be plowing ahead full speed on its section of the pipeline, progress has been faltering elsewhere. In February, Afghan media reported that work there had finally begun and that the government had agreed for German energy consulting company ILF to develop a design blueprint for the project. But as recently as October, the Afghan Ambassador to Turkmenistan, Mirwais Nab, was reportedly declaring that construction was likely to be held up because of the drop in the price for natural gas.

And in what sounds like a very after-the-fact consideration, the TAPI steering committee has now begun giving thought to the fraught matter of the pipeline’s security.

Reports from the Turkmen-Saudi conference in Riyadh have been scanty in detail, but the Turkmen government has optimistically alluded to a renewed, but frustratingly vague, expression of support for TAPI from Saudi Arabia. Whether that means any more loans or firm assistance are planned is to yet to be determined. 

But judging from the reported remarks of Saudi Energy Minister Khalid al-Falih, interest seems to lie more in exploration than transportation.

“[Saudi oil company] Aramco is looking at any possibility for investment in oil and gas production globally, including countries overlooking the Caspian Sea, and Turkmenistan as I mentioned is among the countries that have the most reserves, especially in gas,” al-Falih was quoted as saying by the broadcaster Al-Arabiya.

In a coincidental development, there has in recent weeks been a sudden outpouring of reconciliatory language from Iran, which has been embroiled in a gas debt tiff with Ashgabat since the start of the year.

Speaking to Iran’s ISNA news agency, Hamidreza Araqi, the managing director of National Iranian Gas Company, expressed hope of averting the need for Iran to file suit against Turkmenistan for what Tehran says was an illegal, unilateral decision to suspend gas deliveries. Turkmenistan claims in turn that Iran owes it many hundreds of millions of dollars.

“Negotiations on the gas dispute are underway... We hope to end the dispute through dialogue,” Araqi was quoted as telling ISNA on November 5 in remarks relayed by Tehran-based, English-language business website Financial Tribune. “Iran still has time for taking legal action against Turkmenistan but any issue, in my opinion, can be settled in negotiations.”

Potential motivations for this goodwill are analyzed at length in a detailed Trend news agency article by Azer Ahmadbayli that deserves careful reading. In brief, Ahmadbayli argues that Iran is not only struggling to meet its export obligations, to Turkey and Iraq, but that it still cannot cover the winter-time needs of some 15 million residents in its northeast into whose homes Turkmen gas was once pumped. 

Turkmenistan’s tall debt demands are unlikely to be met in any hurry, but Iran is making a show of being amenable by agreeing on principe to allow Ashgabat to supply Armenia and Azerbaijan.

"We are averse to swapping Turkmen gas with Turkey and Iraq, but we have no problem with Azerbaijan and Armenia," Araqi told IRAN, again relayed by Financial Tribune, but this time on November 12.

Talks for those swaps to go ahead are reportedly already underway, and it helps that Azerbaijan and Armenia would both be willing buyers.

In another intriguing nugget volunteered by Araqi, it emerged that Iran and Turkmenistan are also exploring the option of jointly exporting natural gas to Persian Gulf littoral states. No specific nations were named. That solution would rest on Tehran’s program to create facilities for gas liquefaction. This all sounds like talk for the time being, but Ashgabat will surely be heartened by the prospect of any new export market, given its current total reliance on China as a client.

And it is not just gas that Turkmenistan may look to start exporting through Iran. Tehran has this year actively begun lobbying fellow Caspian nations — Turkmenistan, Azerbaijan, Kazakhstan and Russia — to consider the resumption of the oil swap arrangements that ground to a halt following the imposition of international sanctions.

In actual fact, this has already started, after a fashion. By a convoluted series of events, the port of Neka in northern Iran in August received two consignments of Turkmen oil extracted from UAE-owned Dragon Oil’s concession at the offshore Cheleken block. 

Is it possible that Turkmenistan is finally spotting a way out of its energy cul-de-sac?

The statements, opinions and data contained in the content published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the publisher and the editor(s) of Natural Gas World.