Caspian & Iran Overview: Turkmenistan Suffers from Trapped Gas
A week after Islamabad and Ashgabat emphasized the importance of accelerating work on the Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas pipeline, India – still smarting from its RasGas LNG contract dispute – said it did not want to commit itself to a long-term gas price or formula with Turkmenistan.
Turkmenistan's state Nebit-Gaz paper reported March 17 that the president, Gurbanguly Berdimukhamedov, and Pakistan’s prime minister, Mahomed Nawaz Sharif, had agreed to build Tapi in the shortest possible time. Berdimukhamedov said that his country had started building a 214-km section of pipeline on its territory and that Tapi would become operational by the end of 2019.
The $10bn project is aimed at delivering 33bn m3/yr from Turkmenistan's giant Galkynysh field's gas to the participant countries.
At the same time, the CEO of Pakistan's Inter-State Gas Systems (ISGS) Mobeen Saulat told Pakistani newspaper The Nation that the process of removing land-mines in Afghanistan from the Tapi gas pipeline route is under way with the help of Afghan security forces.
However, India Times quoted an oil official on March 21 saying that India does not plan to freeze a long-term price or formula for the gas it plans to buy from Turkmenistan using Tapi following a bitter experience with Qatar recently when it had to forgo the benefits of the commodity crash and pay twice the spot rate for a long time before the 25-year contract was reworked.
"Petronet LNG, which had reaped the benefit of lower prices in previous years, had to pay an extremely high price in 2015 to Qatar's RasGas despite a commodity collapse. Petronet's 25-year contract linked prices to 12-month moving average of crude oil prices with a rolling ceiling and floor allied with 60-month average," he said.
The cost of Tapi is more than one third of Turkmenistan’s yearly budget, which was $29.37bn last year. There have been reports of linking the gas price to assessments of crude prices at relevant Asian delivery points.
On the other hand, Iranian president Hassan Rouhani is preparing to visit Pakistan on April 6 to discuss a pipeline project, considered as the main rival to Tapi.
Pakistan should have started importing 22mn m3/d of Iranian gas in January 2015, but it has yet to begin building the pipeline in its territory. Iran can get $200mn compensation from Pakistan each month owing to delays, but they are still negotiating the gas deal.
Turkmenistan has another project to be developed, especially a gas and chemical complex in Kiyanly district with worth $3.4bn.
A Turkmen newspaper reported on March 18 that the complex would become operational by 2018 to process 5bn m3/yr for the production of 386,000 metric tons/yr of polyethylene and 81,000 mt/yr of polypropylene.
The country is also obligated to develop the D line of Central Asia-China pipeline, but the project is behind the schedule, thanks to Turkmenistan.
On February 18, Kyrgyzstan blamed Turkmenistan, Tajikistan and Uzbekistan for delaying the building work. The Kyrgyz government said that the construction of Turkmenistan-Uzbekistan-Tajikistan-Kyrgyzstan-China gas pipeline was planned to start in 2016, but that its neighbors had not finished their internal processes.
Uzbekistan
Uzbekistan has put up gas prices for the second time in six months. According to the Uztransgas website, the gas price for domestic sectors including households will go up 8.2% by April 1, 2016.
Domestic users are to pay sum 226,000 ($79)/000 m³. For now, the gas price is $73.13/”000. This is the second time that Uzbekistan increased the gas price by 7.3% in October 2015. The price is still far below the regional gas price.
Gazprom and Uzbekneftegaz signed a contract on March 15 for the purchase of 4bn m3 of Uzbek gas in 2016, or about 4 times more than 2015. According to BP’s statistical review, the country produced 57bn m³ of gas in 2014, the latest year for which BP data is available.
Azerbaijan
Despite more raw gas production, the commercial natural gas output of Azerbaijan experienced a significant decrease during two months of 2016.
Azerbaijan’s statistics committee reported on March 17 that the country’s total gas production – including re-injected gas – rose by 2.5% to about 4.95bn m3 during the first two months of 2016, but commercial gas production dropped by 8.3% to 3.155bn m3.
The decline in commercial gas production is due to cutting associated gas deliveries to Azerbaijan's state energy company Socar from the BP-operated Azeri-Chirag-Guneshli block, operated by BP.
During last year, some 3.2bn m³ of associated gas, extracted from ACG, were delivered to Socar, while 9.2bn m³ were re-injected. However, for 2016, the re-injection volume is projected to increase, and then there will be less associated gas to be delivered to Socar from ACG.
Iran desk