TCP Shelved, TAPI Stalled; Shake-up in Turkmenistan's Oil and Gas Ministries
Last September, Turkmenistan made an upbeat announcement that it was working on the creation of a consortium for the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline and would even attract new membership in the group as well as chose a leader. Since then, the momentum has stalled, although Turkmen officials reiterated support at their annual Oil and Gas Conference in November. No mention at all was made of the Trans-Caspian Pipeline (TCP), a subject of great expectations only a year ago. Now a shake-up in the oil and gas sector in Turkmenistan has thrown into question where the projects stand, characteristic of a long period of uncertainty regarding Turkmen intentions.
A conference on Azerbaijan at Jamestown Foundation in Washington, DC in December shed some light on the reason for persistent difficulties in getting Turkmenistan on board with the Southern Corridor. Daniel Stein, Senior Advisor, Bureau of Energy Resources, of the US Department of State said the US supports the Trans-Anatolian Pipeline (TANAP) as "basically a commercial decision for the Shah Deniz Consortium to make". He then recounted the troubled history of the TCP since 1998, citing Shah Deniz in fact as the biggest factor for its failure, along with the chronic, unresolved demarcation dispute between Turkmenistan and Azerbaijan over the Caspian Sea bed fields.
The Turkmens were unhappy that Caspian revenue was now going to Azerbaijan, so the TCP project was put in hiatus, then revived in 2006 when Russia shut off Ukraine’s gas and hence delivery to Europe. In 2010, Turkmen President Gurbanguly Berdymukhamedov was finally willing to decouple the delimitation issue from development of the Caspian fields and was amenable to a tripartite agreement negotiated by the European Union among the EU, Azerbaijan and Turkmenistan. EU Energy Commissioner Gunther Oettinger and European Commission President José Manuel Barroso traveled to Ashgabat in 2011, mandated by the EC to make a deal. Since then, there have been a series of trilateral negotiations, and even quadrilateral as Turkey joined in the meeting in September 2012 in Ashgabat.
"Frankly, we don't see a lot of progress coming out of those discussions to date," Stein concluded, however; Berdymukhamedov didn’t even meet with Oettinger when he was last in Ashgabat. “Draw your own conclusion on the ability of the EU to make things happen,” he quipped. The problem is that while the Chinese are able to say to the Turkmens, “We need your gas; we will build you a pipeline,” Europe does not have the resources and is ambivalent about challenging Russia.
"If Turkmenistan and Azerbaijan agree on construction of a pipeline across the Caspian, across their territorial waters, no one has veto power on that decision," Stein maintained. Russia and Iran oppose construction of the TCP, but if the EU, Azerbaijan and Turkmenistan reach an agreement, "no one else can say no."
Former US ambassador to Azerbaijan, Mathew Bryza, now Director of the Tallinn-based International Centre for Defense Studies, who also spoke at the Jamestown conference believes the Turkmens were unable to tell Europe definitively that they would sell them gas because they feared Russian retribution. He believes that TANAP‘s successful installation will be the “chicken before the egg” that must occur for TCP to succeed. The Turkmens will only commit when TANAP is already built and gas is already flowing westward, he said. The US and Europe should provide “the political umbrella” for the Southern Corridor to go forward: “instead of saying it will fail; we should be clear, pushing and fighting,” he said. Bryza recently accepted a position on the board of Turcas Petrol, a private Turkish company which has joint ventures with Socar, the State Oil Company of Azerbaijan.
As recently as December 3, while concluding that “Caspian gas is our salvation,“ Oettinger seemed to feel prospects were bleak: "If the 'South Stream' gets implemented, and not TANAP (the project has not yet passed the ratification of the Turkish Parliament), the entire Turkmen gas will go to Russia, and on, but at a higher price to Europe," news.az reported. Yet by January 18, Oettinger seemed reassured after Azerbaijan and Turkey signed an MOU on construction of the pipeline, “I am pleased to see that a crucial step towards realisation of the South Corridor has been taken: both Azerbaijan and Turkey have ratified the TANAP agreement, thus enabling a dedicated infrastructure for the transport of Azeri gas to the EU," he said.
On a visit to Ashgabat January 15 where he met with President Berdymukhamedov, US Assistant Secretary of State for South and Central Asia Robert O. Blake, Jr. told reporters “Nabucco was not a main topic of conversation today, but that doesn’t mean it’s not important. We continue to support the development of multiple pipelines out of Turkmenistan, and we’ll continue to work towards that goal”. He also expressed his gratitude for Turkmenistan’s efforts at stabilization of neighboring Afghanistan and "broader regional efforts to forge regional integration through projects such as the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline". Pressed for more information about any American companies that might join the TAPI consortium -- Chevron and ExxonMobil have expressed interest -- Blake said the details are still being worked out. “I leave it to the government of Turkmenistan to provide any updates on that, because this will be their decision about who should form such a consortium and who should lead it, he said.
While Blake’s statements seemed merely to repeat cautious affirmations of the past, Russian analysts chose to see them as more aggressive, Voice of Russia reported. Just as the US has laid down the gauntlet that “no one” should veto Turkmenistan’s plans, so on December 1 just before a regional summit in Ashgabat, Alexander Blokhin, Russian ambassador in Turkmenistan, objected that when “some Caspian littoral states disregard the opinions of others” this could lead to "total disorder and a hotbed of tension" and that "this pipeline [TCP] in the large scheme of things has virtually no influence on Europe's energy security"; it was more politics than economics, Regis Gente reported for Chronicles of Turkmenistan. Meanwhile, Jamestown analyst Vladimir Socor characterized Russia’s South Stream project as a “political bluff” whose gas sources have not yet been identified, conceived mainly to block the West and Turkmenistan.
Turkmenistan and the Asian Bank for Development took the TAPI project on a roadshow to Singapore, New York and London last autumn. The results were rumored to be unimpressive for supporting the $9 billion 1,735 kilometer project, fraught with security and pricing negotiation troubles. Even so, at the November conference, Sakhatmurad Mamedov, then head of the state-owned company Turkmengaz, announced that the project had been “successfully pushed forward” on the roadshow and "will also strengthen stability in the region as well as creating new jobs”.
But in yet another harsh purge of his administration this month, President Berdymukhamedov fired Mamedov and replaced him with close supporter Kakageldy Abdullaev, who was acting minister of gas and oil industry and mineral resources, and a candidate in the presidential elections, gundogar.org reported. Mukhammednur Khalilov, former director of the Institute of Geology, is now minister of gas and oil industry. Khalilov formerly held leading positions in TurkmenGeologia and Turkmengaz from 1993-2009 while at the Institute of Oil and Gas.
In a further puzzling development, the president also issued a "strict reprimand" to Yagshigeldy Kakaev, deputy chairman of the Cabinet of Ministers responsible for the oil and gas sector, and director of the State Agency for Management and Use of Hydrocarbons Resources under the president, for unspecified "improper performance of his official duties and violation of labor discipline" and for "permitting shortcomings in his work". Kakayev has held this post since 2008, and it is traditionally seen as the most important of the industry jobs.
Abdullayev had earlier announced further delays to TAPI; “Turkmenistan can construct its pipeline in its own territory in three years, but for other countries, it depends on their participation,” he said. “The companies that we have met, they have no objection to financing,” Abdullaev claimed, but declined to say which investors had made commitments, the Nation of Pakistan reported. Now Abdullaev may be in a less powerful role and it is not clear what’s next. The stumbling block for foreign companies has been a refusal by Turkmenistan to give companies production-sharing agreements. Gas sales and purchase agreements with Pakistan’s Inter State Gas Systems and Indian state-run utility GAIL were signed last year, but the TAPI consortium appears still to be in a quest for a large oil and gas company that will shoulder the construction and security costs in exchange for a share of the gas fields, says India Times.
Catherine A. Fitzpatrick