11 August 2008
As the great powers seek energy security, Turkmenistan is at the center of a number of pipeline proposals.
After years of isolation, Turkmenistan has been host to hundreds of official delegations from the world’s great powers, as Europe, Russia, China, and India pursue energy security with an eye toward the country's gas deposits. President Berdymukhamedov has forsaken at least some of his predecessor’s inward focus, in favor of a “multi-vector” natural resource strategy. The strategy relies on multiple hydrocarbon export routes, and the various gas importers each have a route in mind. Key pipeline proposals include the Caspian coastal pipeline, the Central Asia-China pipeline, the TAPI and IPI pipelines, and the Nabucco and Trans-Caspian pipelines.
Central asia-china pipeline
Only the Central Asia-China project has broken ground; construction began in the summer of 2008. The 1,818 km, $30 billion pipeline is intended to export 30 billion cubic meters (bcm) of gas from Turkmenistan through Uzbekistan and Kazakhstan into Xinjiang, China. The pipeline would connect with the West-to-East natural gas pipeline and extend into Shanghai. The China National Petroleum Corporation (CNPC) is requesting a $2.5 billion loan from the China Development Bank to fund construction for the segment in Uzbekistan. This pipeline deal, like others in the region, challenges western predominance in the energy market.
pre-caspian pipeline
Russia’s hopes lie with the pre-Caspian, or Caspian coastal, pipeline, which would carry 30 bcm of gas from Turkmenistan and Kazakhstan to Russia. Turkmenistan reaffirmed its commitment to the project in July 2008, following an inter-governmental agreement at the end of 2007 and decisions by Russia to increase its purchase price for Turkmen gas. Construction is projected to begin in 2009 in Kazakhstan and 2010 in Turkmenistan.
tapi and ipi pipelines
India’s interests would best be served by the TAPI and IPI pipelines. The Iran-Pakistan-India (IPI), or Peace, pipeline is in the negotiation stage. The proposed project would span 1,700 km for a cost of $7.4 billion, double the initial estimates. Besides the increase in price, disagreements over gas transit fees and U.S. opposition could stifle implementation.
The U.S. prefers the Turkmenistan-Afghanistan-Pakistan-India (TAPI), or Trans-Afghan, pipeline, which would exclude Iran, and provide a similar $7.6 billion, 1,680 km route. India has quoted over $200 for Turkmen gas, competing with Russia's Gazprom’s hikes. In July 2008, Turkmenistan reaffirmed its commitment to TAPI, and a meeting in India is likely in October. However, the project has been pending for more than 10 years. At present, insecurity in Afghanistan is a major concern. The Asian Development Bank (ADB) has conducted feasibility studies and provided technical assistance for the project in the past. Any progress in the pipeline would likely involve ADB assistance as well.
nabucco and trans-caspian pipelines
U.S. opposition to IPI is mirrored by Russian antagonism toward Nabucco. Although divisions over energy security exist, the European Union has made clear its interest in Nabucco and a trans-Caspian pipeline. In many ways, the two projects – Nabucco and trans-Caspian – are interlinked. June delegations to Turkmenistan led to a commitment for 10 bcm of Turkmen gas to be sent to Europe in 2009 and discussions of an impact assessment for a trans-Caspian pipeline. The trans-Caspian route would likely connect Turkmenistan to Azerbaijan, allowing Turkmen gas to be sent via the South Caucasus Pipeline (SCP) from Baku to Erzurum, Turkey, where it would then be carried by Nabucco to Austria. The route would bypass both Russia and Iran. Major obstacles to the project include Russia, which remains more closely connected to Turkmenistan than Europe, and feasibility, since a trans-Caspian route would require considerable technical input.
concerns
A main concern in all these projects is the potential lack of accountability for Turkmenistan. Russia and China are unlikely to question Turkmenistan’s human rights offenses or exert reform pressures. Unconditional investment may appeal to free market economics, but support for an authoritarian regime, particularly one able to rely on resource rents, has its risks, both economically and politically. Even Europe may be tempted to turn a blind eye to conditions in the country for the sake of Nabucco. The European Investment Bank (EIB), barring a surprise rejection by the EU Parliament in September, is set to extend its operations into Central Asia with an explicit focus on energy transportation projects. The European Bank for Reconstruction and Development (EBRD) has prohibitions on countries with poor human rights records, but the EIB seems prepared to forego those considerations for the sake of European energy interests.
Besides these socio-political concerns, the pipelines pose significant risks to the environment and local communities. The problems documented from the South Caucasus and Baku-Tbilisi-Ceyhan (BTC) pipelines reveal the challenges ahead, should these new pipeline projects move forward. Of particular concern are the lack of environmental and social safeguards offered by Russia and China and the potential for Europe to lower its standards through EIB financing, given the competitiveness of the market.
Finally, these grandiose pipeline plans could unravel if Turkmenistan’s gas reserves prove less than expected. According to Richard Pomfret,* a scholar specializing in Central Asian economies, Turkmenistan would have to double its exports over the next 15 years to meet its natural gas commitments based on these pipeline plans. Thus, the greatest question is whether Turkmenistan can indeed deliver on its promises. This is particularly relevant for Europe and India, since, for now at least, the TAPI, IPI, Nabucco, and Trans-Caspian pipelines appear near the end of the line for Turkmen gas. China and Russia have used their position in the neighborhood and their best negotiation tactics to take the lead.
*Richard Pomfret, “Turkmenistan after Turkmenbashi” (presentation), Johns Hopkins University, July 16, 2008
Sources
CNPC seeks loans to fund Central Asia-China gas pipeline construction, Xinhua, July 24, 2008 (China Daily website)
EIB expands its operations to Central Asia (BIC website)
Gazprom agrees on pricing for Turkmen gas deliveries, by Lucian Kim, July 25, 2008 (Bloomberg website)
India to host next TAPI meeting in October, Zee News, July 3, 2008 (Zee News website)
India quotes higher price for Turkmen gas, The Economic Times, July 2, 2008 (Economic Times website)
Gas pipeline gigantism, by Robert Cutler, July 17, 2008 (Asia Times Online website)
Technical Assistance for the Turkmenistan-Afghanistan-Pakistan Natural Gas Pipeline Phase II, ADB, December 2003 (ADB website, Acrobat pdf)
Technical Assistance for the feasibility studies of the Turkmenistan-Afghanistan-Pakistan Natural Gas Pipeline Project, ADB, December 2002 (ADB website, Acrobat pdf)
Resources
BIC’s Europe and Central Asia page
Counter Balance website (monitors the EIB)
Asia Regional Integration Center (ADB website)
Additional Sources
- Ashkhabad announced construction of the Caspian coastal gas pipeline, July 18, 2008 (WPS: Russian Oil & Gas Report/Factiva)
- Turkmenistan started the implementation of the Caspian gas pipeline project, July 18, 2008 (Oil & Gas of Kazakhstan/Factiva)
- CNPC kicks off Uzbekistan-China gas pipeline, report, July 21, 2008 (Xinhua News Agency/Factiva)
- Turkmenistan for trans-Afghan gas pipeline project, July 16, 2008 (BBC Monitoring Central Asia/Factiva)
- IPI vs. TAPI; Oil pipeline battles and the decline of U.S. influence, by Maha Atal July 21, 2008 (Forbes Asia, 28, Vol. 4, Issue 13/Factiva)
- India, Pak, Iran to meet in Tehran to push IPI project, July 16, 2008 (The Press Trust of India Limited/Factiva)