Pipeliners

13 May 2007 - Upstream OnLine - The leaders of Russia, Turkmenistan and Kazakhstan have agreed to build a new natural gas pipeline around the Caspian Sea, a move that bolsters Russia's dominance over the region's gas exports. The new pipeline will link supplies in Turkmenistan to existing infrastructure via a new pipeline running through Kazakhstan. The deal, struck on Saturday, also includes an undertaking by Russia to upgrade existing Soviet-era infrastructure. The move delivers a blow to US, European and Chinese hopes of prising the flow of Central Asian gas out of Russian hands. Although all three former Soviet republics sought to play down the diplomatic implications of the pipeline, it comes at a time of increased Western anxiety about Russia's use of its vast energy resources for political ends, a charge Moscow denies. The agreement was reached at a summit of the three states in the Turkmen Caspian port of Turkmenbashi. Russian President Vladimir Putin said the deal meant "more supplies of energy resources to Europe and the world's markets". In its first stage, the pipeline will deliver 10 billion cubic metres of gas per year by 2009-2010, Russian Energy Minister Viktor Khristenko told reporters. Including the infrastructure upgrade, deliveries to the Russian border will rise to 90 Bcm. While Turkmen President Kurbanguly Berdymukhamedov said plans for a rival US-backed trans-Caspian pipeline that bypasses Russia had "not been completely dropped", Khristenko said he believed there was now little chance of it going ahead. "Technological, legal and ecological risks are so big that it will be impossible to find an investor unless it is a political investor who does not care how much gas there is to pump through," he said. The three states issued joint declarations saying they would sign a treaty by September on building the new pipeline and would work with Uzbekistan to improve existing Soviet-era Central Asia pipelines. New gas finds in Turkmenistan and a new Turkmen leader following the death in December of president Saparmurat Niyazov had raised the possibility that the country, the largest gas producer in Central Asia, might seek new export routes. Berdymukhamedov said Turkmenistan still had a long-term interest in diversifying pipelines and listed possible projects with Iran, China, Afghanistan and India. The country has not published independent audits of its gas reserves, and asked if Turkmenistan had enough gas for new pipelines to Iran, Afghanistan and China, he said: "Do not worry, there is enough." Kazakh President Nursultan Nazarbayev, who this week pledged to keep most of his country's oil flowing through Russian pipelines, said ahead of the signing: "This is a purely pragmatic commercial project... There is no politics there." Russian gas monopoly Gazprom pays Turkmenistan $100 per 1000 cubic metres of gas that it buys, well below the $250 per Mcm it charges its European customers. It needs gas from Central Asia to maintain cheap domestic supplies without cutting exports as its own fields mature. Fyodor Lukyanov, editor of the journal Russia in Global Affairs, told Reuters ahead of Saturday's summit that a pipeline agreement would represent a major diplomatic victory for Putin. "I think the Americans are at the moment following Putin's visit to Central Asia with attention, envy and unhappiness," he said. "If he is able to ensure Kazakh and Turkmen loyalty then the question of alternatives for energy supply to Europe, which is already fairly murky, will just be put on hold."