Big Turkmen field to produce gas in 2013, to feed Europe, Asia

Thu Nov 15, 2012 3:30pm IST

Stocks

   

* Galkynysh pivotal in supplying Europe, south Asia with gas

* Europe pushes Ashgabat to sign contract on gas sales

* Washington ignores Moscow's objections to Caspian route

* U.S. backs TAPI project despite security concerns

By Marat Gurt

ASHGABAT, Nov 15 (Reuters) - Turkmenistan plans to begin production at the world's second-largest gas field next year, a senior Turkmen official said, opening up new U.S.-backed supply routes to Europe and Asia at the risk of Russian opposition.

The Central Asian nation plans to build two new pipelines to carry gas from the Galkynysh field. One would run to Pakistan and India and the other would cross the Caspian Sea en route to the European Union, easing the bloc's dependence on Russian gas.

"We can launch industrial output at Galkynysh next year," the Turkmen government official, who declined to be named because he is not authorised to speak publicly on the matter.

"Right now, three gas-processing plants are being built, and two of them are certain to be ready in January or February," he said on the sidelines of an energy conference.

Turkmenistan's natural gas reserves rank fourth in the world behind those of Russia, Iran and Qatar, BP data shows. British auditor Gaffney, Cline & Associates has estimated the field's reserves at 13.1 trillion to 21.2 trillion cubic metres.

Galkynysh, the Turkmen word for renaissance, is better known by its previous name, South Iolotan.

It is being developed under a service contract by China's CNPC, Dubai-based Gulf Oil & Gas Fze, London-listed Petrofac and a Korean consortium of LG International Corp and Hyundai Engineering Co.

As the start of production draws closer, senior Western diplomats have urged Turkmenistan to waste no time in carving out a niche for itself in the lucrative gas market.

The European Union is in talks with Turkmenistan and Azerbaijan on building a trans-Caspian pipeline to Europe.

Patricia Flor, EU representative for Central Asia, urged Turkmenistan "to reach agreement with EU energy companies on a commercial contract, which would define volumes and price".

"It is important to sign this agreement as soon as possible," she said. "World markets are volatile. Talking about energy markets, we should bear in mind such agreements are long-term."

The Turkmen official said, "We would like to receive guarantees on transit and purchase (volumes). We need to come to a principle agreement on this."

He said Turkmenistan was ready to supply 30 billion cubic metres of gas to the pipeline annually.

MOSCOW WARY

Wary of potential competition with Caspian gas producers on the European market, Russia has objected to plans to lay the 300 km (188-mile) Trans-Caspian pipeline.

Russia, which is one of the five littoral nations of the Caspian, says the sea's legal status is not yet defined and the project could endanger the fragile ecosystem of the shallow sea.

Russia itself has been the traditional market for Turkmen gas but has reduced its purchases to about 10 billion cubic metres (bcm) per year from 40-45 bcm annually in the last two years.

Because of the drop in exports to Russia, Turkmenistan currently produces less than its annual capacity of 75 bcm. Energy major BP estimates last year's output at 59.5 bcm.

Turkmenistan, which also exports gas to Iran and China, plans to increase annual output to 250 bcm by 2030.

Ties between the United States and Turkmen President Kurbanguly Berdymukhamedov are warmer than with his flamboyant predecessor Saparmurat Niyazov. U.S. officials have stated support for the project and see no legal issues.

"We affirm the proposition that if Turkmenistan and Azerbaijan agree on a pipeline that crosses only their territorial waters, no other country has veto power over that decision," Lynne Tracy, deputy assistant secretary of state at the Bureau of South and Central Asian Affairs, told the energy conference on Wednesday.

The 1,735 km (1,085-mile) TAPI pipeline to Pakistan and India, meanwhile, faces security challenges because it must cross Afghanistan. Turkmen officials have said it could carry 1 trillion cubic metres of gas over a 30-year period, or 33 bcm a year.

"The road ahead is long for this project, but the benefits could be significant," Tracy said.

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