Turkmenistan will be able to convince gas buyers of its reliability, as it is incapable of signing binding purchase and sale agreements, Caspian energy analyst John Roberts doubts.
On the Eurasianet.org website, the analyst provides examples on which he bases this conclusion.
Turkmenistan, which has one of the largest natural gas reserves in the world, ended decades of hesitation just over a year ago and announced its serious intention to export to Western markets. For any other country, such a statement would have sparked a flurry of interest from potential buyers and companies interested in developing export deals. However, as events have shown, with Turkmenistan, the process has been slower and more complicated than one might expect.
In March, Turkmen President Serdar Berdimuhamedov signed what appeared to be a landmark agreement in Turkey, paving the way for a "swap deal" that would allow Turkmen gas to be delivered to Iran, which would then deliver the same amount of its own gas to Turkey. Turkish officials were confident that a commercial agreement would soon follow. Turkey's Energy Minister Alparslan Bayraktar announced in a televised interview on July 26 that he would fly to Ashgabat in the coming days to finalize a deal to export 1.5-2.0 billion cubic meters of gas per year from Turkmenistan to Turkey via Iran. Deliveries could begin as early as January 2025, and the gas could be re-exported to Europe.
It seemed like a done deal. But so far, the commercial agreement has yet to be signed. If completed, the deal with Turkmenistan would be a major breakthrough for Ankara, which has been trying to import Turkmen gas to Turkey since the late 1990s, aiming to diversify its gas supply to reduce its dependence on Russia and Iran. Old contracts with Russia and Iran, which account for about half of Turkey's gas demand, are set to expire in the next two years, and there is no sign yet that any of them will be extended.
This would be a chance for Ashgabat to prove that it can be a reliable supplier worthy of attention from European gas buyers. The deal could sufficiently convince Western investors to finance the construction of a dedicated pipeline across the Caspian Sea, which Turkmenistan needs if it intends to export gas to Europe in significant volumes. However, as has been the case throughout the post-Soviet era, obtaining a firm commitment from Turkmen officials has proven difficult.
Bayraktar announced the upcoming deal before his visit to Turkmenistan on July 29. His trip was supposed to last only one day, but it was extended for another day. In the end, the minister returned to Turkey, apparently with nothing more than an agreement that both sides would continue negotiations.
Neither side has disclosed any details about why the expected swap agreement for the export of Turkmen gas to Turkey via Iran has not been concluded.
The recent experience of Azerbaijan, which managed to reach a swap agreement with Turkmenistan for gas imports through Iran, may shed light on the above events. At the end of 2021, Baku concluded a swap agreement whereby Turkmenistan would send about 2 billion cubic meters of gas per year to northeastern Iran, and Iran would send the same amount of its own gas to Azerbaijan. The swap began in early 2022 and was reportedly going so well by mid-year that the three partners reached an agreement to double the volume of trade. However, for reasons that were never confirmed, the doubling did not take place, and by January of this year, trade operations had apparently ceased: reports circulated that Turkmenistan, encouraged by the initial "success" of the operation, tried to raise the gas price beyond what Azerbaijan was willing to pay.
It seems that Ashgabat has also attempted a price-hiking tactic with Turkey.
Again, as in the case of the Azerbaijani swap agreement, Ashgabat may be overplaying its hand in Turkish negotiations. Ankara is not lacking in other options. In May, Turkey signed an agreement to purchase LNG with Exxon Mobil, the details of which have yet to be announced. And on September 2, Turkey’s state gas importer Botas signed a 10-year agreement with Shell to import 4 billion cubic meters of LNG per year — twice the volume planned for the Turkmen swap. Two days later, Turkish officials announced that they expect to sign another major LNG agreement at the Gastech conference, scheduled to be held in Houston from September 17-20.
The real loser is Turkmenistan, explains John Roberts — Turkey remains the best option for Turkmenistan to develop a new major export route. The nature of energy markets shows that for any gas export deal to succeed, the key factor is reliability. The Turkmen need to prove they are reliable partners.
CentralasianLIGHT.org
September 18, 2024