Turkmenistan emerges as serious natural gas player

by Chris Mayer

Ukraine and Russia were at it again. This time, it turned especially nasty, as Russia cut off natural gas supplies to a host of European countries.
Tired of relying on Russia, the EU will again look for alternatives. Its eyes will wander to Turkmenistan.

Back in October, while the world was busy putting out the fires of a financial crisis that still burns, little-thought-of Turkmenistan made a bombshell of an announcement. It seemed to gather little notice at the time. But it could become much more important.
Gaffney, Cline and Associates, a British consulting firm, completed an audit of Turkmenistan's Yoloten-Osman natural gas deposits. Based on GCA's first results, the fields have a minimum of 4 tcm of gas... and as much as 14 tcm of gas, a truly staggering sum. The announcement put Yoloten-Osman among the four or five largest natural gas fields in the world.

The country's biggest field was Dauletabad, a rich and extraordinary field in its own right. Yoloten-Osman is at least five times as large. And Turkmenistan has many gas fields not yet explored.
"Without doubt," a report weighed in, "Turkmenistan is closing its gap with Russia and Iran, hitherto listed as having the world's largest and second largest gas reserves... If the GCA results are confirmed, Turkmenistan will have reserves just 20 % lower than that of Russia and outstrip Iran by far."

Turkmenistan has the potential to rival Russia's clout in natural gas and provide an alternative for Europe. By creating a pipeline from Turkmenistan, through Azerbaijan, Georgia and onto Turkey, the EU could bypass Russia entirely.
You can be sure the Russians won't like that. Again, from the same report: "[Russia] is no longer the superpower in the world of natural gas, as was widely regarded... Turkmenistan is, unquestionably, also a gas superpower of comparable muscle power to Russia."

The effort to bypass Russia via a southern route is an old game. Tamerlane, the 14th century conqueror of Central Asia, wanted to do the same thing when he sought to divert trade from the northern Silk Road -- controlled by the Golden Horde -- to a more southerly course through Bukhara and Samarkand (in present-day Uzbekistan).
Today, the five Islamic republics that were once part of the Soviet Union are back on the centre stage of geopolitics. Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan -- all have huge oil and gas reserves. The names sound odd today, perhaps. But Americans will get to know their names as well as they know those of Iran, Iraq and Afghanistan.

The race is on to court these countries of the steppe, taiga and desert. In this, China may already have a lead, as it often seems to when it comes to securing energy supplies. Beijing is financing a $ 2.6 bn pipeline through which natural gas will flow from Central Asia to China. It's doing its best to cosy up to the fabulous five.
Russia, too, is already close to them. Russia relies on Turkmen gas to meet its obligations to Europe, for instance. Russia and Turkmenistan have an agreement in place through 2009. But the powers that be in old Ashgabat have been sticking it to Russia. They're making Russia pay up for its gas supplies. In 2007, Ashgabat raised the price to $ 100, from $ 65, per 1,000 cm. Then in 2008, the price went to $ 130... and then to $ 150 in June 2008.

As the report remarked, "Russia will have to rework its bonding with its Central Asian partners."
It's as if Turkmenistan just drew an ace face up -- and now Moscow is starting to sweat it a bit. Turkmenistan now has even more clout to peddle with eager Americans, Europeans and the Chinese -- all who want Turkmen gas and the opportunity to build out the infrastructure.

Russia will have to play the game like everyone else.
Turkmenistan is in the driver's seat.