Turkmenistan’s gas hurdles: No end in sight

Turkmenistan’s energy sector is being hit by a wave of misfortune. The latest blow to Ashgabat came this March in the guise of indefinite postponement of Line D of the Central Asia – China pipeline (CACP). This pipeline is essential to Turkmenistan’s ability to export more gas in order to receive more hard currency. Turkmenistan lost Russia as a customer one year ago, and has since provided gas only to China and Iran. However, Turkmenistan is not receiving cash for the entire China-supplied gas volumes, as part the two countries had previously closed a “debt for gas” deal.

Furthermore, Ashgabat’s relationship with Tehran has worsened, because of dispute over a gas debt. This has resulted in halted exports to Tehran, and to massive lay-offs in the Turkmen oil and gas sector.

The country’s revenues suffered when oil prices went down. The Turkmen economy is heavily dependent on oil and gas revenue, so it started to crumble as the global oil prices plunged from $115 per barrel in June 2014 to under $35 at the end of February 2016. Turkmenistan’s main revenue source is natural gas exports, estimated to make up 31% of GDP . Ranked 4th globally by total proved gas reserves after Russia, Iran and Qatar, Turkmenistan had 17.5 tcm2 in reserves, and a gas output of 72.4 bcm in 2015, up 4.5% year-on-year. The country’s total proved oil reserves as of 2015 are estimated at 600 million barrels.

Turkmenistan is a landlocked country, thus it is dependent on pipelines to export its gas on world markets. The three main export routes of Turkmenistan are: Central Asia – Center pipeline (CAC) to Russia; Central Asia – China pipeline (CACP) to China; and two pipelines to Iran: Korpedzhe-Kurt Kui (KKK) and Dauletabad-Sarakhs-Khangiran.

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