The diversification of energy exports is an emerging trend in Russia'senergy diplomacy. The share of oil and gas exports to the Asian countrieswill reach 10-13% by 2015. Source: DPA/Vostok-Photo
First, they agreed to put off construction of the Caspian gas pipeline (Turkmenistan–Kazakhstan–Russia) with an annual capacity of 30 billion cubic metres until the demand for gas starts to revive in the European Union. Second, Gazprom, Russia’s state-owned natural gas behemoth, began discussing possibilities for participation in the 1,680-km TAPI (Turkmenistan–Afghanistan–Pakistan–India) pipeline, which will deliver Turkmen gas to India and Pakistan through Afghanistan.
The $3.3 billion project, with an expected annual capacity of 33 billion cubic metres, was stalled for long due to security fears as the pipeline would pass through areas affected by the Taliban insurgency in Afghanistan and volatile terror-prone areas of Pakistan. The two decisions were announced by Russia’s Deputy Prime Minister Igor Sechin, who is in charge of the energy sector, after the presidential talks. The Russian delegation, however, did not include either Gazprom CEO Alexei Miller, or any of his deputies. Sechin, however, indicated that Gazprom’s participation could take different forms: “possibly as a contractor, designer or full member of the consortium”.
While postponing construction of the Caspian pipeline, it is crucial, as Russian energy diplomacy goes, to offer alternative forms of cooperation; and the possible interest in TAPI fits into this logic, according to Vitaly Kryukov of IFD Kapital.
By reviving discussions about possible participation by Gazprom in TAPI with Turkmenistan, Moscow is attempting to make Asian gas exports more appealing. Reporting on the development, the Kommersant daily suggested that it meant that Gazprom is willing to help fund the high-risk project in order to thwart the West's efforts to get Turkmen gas for the proposed EU-led Nabucco gas project that would compete with Russian gas exports to Europe. Today, European demand is not enough to drive new exports, says Mikhail Korchemkin, Director for East European Gas Analysis. Agrees Sechin: “Given the current conditions on the gas market – I say it without any sarcasm – Nabucco has no future,” said Sechin.
In a significant development, India, along with three other participating countries, on September 20 initialed the Gas Pipeline Framework Agreement (GPFA) and heads of agreements for the proposed Gas Sales Purchase Agreement for the TAPI, in Ashgabat. This will be followed by signing of Gas Sales and Purchase Agreement, which will outline the terms on which the Central Asian nation will sell gas, and agreements providing state support by the four nations in the project. Turkmenistan is hoping the GSPA may be signed during a proposed TAPI summit in Ashgabat in December.
The cross-border TAPI pipeline has its share of critics. “This project is not going to be completed in the foreseeable future because of the instability in Afghanistan. The discussions are too theoretical,” said Aleksey Makarkin, deputy director of the Centre for Political Technologies. This is also why there is no way Gazprom can walk out of the IPI project (Iran–Pakistan–India) with an annual capacity of 30–35 billion cubic metres. Many experts point out that the TAPI was backed by the US as an alternative to the IPI due to Iran's involvement in it.
However, India has a chance to start receiving Russian gas much earlier. The ONGC can exchange its share in Sakhalin-1 for Gazprom liquefied gas, said Stanislav Tsygankov, head of the Foreign Trade Department of the Russian company. The problem is that, officially, the ONGC may not carry on negotiations on behalf of the consortium because the project is operated by Exxon Neftegas. It’s important to remember that the Russian authorities expressed their displeasure with Exxon Neftegas in late October because the estimated project budget included in the programme of works upto 2055 nearly doubled from $42.8 billion (in the 2003 programme) to $95.3 billion. Russian Energy Minister Sergei Shmatko has, however, said that no change of operator is on the agenda.
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