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TURKMENISTAN - The Russian Market.

Apart from the Itera supplies to Russia, Gazprom will need to import large volumes of gas from Turkmenistan in the future. From Gazprom's standpoint, it is cheaper to import Central Asian gas into Russia than develop some of its huge fields in very remote Arctic areas that have no infrastructure.

In September 2002 Russia's Energy Minister Igor Yusufov threw his weight behind conclusion of a long-term gas supply agreement between Gazprom and Turkmenistan. The move came during Yusufov's visit to Ashgabat and talks with President Niyazov. Both sides initialled an agreement under which Gazprom will begin taking 10 BCM/year from Turkmenistan starting in 2005. The volume will increase to 20 BCM/year from 2008. Eventually, Russia could import up to 50 BCM/year. The volume of current Gazprom purchases until 2005 will depend on the Turkmen pipeline capacity. The final signing of 10-year gas supply and partnership agreements between Gazprom and TurkmenNefteGaz is to be signed before end-2002. The two will have JVs in gas E&P, gas processing, transmission and marketing.

For almost a year, Gazprom's CEO Alexei Miller had been unsuccessfully trying to win a long-term gas supply agreement with Turkmenistan bypassing Itera. The main problem for debt-ridden Gazprom is the low price that it offers to Ashgabat. Gazprom is said to have offered to pay between $32-$33/000 CM on the Turkmen-Uzbek border. President Niyazov is insisting on $45/000 CM and a formula whereby the price will be reviewed annually. According to the Turkmen Oil and Gas Industry Minister, Kurbannazar Nazarov, it costs between $37-38 to produce and deliver 1,000 CM of gas to the border. This is because Turkmenistan has invested around $1 bn to upgrade its gas transportation system, Nazarov says. Moreover, he adds, Russia sells its gas on European markets a three times this price.

Gazprom plans to reconstruct the Central Asia-Center 3 pipeline in western Turkmenistan. The current capacity of this is about 10 MCM/day.

"Turkmenistan and Russia intend to legalise their long-term gas partnership", said Gazprom deputy CEO Yuri Komarov after a meeting between a Russian governmental delegation and President Niyazov in September. He added: "This is a matter of rather large supplies of Turkmen gas before 2020. The projects will require sizable investments and an upgraded inter-state gas pipeline system".

The planned 10-year supply contract will enable Russia and Turkmenistan to finance the modernisation of old gas pipelines and construction of new ones, Komarov said. "A potent and widespread network will make it possible to transport Turkmen gas from the Caspian fields as well", he said.
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Publication:APS Review Gas Market Trends
Geographic Code:4EXRU
Date:Oct 21, 2002
Words:430
Previous Article:TURKMENISTAN - Gas Export To Europe.
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