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Turkmenistan

Turkmenistan: Gazprom to Make Cutback on Gas Purchases

Nov 24, 2009

Gazprom's natural gas purchases from Turkmenistan are set for a drastic fall over the next three years, according to a Russian newspaper report.

The broadsheet Vedomosti reported that Gazprom plans to purchase "not more than" 10.5 billion cubic meters (bcm) from Ashgabat during 2010-2012. In 2009, Gazprom had planned to purchase in excess of 50 bcm of gas from Turkmenistan at a cost of $375 per thousand cubic meters (tcm). However, Gazprom sources told Vedomosti that relations between Ashgabat and Gazprom "collapsed" earlier this year when Gazprom refused to continue paying above European market rates for Turkmen gas. Deliveries came to a standstill in April following a pipeline explosion.

"The partners have been discussing a new contract since [April], but there is no clarity on either volumes or price," the source said adding that Gazprom was not prepared to pay more than $222/tcm.

Gazprom reportedly plans to increase gas imports from Uzbekistan by 2 percent, up to 14.5 bcm over the next three years, and is willing to pay $220/tcm. The company is also ready to pay $230/tcm and $244.50/tcm respectively for Kazakh and Azeri gas, the source continued.

Even at these rates, Gazprom's penchant for buying up Caspian Basin gas is not cost-effective, Michael Korchemkin, the director of the US-based energy consulting firm East European Gas Analysis, told the newspaper on November 24.

"The only reason for the concern to continue purchases from producers in Central Asia is an unwillingness to let them [export] directly to Ukrainian and European markets, as that would mean Russia would lose its 'favorite instrument of pressure' on its neighbors," he said.

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