Prospect of Caspian littoral states’ gas industry
By Dalga Khatinoglu
Iran and its neighbors hold more than 70 percent of world’s
total gas reserves. Iran, Russia, Qatar and Turkmenistan are
world’s largest gas reserves’ owners respectively.
But none of Iran’s neighbors, except for some certain projects, has
any interaction with others in gas industry. They ignore the
available cooperation opportunities viewing each other as tough
rivals.
Iran’s littoral neighbors - in the north and south- enjoy
significant gas reserves. On the other hand, Iran’s eastern and
western neighbors are in dire need of gas and power. So, Iran can
play the role of a regional hub for gas or power exports. But in
practice, Iran is importing and exporting only a limited amount of
gas and power.
With the current joint gas markets in the region, it seems we will
see an intense rivalry between regional states to raise their share
in the global gas markets. There are some options for cooperation
in this field.
Caspian Region
The five littoral states of the Caspian Sea have in total about
85 trillion cubic meters (45 percent) of the worlds’ proved gas
reserves.
A glance at the Caspian Littoral States’ Gas Industry
(bcm/a)
Caspian Littoral States |
Natural Gas Production in 2014* |
Gas Production based on BP figures for 2013** |
Net Exports of Gas in 2014 (Including LNG) |
Iran |
210 |
166.3 |
2.5 |
Russia |
640.3 |
604.8 |
162 |
Turkmenistan |
76 |
62.3 |
44 |
Azerbaijan |
29.5 |
16.2 |
8.5 |
Kazakhstan |
43 |
18.5 |
11 |
* The figures are taken from official sources or statements
in the mentioned countries
** Excluding the flaring and re-injected gas.
Azerbaijan’s gas export to Russia decreased more than 1.1 billion
cubic meters in 2014. Russia also planned to decrease Turkmen gas
import from 10.5 billion cubic meters (bcm) in 2014 to 4 bcm in
2015. Turkmenistan’s gas export to Iran stood at just 7.5 bcm in
2014, while this country should deliver 14 bcm per annum to Iran
based on existent agreements.
So, to meet their constant energy security, the Caspian littoral
states have no other way but to reach the European and Chinese
markets.
Considering eastern, western markets
No Caspian littoral states except Russia views European markets as
a potential gas market by 2019.
Turkmenistan is still hesitating to export its gas via
Trans-Caspian Gas Pipeline and instead prefers to put its focus on
the eastern markets. This comes as Russia’s gas export to Europe
decreased by 14.3 bcm in 2014 compared to the previous year. On the
other hand, Europe is planning to lessen by 25 percent its
dependence on Russian gas by 2020.
But China increased its gas imports from Turkmenistan and
Kazakhstan last year by 5.8 percent and 159 percent respectively.
China which used to consume annually 25 bcm of gas in 2000 has
increased its gas consumption to over 180 bcm/a currently. It is
now expected to raise its consumption to 420 bcm/a and 555 bcm/a by
2020 and 2030 respectively.
Despite reducing its gas export to Russia by 6 bcm in 2015,
Turkmenistan is set to increase its total gas export to 48 bcm. To
put it differently, in the current year, Turkmenistan gas export to
China will rise by at least 8 bcm/a reaching 34 bcm/a in current
year.
On the other hand, Russia is set to export up to 38 bcm/a of natural gas from fields in East Siberia to China over a 30-year period starting after 2018 through the Power of Siberia pipeline, of which construction started earlier in September.
Currently, Russia is one of China’s LNG suppliers.
Russia's gas supplies to the Asia-Pacific Region by 2035 can rise ninefold from 14 bcm/a to 130 bcm/a, Russian Energy Minister Alexander Novak said on February 27.
Turkmenistan also plans to allocate about 36 bcm of its gas to
domestic consumption in 2015. BP had estimated just over 22 bcm for
Turkmenistan’s domestic consumption in 2013. It seems that the
country has decided to increase its domestic gas consumption in
power plants as part of efforts to increase its electricity
production for further export.
Now, Turkmenistan is vying with Tehran for taking a greater share
in the energy markets of Iran’s eastern neighbors. To this end,
negotiations are underway over establishing a gas pipeline among
Turkmenistan, Afghanistan, Pakistan and India (TAPI). Pakistan was
expected to import Iran’s gas based on an agreement signed two
months ago, but the country has not yet taken any step to start the
required pipeline construction for this end.
On the other hand, Iran and Russia are vehemently against the
Trans-Caspian Gas Pipeline project for exporting Turkmenistan’s gas
to Europe through Azerbaijan.
Turkmenistan plans to raise its gas production to 230 bcm/a by
2030. Based on current agreements, the total volume of China’s gas
import from Turkmenistan will remain at 65 bcm/a by 2020. China is
determined to receive 85 bcm/a gas from Central Asian countries by
this date.
As a result, Ashgabat needs to develop a comprehensive plan to
diversify its gas markets because as things stands, Iran and Russia
will not import further gas from Turkmenistan.
Iran plans to raise its gas production to 365 bcm/a by 2018.
Meanwhile, the country’s gas export would reach to 80 bcm/a by
2022. Iran’s Outlook Plan Document has envisaged exporting gas to
Europe. At present, Iran has obligation to export 52 bcm/a of gas
based on signed memorandum of understandings (MoU) and agreements
to Iraq, Oman, Pakistan and Turkey, but it exports only 10 bcm/a to
Turkey currently.
Azerbaijan is also working on a plan to start exporting annually 16
bcm/a of gas to Turkey and Europe from Shad Deniz Stage 2 (SD2) by
2020. So, Iran and Russia would play the role of main rivals for
Baku government.
At the same time, Europe has decided to decrease its gas import
from Russia by about 25 percent (45 billion cubic meters) by 2025.
This is part of a larger plan to decrease the block’s dependence on
Russia’s gas which is standing now at 27 percent. If become
operational, the decision would prepare the ground for Iran and
Azerbaijan’s export to Europe.
Converting gas to power option
So, as said above, a tough competition between regional states to
gain more shares in the global gas markets seems almost inevitable.
But the issue of converting the natural gas to electricity and its
export is also among the options that first attracted huge
attentions from Iran and its northern neighbors but they left it
undecided later.
Last year, Iran imported 3,718 million kilowatt-hours (KWh) of
electricity, 67 percent of which comes from Turkmenistan. Back in
December 2008, members of the Economic Cooperation Organization
(ECO) including all Central Asian countries, Iran, Afghanistan,
Pakistan, Turkey and Azerbaijan agreed to hold talks on converting
some of their gas to power. The agreement was part of a larger plan
to establish a regional power network for exporting power to Iraq,
Europe and Syria. The issue was forgotten later. Now, Iran and
Turkmenistan are working separately to increase their power
production. Last year, Turkmenistan increased its electricity
production by about 12 percent. The country exports 2.8 billion KWh
of electricity but based on a state program, Ashgabat plans to
establish 14 new power plants to raise its electricity production
to 27.4 billion KWh.
Iran which exports annually about 12 billion KWh of electricity, is
now planning to allocate further 6 bcm/a of its gas to new power
plants by 2018 to increase its power export by additional 5,000
MW.
Iran is now producing more than 70,000 MW power (Equivalent to
about 263 billion KWh electricity). On the other hand, Azerbaijan
is exporting more than 2 billion KWh. But since Iraq and Turkey are
importing 68 and 20 percent of Iran’s power export respectively,
the idea of establishing a regional network for exporting
Azerbaijan’s power to these countries via Iran seems very
promising.
Iran’s eastern neighbors, Afghanistan and Pakistan both constitute
about 10 percent of Iran’s power export. So, Turkmenistan can gain
a greater share in these markets via Iran. For the time being,
Ashgabat is exporting about 250 MW power to Afghanistan.
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