Azernews.Az

By Gunay Hasanova

Turkmengaz and Russian company Gazprom suspended the arbitration process due to the development of a peaceful resolution of the dispute, said Turkmenistan's Oil and Gas Complex citing a memorandum on the issuance of Eurobonds of Gazprom.

Being on a working visit to Russia Turkmen President Gurbanguly Berdimuhamedov held negotiations on this issue with his Russian counterpart Vladimir Putin.

"Despite the difficulties in the economic sphere and in terms of the ruble, the trade turnover between our countries are growing," said Putin at the meeting.

However, according to the Turkmen media, he didn’t mention anything about the gas dispute during the meeting.

Russia’s purchase of natural gas from Turkmenistan is regulated by the intergovernmental agreement of 2003, which envisages the cooperation until 2028. The document envisages the supply of up to 80 billion cubic meters of gas per year to Russia via the Central Asia - Center and East - West pipelines.

Since early 2008, Gazprom was trying to revise the price of the gas purchased from Turkmenistan.

Despite the contracted annual volumes of 70-80 billion cubic meters, firstly, the volumes were decreased to 10-11 billion cubic meters per year throughout five years. The annual volumes dropped by 2.5 times in 2015 to 4 billion cubic meters.

Last year, Turkmenistan’s Ministry of Oil and Gas Industry and Mineral Resources reportedly said that Gazprom Export LLC (100-percent subsidiary of Gazprom) doesn’t pay the remaining money for the actually delivered Turkmen natural gas, without explaining the reason.

In early 2015, Gazprom announced that it will purchase only 4 billion cubic meters of gas from Turkmenistan and was going to change the terms of the contract in the Stockholm arbitration mid-2015

Gazprom filed a lawsuit in Stockholm Arbitration Court against Turkmengaz, demanding to revise the price in the gas supply contract.

Due to declining gas export prices in Europe, linked to the constantly falling oil prices, the previously set price for Turkmen gas at $240 per 1,000 cubic meters appeared unsatisfactory to the Russian side.

Turkmenistan possesses the world's fourth largest natural gas reserves after Russia, Iran, and Qatar.

Turkmenistan holds 9.4 percent of the world’s total proven natural gas reserves and produced 2 percent (72.4 billion cubic meters) of the world’s total blue fuel output in 2015 which is up by 4.5 percent compared to the country’s production level in 2014, according to the BP statistical review of 2016.

Gas supply was one of the strategic areas of partnership between Turkmenistan and Russia until recently. Turkmenistan transports its gas to Russia via the Central Asia-Center gas pipeline that was constructed during the Soviet period and monopolized by Gazprom.

Turkmenistan, which produces about 70-80 billion cubic meters of gas a year, is actively implementing an energy strategy aimed at increasing exports of the blue fuel and diversifying its supply routes to the largest global markets, where the demand for energy resources is growing.

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Gunay Hasanova is AzerNews’ staff journalist, follow her on Twitter: @gunhasanova

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