Russia’s Gazprom Export stops arbitration procedure with Turkmenistan’s Turkmengas

By Trend

Russia’s Gazprom Export LLC and Turkmenistan’s Turkmengas State Concern signed an agreement on termination of arbitration procedures in early 2019, Trend reports referring to the Russian company’s quarterly report.

The corresponding notification was sent to the arbitral tribunal. The matter rests in a lawsuit filed by Gazprom Export in June 2005 against Turkmengas State Concern to the Arbitration Institute of the Stockholm Chamber of Commerce, in which a proposal was made to revise the price for the Turkmen gas.

Turkmenistan resumed the export of natural gas to Russia on April 15, 2019, after a three-year break. Gazprom company intends to purchase up to 1.155 billion cubic meters of natural gas from Turkmenistan till June 30, 2019.

The cost of the new transaction is unknown. Turkmenistan transports its gas to Russia via the Central Asia-Center pipeline, built during the Soviet period and monopolized by Gazprom. Until 2009, Gazprom was the biggest buyer of Turkmen gas, purchasing up to 40-42 billion cubic meters a year.

During that period, the Kremlin was interested in purchasing cheap Turkmen gas, as it received big dividends, reselling this raw material to the CIS countries and Europe. Since 2009, the Turkmen side has decided to gradually sell its fuel at reasonable prices of the world market.

Gazprom Export LLC sharply reduced the volume of gas purchased from Turkmenistan in April 2009. According to Ashgabat, this led to the explosion in the Central Asia-Center pipeline, and supplies were suspended. The supplies were resumed only in early 2010, but in much smaller volumes.

Despite the contractual arrangements, at first the volumes decreased to the level of 10-11 billion cubic meters per year within five years. The annual volume decreased by 2.5 times and amounted to four billion cubic meters in 2015.

Gazprom explained the decrease in the volume of gas purchased from Turkmenistan by a decrease in demand in Europe and Ukraine. The Russian side was not pleased with the price for Turkmen gas set at $240 per 1,000 cubic meters due to the fall in export prices for gas which are constantly connected with falling oil prices.

In early January 2016, after the cessation of gas purchases from Russia, Turkmengas voiced its readiness to hold talks with Gazprom Export LLC on a wide range of issues related to the economic ties between the two economic entities.

"The Turkmen enterprises continue to cooperate with foreign companies in the supply of natural gas, realizing that the basic principles of partnership are mutual interest and mutual benefit and taking into account the fact that these important components of interaction in the gas sector mainly depend on financial and economic situation in the world," the report says.

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