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Moscow ceases Turkmen gas purchasing

18 January 2016 11:04 (UTC+04:00)
Moscow ceases Turkmen gas purchasing

Russian Gazprom Export LLC has officially notified the Turkmengaz State Concern about the pre-term unilateral termination of the purchase-sale contract since January 1, 2016, the Turkmen concern reported.

Turkmenistan supplied its gas to Russia via the Central Asia-Center (CAC) pipeline, which was built in the Soviet period and later monopolized by JSC Gazprom. The gas was supplied on the basis of a 25-year contract signed in 2003.

Gazprom was the biggest buyer of Turkmen natural gas until 2009, by acquiring up to 40-42 bcm.

That period Russia was interested in buying cheap Turkmen gas, as it received big dividends by reselling it to the CIS countries and Europe. The Turkmen side has gradually decided to sell natural gas at the reasonable prices of the world market since 2009.

Gazprom Export sharply reduced receiving the Turkmen natural gas in April 2009. According to Ashgabat, this resulted in an explosion on the CAC gas pipeline. Therefore, Turkmen gas supplies were suspended, but resumed in early 2010 in much smaller volumes.

Despite the contractual arrangements, first, the volumes declined up to the level of 10-11 bcm a year for five years. The annual supply volume decreased by 2.5 times and amounted to four bcm in 2015.

Gazprom explained a decrease in the procurement volumes by a decline in demand for Russian gas in Europe and Ukraine. The fixed price on Turkmen gas at $240 per 1,000 cubic meters did not suit the Russian side any more due to the fall in export gas prices in Europe connected to the constantly falling oil prices.

Gazprom filed a suit against Turkmengaz in the Stockholm arbitration court in 2015, demanding to reconsider the contract prices on the gas supply.

After Russia stopped buying gas in early January 2016, Turkmengaz stated its willingness to negotiate with Gazprom Export on a wide range of issues related to the economic ties between the two economic entities.

"The Turkmen enterprises continue cooperating with foreign companies concerning natural gas supply,” the Turkmen state concern said. “They understand that the fundamental partnership principles are the mutual interest and mutual benefit. These important components of cooperation in the gas sector are mainly dependent on the financial and economic situation in the world."

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