November 17, 2011 / 11:58 AM / 6 years ago

Turkmenistan to seek partners to build EU gas link

5 Min Read

* State gas company in talks with international firms

* Plans to construct 800 km pipeline to Caspian coast

* Azerbaijan, EU reiterate support for trans-Caspian link

* Russia against politicization of gas market

By Marat Gurt

ASHGABAT, Nov 17 (Reuters) - Turkmenistan is in talks with international companies to assist in construction of a cross-country pipeline to pump gas from the world's second-biggest field to the gateway of a potential new supply route to Europe, a senior official said on Thursday.

Amanali Khanalyev, chairman of state gas firm Turkmengaz, said a new pipeline system would enable the Central Asian state to supply 30 billion cubic metres (bcm) of natural gas annually toward Europe along a route that would bypass Russia.

The proposed 800 km (500 mile) "East-West" pipeline would take gas from the hugely prospective South Iolotan field to the shore of the Caspian Sea. There, it would join a European Union-backed undersea supply route to Azerbaijan and beyond.

Turkmenistan, a reclusive former Soviet republic of 5.4 million, holds the world's fourth-largest natural gas reserves, according to BP data, and is seeking to diversify supply routes to energy-hungry markets in Europe and Asia.

While estimates of its gas reserves have grown substantially in recent years, international energy majors are frustrated at the absence of any big deals and question whether the country alone can finance its many ambitious projects.

Khanalyev told an industry conference that Turkmengaz and energy-focused construction firm Turkmenneftegazstroi were already building separate sections of the "East-West" pipeline.

"We are also conducting negotiations with a host of international companies that have the requisite experience, technical capability and the means for raising finance to fulfil construction work on separate sections of the pipeline," he said.

At the eastern end of the proposed route lies South Iolotan, a field ranked by auditor Gaffney, Cline & Associates as second in size only to South Pars in Iran. It could hold 13.1 trillion to 21.2 trillion cubic metres, GCA said.

The western terminus would be the Caspian Sea. Turkmenistan and Azerbaijan have agreed in principle, with support from the European Union, to lay a pipeline under the sea to connect into the proposed "Southern Corridor" supply network to Europe.

Pipeline Politics

The route is attractive to European states that rely on Russia for a large proportion of their gas supplies. Moscow has opposed the plans, saying that all five Caspian Sea littoral states -- including Russia -- should approve such a project.

"Russia is not speaking out against the Southern Corridor, Nabucco or other EU projects," said Vladimir Lapikov, adviser to Russia's energy minister.

"Russia is speaking out against the gas market's unnecessary and over-politicised focus on energy security and market liberalisation to the detriment of the more fundamental problems of long-term energy supply and the environment," he said.

A day earlier, in a show of U.S. support for the project, Daniel Stein, senior adviser to the State Department's office of the special envoy for Eurasian energy, said that no country had "veto power" over a Turkmen-Azeri pipeline agreement.

Tofig Gahramanov, vice-president of strategic development for Azeri state energy company SOCAR, told the conference that Azerbaijan and Turkmenistan had similar thoughts on the plan.

"Namely, this means providing diversification and versatility for our export potential," he said. "Azerbaijan guarantees it will make its territory fully available for transit and infrastructure to put this project into effect."

Turkmen gas is keenly sought by investors in the Nabucco pipeline project, which envisages annual supplies of 33 bcm along a 3,000 km (1,875 mile) route.

Though EU Energy Commissioner Guenther Oettinger said on Nov. 4 that the 10 billion euro Nabucco project was not cheap in the middle of the euro zone's debt crisis, he said the project was well-founded and could be made bankable.

Brigitte Bichler, senior project manager for Nabucco at Austrian energy group and Nabucco shareholder OMV, said 2012 would be a decisive year for the Southern Corridor.

"The finalisation of a framework support agreement between Turkmenistan, Azerbaijan and the EU will be decisive and will trigger all further decisions," she said.

She said the trans-Caspian pipeline was "legally feasible" and "commercially under evaluation". A feasibility study for the project will be initiated as soon as possible, she said.

As well as OMV, shareholders in Nabucco include Germany's RWE, Hungary's MOL, Turkey's Botas, BEH of Bulgaria and Romania's Transgaz. (Writing by Robin Paxton, editing by Jane Baird)

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