Oil and Gas

UPDATE 2-Russia resumes Turkmen gas imports, slashes volumes

* Russia to import 30 bcm a year of Turkmen gas

* Supplies to restart in Jan 2010

* Volumes smaller than in old deals

* Pipeline, production projects under discussion

(Adds details, quotes, background)

By Denis Dyomkin

ASHGABAT, Dec 22 (Reuters) - Russia will resume Turkmen gas imports next year at less than half the volumes agreed in deals before a supply dispute between the ex-Soviet states prompted Ashgabat to develop new markets in China and Iran.

Gazprom GAZP.MM, Russia's state-run gas export monopoly, agreed on Tuesday to import up to 30 billion cubic metres of Turkmen gas under a long-term deal and said the two countries could also co-operate on a new pipeline and production ventures.

But the annual volumes are below the 50 bcm that Gazprom was buying annually before the dispute and also below some 70-80 bcm agreed in a long-term deal earlier this decade.

Turkmenistan, holder of the world’s fourth-largest natural gas reserves, has since moved out of Moscow’s shadow with deals to supply energy to China and Iran.

“If you deny a country like Turkmenistan access, then sooner or later they will find ways to circumvent your territory. It was important for Russia to bring Turkmenistan into the fold,” said Alfa-Bank senior oil and gas analyst Chirvani Abdoullaev.

Turkmenistan, long dependent on Russian gas purchases, accused Moscow in April of suspending gas imports at a time when demand for gas nosedived in Europe, and stepped up diplomacy to clinch alternative gas export routes elsewhere. [ID:nLA398737]

Alongside oil and cotton, natural gas represents the lion’s share of Turkmen budget revenues, bringing in up to $1 billion per month. The suspension encouraged Turkmenistan to open a new gas pipeline to China this month and develop contacts with Iran.

Gazprom initially blamed an explosion on a key pipeline for the halt, but later said Ashgabat should understand that it cannot sell the same volumes when demand in Europe is falling.

“We plan to start supplies starting from Jan. 1, but no later than Jan. 10,” Gazprom Deputy Chief Executive Alexander Medvedev told reporters on Tuesday. He did not specify volumes for 2010 or the price that Russia would pay.

The Russian delegation to Ashgabat was headed by President Dmitry Medvedev, who was meeting Turkmen leader Kurbanguly Berdymukhamedov for the third time in as many months in an attempt to solve the gas supply row.

“I consider this a step forward,” President Medvedev said after the gas deal was agreed.

Berdymukhamedov told reporters: “Our meeting with the president confirmed our mutual readiness and desire to increase cooperation.”


Lying on some of the world’s biggest oil, gas and metals reserves, Central Asia is now at the centre of a geopolitical tug-of-war between Russia, China and the West, all seeking to grab a share of its untapped riches. [ID:nLDE5BD04Y]

Turkmenistan aims to boost gas production to 100 bcm in 2010 from around 75 bcm in 2009 but the country has repeatedly failed to achieve its aggressive output targets in previous years.

China’s foray into the region, including a 1,833-km (1,139-mile) pipeline with capacity to pump 40 bcm of gas eastward by 2012-2013, represents a challenge to Russia, which sees the region as part of its Soviet-era sphere of influence.

Russia made a further play for a share of its market when the two sides discussed various deals, including a new pipeline.

“There is the prospect of constructing a new gas pipeline, across Turkmenistan and further into Europe,” Medvedev, the Gazprom deputy chief executive, said.

“We also see the prospect of co-operation in exploration and production of oil and gas in the Turkmen zone of the Caspian shelf.” Deputy Prime Minister Igor Sechin, Russia’s foremost energy official, said cooperation could extend into many other spheres.

“There is a colossal number of projects, in shipbuilding, aircraft building, machine building as a whole,” Sechin said.

“Ahead lie the realisation of projects and the examination of proposals in gas and chemicals, fertilisers, electricity, the power grid,” he added. (Additional reporting by Robin Paxton, writing by Dmitry Zhdannikov and Robin Paxton; Editing by Keiron Henderson)