April 9, 2009 / 7:45 AM / 10 years ago

UPDATE 4-Pipeline blast halts Turkmen gas exports to Russia

* Pipeline blast halts Turkmen gas exports to Russia

* Turkmenistan blames Russia for accident

* Analyst say Gazprom’s exports to benefit from blast (Adds Miller statement)

By Marat Gurt and Olzhas Auyezov

MOSCOW/ALMATY, April 9 (Reuters) - A pipeline blast in Turkmenistan on Thursday fully halted Turkmen gas exports to Russia, which said the accident would have no impact on its customers in Europe.

Turkmenistan, however, in a burst of undiplomatic language, blamed Russia for the pipeline disruption, saying Russia’s gas export monopoly Gazprom (GAZP.MM) had “irresponsibly” cut imports of gas and caused the accident.

Gazprom declined immediate comment on the accusation, while analysts were sceptical that low imports could have caused the explosion.

Gazprom’s CEO Alexei Miller, who made a statement to reporters in the Kazakh commercial capital Almaty, did not mentioned the accident, but stressed the importance of cooperation with Turkmenistan.

“(Turkmenistan) is our strategic partner in the gas sector, with whom we are linked by many years of fruitful cooperation,” Miller said in a clear move to ease the looming stand-off. “We are sure that in future this cooperation will only strengthen.”

Miller said that new gas transport facilities will be created as a part of the Caspian pipeline, planned by Russia, Turkmenistan, Kazakhstan and Uzbekistan to increase volumes of Turkmen gas export through Russia.

“They will contribute to enhancing the reliablitiy of gas export from Turkmenistan,” he said. “This is a common goal of Gazprom and our partners in Central Asia.”

Former Soviet republic Turkmenistan is the biggest gas producer in Central Asia and Gazprom buys up to 50 billion cubic metres of its gas a year to meet its export obligations and demand at home.

Turkmenistan’s foreign ministry said in a statement Gazprom cut gas imports on April 8 without warning its government in the capital of Ashgabat.

“Such actions by Gazprom Export are ill considered and irresponsible because it created a real threat to peoples’ lives and health and can lead to unpredictable ecological consequences,” the ministry said.

“Such an approach (low gas imports) is a unilateral, rude violation of the terms of the take-or-pay gas supply contract,” the ministry said in an unusually harsh statement. Gazprom is a state controlled firm and Turkmenistan has repeatedly called Moscow one of its most important strategic partners.

SCEPTICISM

Analysts said Gazprom would benefit from a halt of Turkmen gas flows at a time when it is suffering from a gas demand slump in Europe, but poured cold water on Turkmenistan’s accusation.

Mikhail Korchemkin from East European Gas Analysis think-tank said he doubted low pressure could have caused the blast, a view supported by engineers at a European gas network operator.

“Pipelines do not explode from low pressure. In January, Russia fully cut gas to Ukraine, but there was no explosion,” Korchemkin said.

“Gazprom doesn’t need Turkmen gas now because its re-exports cut Gazprom’s profits while exports of its own gas can bring a profit of 60-70 percent. Gazprom will be able to export an extra 200 million cubic metres a day of its own gas instead of Turkmen gas. It is good news for Gazprom,” he said.

An industry source in Kazakhstan said repairs could take up to three days.

“In terms of what it means for Central Asia and Russia, it depends how long that pipeline is down for,” Noel Tomnay, principal gas analyst at consultants Wood Mackenzie said.

“If it was to be a prolonged outage then Russia could benefit financially on the basis that they would then be able to export more of their own gas.”

Gazprom normally cannot meet both its export obligations and peak demand at home without the Turkmen gas but at present it faces a slump in demand in Russia and Europe. [ID:nL9960893]

On Thursday, it said its output would fall 12 percent this year and stay at low levels for a few more years, while oil firms, such as LUKOIL (LKOH.MM), have said Gazprom had asked them to trim production of gas in Russia [ID:nL958178]

The blast was the second major accident on the territory of the former Soviet Union this month. A pipeline explosion in Moldova, attributed to the age of the infrastructure across large stretches of the former Soviet Union, reduced deliveries of Russian gas to Romania, Bulgaria and Turkey.

Korchemkin said the damaged Turkmen pipeline was built in 1975. Turkmen gas goes through a pipeline via Uzbekistan and Kazakhstan, both of which also supply smaller amounts, before reaching Russia.

European markets, which receive a fifth of their gas from Russia via Ukraine, have been uneasily watching a long-running dispute between Gazprom and Kiev that led to supply interruptions to Europe early this year. [ID:nL7629506] (Reporting by Marat Gurt, Dmitry Zhdannikov, Olzhas Auyezov, Katya Golubkova; additional reporting by Daniel Fineren; Editing by Keiron Henderson)

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