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Pipeline explosion reveals Turkmenistan-Gazprom rift

By JOHN C.K. DALY, UPI International Correspondent   |   April 13, 2009 at 7:51 PM   |   Comments

WASHINGTON, April 13 (UPI) -- In the intense international competition for Caspian hydrocarbons that developed after the 1991 collapse of communism, Western interest focused initially on Azerbaijan and Kazakhstan. Turkmenistan was regarded largely as a closed market because of the mercurial policies of its president for life, "Turkmenbashi" or "father of the Turkmen," Saparmurat Niyazov.

Since Niyazov's unexpected death in December 2006, the race to develop Turkmenistan's vast natural gas deposits, estimated to be the world's fourth- or fifth-largest, has intensified under Niyazov's successor, Gurbanguly Berdimuhamedov. Berdimuhamedov's administration has been carefully sifting through myriad proposals not only from Russia's state-owned Gazprom but from American, British, Chinese, Japanese, Indian and Iranian firms and consortia, to name but a few contenders. While Russia had the initial inside track because of its legacy of Soviet-era pipelines, with Turkmenistan's pipeline infrastructure currently exporting 42 billion to 45 billion cubic meters of natural gas to Russia annually, a recent incident has soured relations between Moscow and Ashgabat, indicating that Gazprom's monopoly is not necessarily the last word in Turkmen production.

On April 9 at 1:32 a.m., an as yet unexplained explosion occurred at the 302nd-mile segment of the Truboprovodnaiia sistema Sredniaia Aziia-Tsentr (the Central Asia-Center, or SATS, pipeline system) SATS-4 Davletbat-Daryalik pipeline between the Ilyaly and Deryalyk compressor stations near the Turkmen-Uzbek border, halting Turkmen natural gas exports to Russia. While little concrete information has been released about the incident, in an extraordinary move the following day, Turkmenistan's Foreign Ministry blamed Russia for the pipeline explosion and subsequent conflagration that halted the country's gas supplies to Moscow.

The ministry issued a number of statements about the incident, alleging that Gazprom unilaterally decided on short notice to reduce the amount of gas it takes from Turkmenistan; its export division gave Ashgabat only one day's warning, which wasn't sufficient time for Turkmen specialists to reduce its flow into the pipeline network. The Turkmen Foreign Ministry said, "This accident was caused by a gross unilateral violation by Gazpromexport of the norms and rules of the natural gas sales agreement." A second statement said Gazprom's actions were "rash and irresponsible" and put lives at risk. According to a report by Interfax, Gazprom's unilateral reduction of Turkmen gas was approximately 90 percent to 95 percent.

The Turkmen Foreign Ministry was at pains to make its case laying responsibility for the debacle at Gazprom's door, noting in an April 10 statement, "A letter of Gazpromexport about the decrease of the volumes of taking Turkmen natural gas received by the Turkmen side by the end of the day on April 7 cannot be regarded as a preliminary notification, because on April 8 at 11 a.m. the sharp reduction in the volume of natural gas received by the Russian side began."

Gazprom immediately swung into damage-control mode; Gazprom Management Committee Deputy Chairman Valerii Golubev, attending the fourth annual Russia's Fuel and Energy Complex in the 21st Century forum in Moscow, immediately flew to Turkmenistan to discuss the situation. Before departing Golubev noted that the failure occurred on only one of the four SATS natural gas pipelines supplying Turkmen gas and the other three lines were functioning as usual, while Gazprom's information directorate hastily issued a statement noting that "this failure will not affect gas supplies to Gazprom's customers."

Russia's Foreign Ministry also got involved; on April 10, Foreign Ministry spokesman Igor Lyakin-Frolov told journalists, "We are expecting that all controversial issues related to the accident at a pipeline in Turkmenistan will be settled between Gazprom and the Turkmen side. Our understanding is that it is a technological incident." Less diplomatically, Lyakin-Frolov added, "The Turkmens are somewhat emotional people."

In the wake of Russia's earlier well-known "pipeline politics" with Belarus, Ukraine and Georgia, Russian Foreign Minister Sergei Lavrov was at pains to reject the idea of any political subtext to the incident, telling journalists in Moscow on April 10, "This is purely a technical accident. Specialists are working on it. I expect that all of this will be settled quickly."

Despite Moscow's obvious attempts to shift blame for the incident, Lavrov may well be right, as the Soviet-era SATS natural gas pipeline network is an elderly technological legacy urgently in need of renovation. Gazprom controls the SATS complex of pipelines, which run from Turkmenistan via Uzbekistan and Kazakhstan to Russia. The SATS eastern branch consists of SATS-1, 2, 4 and 5 pipelines, which were built between 1960 and 1988. Construction began after the discovery of Turkmenistan's Dzharkak field, with the first SATS section coming online in 1960, while SATS-4 was commissioned in 1973. In 2003, Niyazov proposed renovating the system, but nothing concrete was accomplished in the wake of his suggestion.

For Moscow, the stakes are immense, as Russian analysts believe that the incident might give Ashgabat further cause to consider Western offers of both state-of-the-art technology and cash to construct new systems. Even worse for Gazprom, declining demand for natural gas during the global recession is savaging Gazprom's profits; last month alone, Gazprom's production fell 24 percent compared with the same period in 2008.

While attempting to decipher Turkmen governmental intentions is an exercise reminiscent of the most arcane musings of Kremlinologists during the depths of the Cold War, for Gazprom some of the handwriting is already on the wall. The day after the explosion, opening a meeting of the Council of Foreign Ministers of the Commonwealth of Independent States in Ashgabat, Berdimuhamedov called for an international meeting on energy-supply stability, saying, "It is important to ensure safe, reliable and stable energy supply both for the producers and to transit countries and consumers, (in light of which Turkmenistan) proposes to begin open and comprehensive dialogue on this issue to work out approaches to operations in the fuel market, create international legal mechanisms and protect the infrastructure."

For Gazprom, the infrastructure comment in light of its SATS management was particularly telling, while the comment on "international legal mechanisms" contained a direct threat to Gazprom's preferred method of direct bilateral business transactions with the government.

In any case, Gazprom will not have long to wait for further insights, as Berdimuhamedov concluded his opening council statement by saying, "We are inviting C.I.S. representatives to take part in a high-level conference on the reliability and stability of fuel supply, which will be held in Ashgabat on April 23-24." If Gazprom is unwilling or unable to guarantee "reliability and stability" for Turkmen natural gas exports, then Ashgabat is hardly bereft of new contenders willing and able to replace Gazprom's stewardship.

© 2009 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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