by Roman Kupchinsky
Russia’s Gazprom and Turkmenistan’s state-owned gas company, Turkmengaz, were reported to have begun negotiations today on changing the terms of the gas purchase contract signed last December. Russia is proposing that the contract be a “take or pay” contract, linked to the price of oil and not the annual fixed price as was agreed upon in December.
Gas sales from Turkmenistan to Russia were suspended in April when a conflict broke out between the two countries over a pipeline blast caused by a change of pressure in the pipe. Turkmenistan blamed Gazprom Export for not notifying Turkmen authorities that it had stopped receiving gas. The Russian side rejected the charges and gas stopped flowing to Russia.
The conflict grew when the Turkmen side decided not to automatically award Gazprom a contract for the construction of the East-West pipeline and clinched a deal with China to develop the on-shore part of the giant Yolotan gas field.
At the heart of the dispute is the pricing mechanism agreed upon in the December 31, 2008 contract. Gazprom, according to Russian Prime Minister Vladimir Putin, agreed to pay Turkmenistan a fixed rate of $340 (which includes transit fees) for 1,000 cubic meters throughout 2009.
However, a few days later Putin and Gazprom insisted that Ukraine pay Gazprom on the basis of a take or pay contract linked to the price of oil. Why Turkmenistan was given a fixed price is difficult to say. Furthermore the terms of the December 2008 contract with Turkmenistan were never made public.
In the first quarter of 2009 Gazprom paid Ashgabat $300 per 1,000 cubic meters of gas. If a take or pay pricing method is agreed upon, Gazprom will pay Turkmengaz $220 in the third quarter and $160 in the fourth quarter of 2009.
A number of factors might have played a role in bringing Gazprom and Turkmenistan back to the negotiating table. When Turkmen gas ceased going to Russia in April, Turkmenistan, which has no other significant customers for its gas or export routes, was forced to cap some bore holes or flare off the gas, losing millions of dollars.
Russia, on the other hand, is faced with lower demand in Europe and Ukraine; however, the different opaque gas middlemen schemes Gazprom Export has created in Europe, like Gazprom Germania, rely on Central Asian gas supplies to sell to their customers. These schemes cannot continue siphoning off Russian gas without that gas being replaced by gas from Central Asia.
The Gazprom Germania website states: “The main focus of our business activities is on marketing natural gas of Russian and Central Asian origin in Western and Central Europe.”
The other question which needs to be resolved during the new negotiations is the volume of gas that Russia will buy from Turkmenistan in 2009. The earlier number of some 40 billion cubic meters, is now unrealistic and Gazprom will most likely insist on a far lower amount.
Showing posts with label Gazprom Germania. Show all posts
Showing posts with label Gazprom Germania. Show all posts
Tuesday, June 23, 2009
Wednesday, June 3, 2009
Turkmen-Russian Gas Relations Continue to Sour
by Roman Kupchinsky
Compounding Russia’s ongoing problems with its European and C.I.S. gas clients is the geopolitically sensitive case of Turkmenistan. On June 2, 2009 The Moscow Times reported that Gazprom demanded that this prime Central Asian gas producing country either slash the price of gas it sells or reduce the volume it ships to Gazprom. The reason for the request was that Gazprom had no immediate need for expensive Turkmen gas at a time when its own exports had dramatically decreased due to depressed Ukrainian and E.U. demand for gas.
The Turkmenistan conundrum has placed the Russian government in a dire squeeze. It exposes the total failure of Russian Prime Minister Vladimir Putin’s strategy to maintain total control over Turkmen gas production which was meant to: A.) Supplement declining gas production in Russia; B.) Prevent Turkmenistan from supplying gas to the Nabucco pipeline.
The announcement was made by Valery Golubev, a former KGB agent who is now a deputy director of Gazprom responsible for sales to C.I.S. countries. Golubev stated: "Since Europe is not taking the gas anymore, we said, 'Dear colleagues, there is no market for your gas at such a price.” But it was Putin who in late December 2008 announced that he had made a deal with Turkmen President Gurbanguly Berdymukhammedov to buy Turkmen gas at “world prices.” Did Putin grossly miscalculate the demand for Turkmen gas or was he guided by other, more personal motives? It is well known that Turkmen gas was sold on the European market not only by the discredited company RosUkrEnergo, but also by various subsidiary companies of Gazprom Germania, Centrex and other Gazprom-affiliated intermediaries.
Golubev, speaking in the Urals city of Chelyabinsk, reminded Turkmenistan that they have no choice but to ship their most valuable export through Russia since no other pipeline routes exist, at least not for the next five years.
"There are no alternatives. Gas to Europe can be supplied from Turkmenistan mainly through the Central Asia-Center gas pipeline system," he said, the news agency reported.
A Turkmen official said last week that if talks failed, it could take Russia to the International Court of Arbitration. Presumably the Turkmen government would attempt to prove that Gazprom was not meeting its obligations under a “take or pay” contract signed with Turkmenistan. However, the contract between Turkmenistan and Russia has not been made public and it is not clear what the payment terms were.
At the same time Gazprom kept insisting that Ukraine meet the terms of its “take or pay contract” and while Putin was forced in mid-May 2009 to forego penalizing Ukraine for not meeting its contractual commitments it remains unclear if this a tactical move to give his pro-Russian friends in Kyiv room to maneuver and win the upcoming presidential elections or was it a slight of hand to cover-up his inept handling of the gas purchase agreement with Turkmenistan in December 2008?
Compounding Russia’s ongoing problems with its European and C.I.S. gas clients is the geopolitically sensitive case of Turkmenistan. On June 2, 2009 The Moscow Times reported that Gazprom demanded that this prime Central Asian gas producing country either slash the price of gas it sells or reduce the volume it ships to Gazprom. The reason for the request was that Gazprom had no immediate need for expensive Turkmen gas at a time when its own exports had dramatically decreased due to depressed Ukrainian and E.U. demand for gas.
The Turkmenistan conundrum has placed the Russian government in a dire squeeze. It exposes the total failure of Russian Prime Minister Vladimir Putin’s strategy to maintain total control over Turkmen gas production which was meant to: A.) Supplement declining gas production in Russia; B.) Prevent Turkmenistan from supplying gas to the Nabucco pipeline.
The announcement was made by Valery Golubev, a former KGB agent who is now a deputy director of Gazprom responsible for sales to C.I.S. countries. Golubev stated: "Since Europe is not taking the gas anymore, we said, 'Dear colleagues, there is no market for your gas at such a price.” But it was Putin who in late December 2008 announced that he had made a deal with Turkmen President Gurbanguly Berdymukhammedov to buy Turkmen gas at “world prices.” Did Putin grossly miscalculate the demand for Turkmen gas or was he guided by other, more personal motives? It is well known that Turkmen gas was sold on the European market not only by the discredited company RosUkrEnergo, but also by various subsidiary companies of Gazprom Germania, Centrex and other Gazprom-affiliated intermediaries.
Golubev, speaking in the Urals city of Chelyabinsk, reminded Turkmenistan that they have no choice but to ship their most valuable export through Russia since no other pipeline routes exist, at least not for the next five years.
"There are no alternatives. Gas to Europe can be supplied from Turkmenistan mainly through the Central Asia-Center gas pipeline system," he said, the news agency reported.
A Turkmen official said last week that if talks failed, it could take Russia to the International Court of Arbitration. Presumably the Turkmen government would attempt to prove that Gazprom was not meeting its obligations under a “take or pay” contract signed with Turkmenistan. However, the contract between Turkmenistan and Russia has not been made public and it is not clear what the payment terms were.
At the same time Gazprom kept insisting that Ukraine meet the terms of its “take or pay contract” and while Putin was forced in mid-May 2009 to forego penalizing Ukraine for not meeting its contractual commitments it remains unclear if this a tactical move to give his pro-Russian friends in Kyiv room to maneuver and win the upcoming presidential elections or was it a slight of hand to cover-up his inept handling of the gas purchase agreement with Turkmenistan in December 2008?
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