NUR-SULTAN, Kazakhstan – Although some significant legal obstructions have been removed after the Caspian Sea agreement was signed last year, it is close to impossible to see how the economics of exporting Turkmen gas to Europe via a Trans-Caspian-Pipeline could work, energy experts told New Europe, adding that this would also apply to Kazakhstan, and indeed Nur-Sultan is focusing on two other export markets, Russia and China.

The Convention on the legal status of the Caspian Sea treaty was signed at the Fifth Caspian Summit in Aktau, Kazakhstan, on 12 August 2018 ending more than two decades of negotiations after Russia, Iran, Azerbaijan, Kazakhstan and Turkmenistan – all bordering the Caspian Sea – agreed in principle on how to divide it up.

But Simon Pirani, a senior visiting research fellow at the Oxford Institute for Energy Studies, told New Europe by phone on 4 June that the 2018 agreement about the Caspian Sea between the littoral states did clarify the legal status of the Caspian. “But that does not change, first of all, the export policy of Turkmenistan, which is that it traditionally sold gas at the border of the country and has not participated in any export pipeline projects.

To some extent that approach now seems to have been departed from with the TAPI pipeline, Turkmenistan-Afghanistan-Pakistan-India, but in fact there’s very little progress on that pipeline as well,” Pirani said, adding that there’s no reason to expect that Turkmenistan is going to initiate a Trans-Caspian-Pipeline.

“And the second point is that even if some other coordinating force were found for such an international project, as far as I can see the economics of exporting Turkmen gas to Europe through a Trans-Caspian pipeline just do not make any sense,” Pirani said, explaining that economists forecast that the transport costs are going to be higher than Azeri gas, which itself struggles to compete with Russian gas, and liquefied natural gas (LNG) from a range of sources in the European market and nothing has changed since last year in that respect. “Well, the one thing that has changed that Turkmenistan has re-opened its export route to Russia and has signed contracts for very small volumes.”

Caspian Energy Expert Marika Karayianni also opined that the “actual realization of the Trans-Caspian-Pipeline is not considered likely in the imminent future.” She told New Europe on 6 June that China is the main customer of Turkmen gas and the Turkmen leadership is also focusing on the “swift realization” of the TAPI pipeline. Also, another major development has been the resumption of Turkmen gas sales to Russia.

Meanwhile, Katja Yafimava, a senior research fellow at the Oxford Institute for Energy Studies, told New Europe on 4 June that the commercial gas price environment in the 2020s would not be supportive for justifying an investment in construction of Trans-Caspian pipeline, but it is possible that some Caspian gas could make it into Europe via Russia using the existing infrastructure.

Pirani referred to a paper that he published last year noting that if one believed that a Trans-Caspian Pipeline was likely it would be important to compare the cost of moving Turkmen gas through the Tran-Caspian-Pipeline to Europe and moving it through Russia to Europe.

“That’s not because I believe that large volumes of Turkmen gas are going to be transported in the near future through Russia to Europe but it’s because if there was serious prospect of Turkmen gas reaching Europe, we would have to ask ourselves why it could not travel through these existing pipelines rather than a Trans-Caspian-Pipeline which does not yet exist,” Pirani said.

He also argued that Russia and China are the likely markets for Kazakh gas. The Beineu-Shymkent Gas Pipeline is now finished and there has been some upgrading of Kazakhstan’s gas transport infrastructure in the southeast where most of Kazakhstan’s population is. This would suggest that Kazakhstan is hoping to increase exports to China, added Pirani.

“That would make sense economically, the infrastructure exists and China has a need for the gas. So again if we want to talk about Kazakhstan’s gas export potential over the next few years, it’s first of all to Russia, where it has been exporting gas for very long time, it’s secondly in very small amounts to some of its neighbouring countries in Central Asia although I think that may change but thirdly, and probably most significantly for Kazakhstan, it’s exports to China,” said Pirani, adding, “So why Kazakhstan would want to go to the very great political and diplomatic difficulty of finding a way to get gas into a Trans-Caspian pipeline, which does not exist yet, I don’t know.”

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