EU Gas Demand
The European countries strongly rely on natural gas for industrial processes, power generation, and domestic usage. According to the Ten Year Network Development Plan 2017 (TYNDP), overall EU gas consumption remains stable out to 2040. Because of decreasing production, import requirements are projected to grow at about 1 per cent annually under the reference scenario until then.
Especially the gas-based energy generation is anticipated to grow due to its low CO2 emissions which support the EU’s ambitious climate goals. Simultaneously, the inland gas production of the EU is steadily declining. In 2017, gas imports accounted for about 70% of gas consumption in the EU. Production in the EU is expected to drop to 21 per cent of demand by 2030 and 18 per cent by 2040.
With decreasing domestic production, the EU’s import needs will grow. Energy diversification, requiring investments in additional gas transport infrastructure, is crucial for ensuring secure and resilient energy supplies to EU citizens and companies. EU diversification policy gives the Southern Gas Corridor an important role. It based on finding alternative supplies for the EU, including in particular the access to new sources. Turkmenistan is the most significant new source available.
Note that the Asia-Pacific region becomes the largest importer as gas demand doubles by 2040, while production there grows and then levels off and declines. The Russia/Caspian region becomes the leading gas-export region, as North America’s unconventional production grows but relatively little is exported. Worldwide gas consumption will increase while Asia’s demand grows faster than Europe’s. China has already recognized the potential of Caspian gas reserves.
Turkmenistan’s Gas Potential
According to the conservative BP Statistical Review (2017, p. 26), Turkmenistan’s gas reservoirs held 17.5 trillion cubic metres (Tcm) of proved natural gas reserves at the end of 2015, equivalent to almost 10 per cent of worldwide reserve and more than half of the amount of the Russian Federation. However, according to estimates by Gaffney, Cline & Associates, the reserves of the Galkynysh field together with neighbouring Yashlar by themselves represent nearly 14 Tcm and could amount to over 26 Tcm of natural gas. This does not take into account still other gasfields, such as Garakel and Bagli discovered in 2015, or established fields such as Dauletabad, Yashlar and Minara. It is likely that accelerated programme of exploratory drilling and advanced seismic studies that is now under way, will disclose still further quantities.
All the above-named gasfields are connected to supply the recently completed the East-West Pipeline (EWP) inside Turkmenistan. This pipeline runs up to the country’s Caspian Sea coast, was completed in 2015 and is now filled with gas awaiting sale and export. The EWP is capable of transporting 30 billion cubic metres per year (bcm/y), and the domestic pipeline connections within Turkmenistan guarantee its security of supply.
As a result of engineering completed early in the present decade, Turkmenstan’s gas transmission system gathers all major production volumes together and is able to direct any quantity in any direction. In particular, it transmits gas from the production sites in the country’s southeast to the shore of the Caspian Sea. The domestic gas network thus permits sale of Turkmen gas at the national border there, as is national policy.
The production system is extremely reliable. It is estimated that Turkmenistan could easily export even three times its annual exports to China if pipelines were built in two other directions (such as TCP and the TAPI to India). There is no doubt that Turkmenistan would increase its production if it had the opportunity to export gas to the EU. The overall production level is still very low compared to what its potential.
The Value of Turkmen gas for the EU
East Caspian and particularly Turkmen gas has been in the focus of the EU’s gas supply diversification strategy for almost a decade now. Despite the changing energy market and emerging new opportunities, Turkmen gas still remains the best possibility among all available supply sources capable of having a significant effect on energy prices while at the same time enabling the EU to curb carbon emissions in an important and economically justifiable way.
Turkmenistan’s Galkynysh field is comparable in size and economics of extraction with Qatari-Iranian structure in the Gulf. According to Gaffney Cline, it is the world’s second largest gasfield. The first phase of development of the Galkynysh field, with a capacity of roughly 30 bcm/y, was drilled in just 3 years’ time. It started commercial production in summer 2013. Production on several other developed fields is at present constrained currently by the lack of an accessible market.
Turkmen gas would increase competition would simultaneously stimulate gas market growth. Predictable, non-volatile and competitive prices together with reliability of supply will make gas a better product, increasing trust in gas. As a result, gas will more and more prevail fuel-to-fuel competition, with benefits in carbon emission. Gasification of new areas will be stimulated, and new consumers will emerge. An increased gas market will also help such other suppliers as Azerbaijan, Russia and in future possibly Ukraine if it starts production for export.
Turkmen gas correctly appears to be a unique opportunity, in terms of both size and timing of potential supply, and also in terms of the price of gas delivered into the EU. Hence, European interest in opening the Turkmen gas trade matches the natural interest of East Caspian suppliers, who do not wish to miss the opportunity of establishing the most predictable and beneficial trade partnership available.