A big shift is brewing for Caspian Basin energy exports. In a diplomatic about-face, Turkmenistan has signaled its readiness to develop a Trans-Caspian pipeline that potentially could increase natural gas deliveries to the European Union. 

The westward shift in Ashgabat’s export intentions is not expected to impact Turkmenistan’s ability to fulfill existing exportcommitments to China. The Central Asian state is believed to have more than enough reserves to send large volumes of gas eastward and westward.  The Turkmen announcement, however, could potentially eat into Russia’s share of the gas-export pie, depriving the Kremlin of revenue it needs to sustain its war effort in Ukraine.

Turkmenistan had long remained ambiguous about Trans-Caspian pipeline plans. But in late July, Turkmen officials got off the fence. In a convoluted statement issued by the Turkmen Foreign Ministry, Ashgabat sent a clear signal of support for a Trans-Caspian pipeline.

Specifically, the ministry announced that “Turkmenistan, being committed to the strategy of diversifying energy flows, expresses its readiness to continue cooperation with partners in the implementation of the Trans-Caspian pipeline project.”

The ministry added that it is “convinced that there are no political, economic, financial factors hindering the construction” of a Trans-Caspian pipeline and that the 2018 Convention on the Legal Status of the Caspian Sea provides an adequate legal basis for such a project. 

“The Trans-Caspian pipeline is an absolutely realistic project, justified from an economic point of view, capable of making a tangible contribution to ensuring energy security in Eurasia, providing long-term and uninterrupted access to sources of raw materials for European consumers,” the ministry statement added.

A few days after the statement’s publication, a Turkmen envoy met with EU Commission head Ursula von der Leyen, expressing Turkmenistan’s readiness to “develop effective cooperation between Turkmenistan and the EU.” The statement provided additional evidence of Ashgabat’s diplomatic shift.

If a pipeline for Europe-bound exports is built, Turkmenistan stands to capture some of Russia’s European gas markets and/or replace Russian exports to Turkey. Russia currently provides around 40 percent of Turkey’s gas needs.

Previous Trans-Caspian projects envisaged pipelines that could supply 32 bcm annually. Any new construction initiative would likely aim for that export target at first. The longer the Russia-Ukraine war drags on, the more likely that either a larger pipeline gets built, or additional parallel pipelines are laid. Of course, the sabotage of the NordStream pipelines showed that underwater offshore pipelines are vulnerable to disruption. Thus, there will be a considerable amount of risk involved in any Trans-Caspian project.

For now, regional observers are hailing Turkmenistan’s change in course. 

“The fact that the Turkmen now concede that the Caspian delimitation agreement DOES permit pipelines between two countries is a major step forward,” said Allan Mustard, former US ambassador to Turkmenistan, describing the shift as “a significant reversal.” 

Mustard is a co-founder of TransCaspianResources, a US based company which has been promoting a project for a short pipeline in the middle of the Caspian to transit gas currently flared from a Turkmen oil field to Azerbaijan. It’s unclear whether Ashgabat’s announcement could catalyze that project, or whether the Turkmen government is more focused on developing a major pipeline to transit gas from its main onshore gas fields all the way to Europe. 

With estimated gas reserves of between 10-14 trillion cubic metres – the fifth largest on the planet – interest in transiting Turkmen gas across the Caspian Sea, and through Georgia and Turkey to Europe, is not new.

However, previous attempts at developing pipeline projects since the late 1990s all stumbled due to a combination of factors, including the discovery of significant gas reserves in Azerbaijan‘ssector of the Caspian, and Russia’s aggressive expansion of its own gas export infrastructure in an effort to freeze out potential competition.

Now thanks to Russia’s invasion of Ukraine Turkmenistan’s huge gas reserves are enjoying what the ministry statement accurately described as a “sudden manifestation of interest”, and not without cause. The 175 billion cubic meters (bcm) a year of gas that Russia was supplying prior to the invasion has been cut, causing gas and power prices across Europe to climb to unprecedented levels.

The appetite in Europe for Turkmen gas remains strong. An agreement between Azerbaijan and the European Union should see the volume of Azeri gas flowing to Europe doubling to 20 billion cubic meters a year by 2027. But that amounts to less than 12 percent of the lost Russian gas. 

Whether Baku can deliver such volume to the EU remains uncertain, with questions still being asked over whether Azerbaijan can boost production sufficiently to meet growing domestic demand, while honoring existing export commitments and its promise to Brussels.

Gas from Turkmenistan could help Azerbaijan meet its 20 bcm/yr commitment, and potentially double or even triple that volume. 

And the signs are that it’s not just EU member states that are interested. On May 25, Turkey’s energy regulator EPDK issued another 10-year import license to Turkey’s state gas importer Botas for importing gas from Turkmenistan, the second time that license has been renewed. The license relates to a contract to import 16 bcm/yr of Turkmen gas, signed in the late 1990s on the expectation that a pipeline would be built.

That didn’t happen but Ankara has continued to maintain that the contract remains valid. 

Even with the green light from Ashgabat, the question remains: who wants to finance the pipeline’s construction, a project sure to cost billions of dollars? Speaking in May, Azerbaijan’s president Ilham Aliyev confirmed that Baku would be happy to transit Turkmen gas, but would not help fund any pipelines and called on the companies developing Turkmenistan’s gas fields, international investors and the gas buyers in Europe interested in taking the gas to arrange financing. 

One company whose name has been mentioned as a possible investor is Abu Dhabi National Oil Company (ADNOC). The company has been active in Turkmenistan’s hydrocarbon extraction, refining, and trading for around 15 years, has cash on hand and is looking to further expand its investments outside the Emirates.

On August 4, ADNOC announced that it was taking a 30 percent stake in Azerbaijan’s Absheron gas field, a move which signals an intention to becoming a player in the development of Caspian gas reserves and potentially involved in discussions on a Trans-Caspian pipeline.