Natural gas production figures released this week showed
that output from Gazprom, the Russian near-monopoly, was down
35% year-on-year in the first week in May, as Russia and
Turkmenistan haggle over how to share the gigantic losses
caused by the recession.
The figures, published by Interfax citing Russias gas
dispatching service, are even grimmer than those for the first
quarter (year-on-year cuts of 14.8% for the Russian industry as
a whole, and 18% for Gazprom) and April (23% and 28%
A steep decline in gas demand in European and CIS
export markets as well as from Russian industry is the
main cause of production cuts. In the first quarter, Russian
gas exports were just 56.4% of their level in the first quarter
The most drastic reduction was in exports to Ukraine, which
ran at less than one fifth of their normal level, because of
the January gas dispute and Kievs subsequent efforts to
substitute gas from storage for expensive imported volumes.
The unprecedented decline in demand has exacerbated tensions
between Russia and Turkmenistan, the second largest former
Soviet gas producer. Russia buys most of Turkmenistans
output to supplement its own gas balance, while the central
Asian republic relies on the revenues for most of its national
Russian imports from Turkmenistan were briefly halted last
month after an explosion on the main pipeline linking the
countries. Although no information on import volumes is
published, researchers believe that even after the damage was
repaired, imports have been restored at greatly reduced
Tatiana Mitrova, head of the Centre for International Energy
Market Studies at the Russian Academy of Sciences Energy
Research Institute, said: The balance of interests
between Russia, Turkmenistan and the consuming countries has
always been based on the assumption that demand would increase
This is the first time in the post-Soviet era that
there has been such a reduction in demand, particularly in
Europe. Now Turkmenistan and Russia are trying to reach a
consensus on how to share the losses. Both prices and
volumes of imports are under discussion, she expects.
Turkmenistans single major gas export route is the one
to Russia, and its principal bargaining chip is to establish
new routes. The furthest advanced scheme is the construction of
a new pipeline to China, expected to be completed next
This years clash with Russia has also resulted in
renewed Turkmen overtures to possible European customers,
despite long-mooted plans to take gas to Europe via the
so-called southern corridor being notoriously
expensive and politically difficult.
In April Turkmenistan signed a production agreement with
RWE, the Germany energy company, put a domestic pipeline
project out to international tender, and invited energy
ministers, UN officials and oil company executives to Ashgabat
for a conference on energy security.
European visitors spoke enthusiastically of the
southern corridor pipeline projects, while Igor
Sechin, Russias deputy prime minister with responsibility
for energy, urged economically soundly-based
tariffs for gas imports and long-term supply and
transport contracts rather than the annually renewable
agreements used at present.
Some European commentators interpreted these changes as
potential steps towards a Turkmen-European energy relationship.
But Mitrova argued: Ashgabats main point is to show
Moscow it is displeased. This is how the negotiations on prices
and volumes are being conducted.