Interview with Armen Badalov

Armen Badalov, analyst from PACE Global Energy Services, spoke to Russia Today on the new gas pipeline around the Caspian Sea and its significance for the gas market.

Russia Today: What does this deal mean for Russia and indeed for Europe?

Armen Badalov: I think it is a great deal for everybody and I want to speak about this deal as a great one for all the parties which are involved in this consortium – Russia, Turkmenistan, Kazakhstan and Europe. For Russia it is an excellent deal because it gets additional gas supplies that can be re-sold to Europe at high market prices. It also means additional transit fees for Russia. For Turkmenistan it is an excellent access to the lucrative European markets.

RT: Does that mean they can make a quick bucket of profit by higher prices for Europe?

A.B.: No I don’t think so because first of all Turkmenistan will insist on a sort of a market sharing with Russia which is fair, and also Russia incurs transit fees which used to be recovered.

RT: Is there great concern in Europe that there is yet more dependence on Russia to provide Europe with gas supplies?

A.B.: I don’t really think so because a pipeline is a pipeline. The pipeline’s flow is constant so it can’t be interrupted just as it can happen let’s say with a tanker. And also for Europe it is less risky to have additional supplies through Russia than through other small transit countries.

RT: Washington, Brussels – for a long time they have been thinking over the idea to have their own pipelines supply beneath the Caspian Sea bypassing Russia. Is that still on the agenda?

A.B.: Yes, there have been a lot of plans of bypassing Russia both eastwards and westwards. For the eastward part I don’t think that it is going to happen in the near future. It is too expensive, it is too politically risky. There are a lot of issues including the status of the Caspian Sea. Until it is resolved it is too risky to undertake this capital intensive project.

RT: What about China?

A.B.: For China I cannot rule out the possibility that the China deal will happen some time in the long run. China is energy-hungry and why not to have this pipeline built in 15-20 years? It can happen. It depends on the Turkmenistan reserves.

RT: Do you really know how big these reserves are?

A.B.: Experts who are not from Turkmenistan do not know exactly. What we know now is the amount of proven reserves – it is about 2.5 TRLN cubic meters of gas which will be fine to supply to Russia. We also heard sort of rumours that additional 2 TRLN cubic meters can be unexplored right now in Turkmenistan, which can come on stream again as I have said in next 10-20 years.

RT: Supplies of gas need further infrastructure, more investment in infrastructure. Where will that come from?

A.B.: I think it will come from many sources. Primarily, I think, Turkmenistan, Kazakhstan and other Central Asian countries look at Russia as a source of funding.

RT: This funding – is it good news for Turkmenistan? Is it going to make a lot of money in the next years?

A.B.: I think it will make money that will allow them to return this money back to the country – for social issues and additional exploration of gas that will be required in future.