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.