on 11 April, 2009 13:35:00 | 1429 times read Adjust font size:
Ashgabat, 11 April 2009 (nCa) — It is both sad and funny how a rupture in a single pipeline has exposed the weakness and vulnerability of the Russian economy and its heavy dependence on natural gas supplies from Turkmenistan.
A new dimension of the composite challenge of energy security for producers and end users has also come to surface.
At 0130 am on 9 Apr, an explosion occurred in CAC-4 pipeline, reducing the Turkmen gas supplies to Russia by almost 90%. CAC-4 is one of the five main trunks that constitute the Central Asia-Centre pipeline network for transportation of Central Asian gas to Russia and onward to Europe.
The cause of the accident and the way Russia handled it are a source of concern for everyone, especially the consumers in Europe.
Turkmenistan is working on repairs. Supplies would resume soon but hard questions would remain; questions that Russia must answer with full honesty.
The relations between Russia and Turkmenistan will not suffer any permanent damage because of the unpleasantness caused by this accident because broad-based bilateral relations cannot be hostage to a single incident.
Turkmenistan has explained that the explosion occurred because of insufficient notice given by GazpromExport for sharp reduction in gas volumes it buys from Turkmenistan. GazpromExport is the Gazprom subsidiary that handles purchase of Turkmen gas.
GazpromExport informed in the evening of 7 Apr about its intentions to cut down the volumes it receives from Turkmenistan. On 8 Apr at 11 am, in less than 12 hours after giving the notice, the GazpromExport had already decreased its intake from Turkmenistan to a bare trickle.
In another 14 hours or so, while Turkmenistan was scrambling to respond to the situation suddenly created by GazpromExport, tremendous pressure built in the pipeline because the tap was almost shut at the export exit point, and a main pipe burst open between the compressor stations Ilyaly and Deryalyk compressor stations on 487th kilometer of the Daulatabat-Deryalyk pipeline.
In order to understand the significance of such a short notice, and why it led to the accident, we need to bear in mind certain facts:
- In a large caliber, medium pressure, pipeline such as CAC-4, the natural gas travels at 30 kilometers per hours during the peak season. The speed is less when less volume is being pumped; reduction in speed is proportional to reduction in volumes being sent through the pipe. The peak season is from November to March. Gas flow is rather slow from April to October.
- Natural gas is a gas after all – its molecules are not as strongly attracted to each other as in liquids and solids. That is why so many compressors and boosters are required to keep the gas flowing through a long pipeline. It is not possible to stop the flow of gas by turning off a single tap.
- Natural gas is buried several thousand meters under ground and comes out from the wells with considerable pressure. The flow in the pipeline cannot be reduced without first reducing the input from the wells that are feeding it.
- Large diameter pipelines cannot be fed by a single well. There are dozens of wells giving their combined output through a complex system of pipes and compressors to feed a main trunk.
Looking at these factors one can clearly see that less than 12 hours of notice was inadequate for taking proper action because: 1. The gas fed into the trunk from Daulatabat a day before receiving the notice was still traveling in the territory of Turkmenistan; 2. The adjustment in well output at Daulatabat takes 24 to 36 hours to register at Deryalyk metering station; and 3. Drastic reduction in outflow at Deryalyk without appropriate adjustments in the entire system was bound to create one or more pressure points for the pipeline to burst.
Under ordinary circumstances, Turkmenistan would have taken this irresponsible act of GazpromExport gracefully and restored the system without making any fuss.
However, the way Gazprom preferred to handle it, shifting the blame to Turkmen side publicly, and the grey noise immediately created by the Russian analysts and media were absolutely baseless and out of context. There is probably something more out there than meets the eye
And, that has compelled us to scrutinize closely the motives of the Russian side.
In order to construct a set of possible scenarios, we shall pose some questions and try to answer them:
Was it negligence?
Such a short notice by GazpromExport cannot be dismissed as mere negligence. A company that handles several hundreds million dollars of business every day has no room for negligence. In fact, the internal discipline of Gazprom hardly allows any chance for negligence.
Was it professional incompetence?
Together with negligence, incompetence is also not a possible reason for this lapse. Gazprom has the largest pool of gas experts in the world and there is no reason to assume that none of them could foresee the consequences of drastically reducing the intake from Turkmenistan at such a short notice.
Was it irresponsibility?
Was it irresponsibility, not by Gazprom as an institution but by some employees of Gazprom?
This may or may not be the case. In case it was, it reflects poorly on Gazprom’s ability to meet steadily the obligations toward its clients in Europe.
Following the proper procedures is an integral part of the commitment to maintain energy security.
One can imagine the consequences for European consumers if this thing had happened in the middle of a severe winter.
Was it an emergency situation?
There is no way to justify a short notice like this as the consequence of an emergency situation.
Agreeably, European demand of gas has dropped considerably during the past few weeks. It is not a sudden drop and Gazprom knew in advance about it. Therefore, diminished demand in Europe cannot be cited as a reason for suddenly cutting down imports from Turkmenistan.
Similarly, the pipeline blast that took place in Moldova on 1 Apr leading to reduction of Gazprom supplies to Balkan by 40% can not be presented as an emergency situation. The blast occurred on 1 Apr, and if Gazprom was going to reduce intake from Turkmenistan to adjust for crippled capacity for exports, there was ample time to give fair notice to Turkmenistan.
Was it fear? Was it anger?
Turkmenistan recently announced plans to build East-West pipeline that will be about 800-100 kilometers in length, connecting all the major gas fields of the country to a single network. This will allow for feeding multiple pipelines without being dependent on a single field or cluster.
Was it Gazprom’s fear that the East-West pipeline will brighten the chances for Nabucco? Was it anger at Turkmenistan’s attempt to make room for multiple export routes?
Even though there is no evidence to support this assumption, the overall record of Gazprom and Russia suggests that it is a possibility that cannot be dismissed easily.
Was it a warning shot?
Was the insufficient warning that was bound to cause a serious accident, a warning shot for Turkmenistan?
Quite possibly, this may have been a way by Gazprom to tell Turkmenistan that it should look no farther than Russia for export of its gas, or else.
Was it an attempt to mask Russia’s inability to pay for gas?
The fact that Russia has been hit hard by the current financial and economic crisis is not a secret.
Russia’s ability to meet weekly timetable for payments of Turkmen gas is questionable.
Demand of gas in Ukraine and Europe has fallen dramatically and Russian gas storage facilities are already full to the brim with surplus gas. Gazprom admitted a few days ago that the crisis will force Gazprom to maintain 10% cut in output over the next 4-5 years from its peak last year. The overall output of Gazprom this year would be 492 bcm (billion cubic meters) this year, compared to 550 bcm in 2008; this is more than 10% decrease.
It means that in order to maintain its liquidity, Gazprom will first sell its own gas to Europe and provide only the leftover capacity in the pipes for Central Asian gas. However, that leftover capacity would be of little use as more European demands could be met through Gazprom’s own production.
Russia is probably unable to pay for the entire contracted volumes of Central Asian gas and causing an accident in the system of the main provider could be a convenient way to get rid of its obligations as a buyer.
Was it a deliberate attempt to halt supplies without facing contractual consequences?
There is a ‘pay or use’ clause in the contract, binding Gazprom to draw contracted volumes from CAC. In case it defaults on this commitment, it must pay for the unused capacity of the pipe. However, if the system is down for repairs, this clause could perhaps be subject to legal interpretations.
The contract also stipulates that payments must be made very week for the gas that leaves Deryalyk metering station. Non-supply for gas supplies because of technical problems could give Russia an excuse for not receiving the volumes for several weeks, and consequently not making any payments for the blank period.
The contract says that at least one week’s notice must be given for change in volumes. There is no escape from this clause except in genuine emergencies.
Was it an attempt to transfer some of the effects of financial crisis to Turkmenistan?
Russia is in the grip of the financial crisis more than it is willing to admit. Putin said during a recent cabinet meeting that we should consider putting automatic lamps and lights in government buildings that should switch off when no one is in the room. It may be a small matter but it shows the severity of crisis for Russia.
On the other hand, Turkmenistan remains unaffected by global unraveling of economic and financial systems. If the accident in the pipeline was deliberately engineered, it may have been a way of transferring some of the financial crisis to Turkmenistan, to pull Turkmenistan into the ‘club.’
Gone are the days of Rem Vyakhrev when Gazprom could abruptly refuse to buy Turkmen gas, and brag about it.
Turkmenistan is obliged under a long-term contract signed in May 2003 to supply certain volumes to Russia; Russia is obliged to purchase those volumes under the same contract. The obligation is mutual and binding.
Trying to deflect the blame to the infrastructure of Turkmenistan is meaningless. Compressor station for compressor station, kilometer for kilometer of pipeline, and processing facility for processing facility, Turkmenistan has spent, in comparative terms of GDP, more than any other CIS country including Russia to upgrade and modernize its entire gas extraction, processing and transportation system.
Since negligence and incompetence for giving such a short notice are not conceivable we are left with only two options: Either it was an act of irresponsibility or it was a deliberate attempt to halt Turkmen supplies temporarily.
If it was an act of irresponsibility, what was the size of that irresponsibility? Had it happened in the middle of winter, millions of citizens in more than a dozen of countries would have been affected directly. When the temperatures are in double digits below zero, it is not merely a matter of comfort; it is the question of life and death for many.
If the short notice was given with exactly this kind of outcome in mind, it puts into question Gazprom’s commitment to its consumers and its integrity as a partner.
The Golden Rule that has remained unaltered since the dawn of time is: Do to others as you wish others do to you.
A more diplomatic version of this rule is: Equality and mutual respect.
Russia is a key player in the global energy equation.
For the foreseeable future Gazprom will remain the chief supplier of natural gas to Europe.
These are undeniable facts and no one is happy about the financial woes of either Russia or Gazprom.
As a matter of fact, the countries and entities linked to Gazprom through the supply and demand chain are more than willing to lend a helping hand in these hard times.
What is equally visible is that Gazprom is heavily dependent on Turkmen volumes to maintain its own liquidity. Had that not been the case, it would be openly asked for discontinuation of supplies for a few weeks. This fact should be considered together with Gazprom’s efforts to sign more supply contracts with European countries and Iran, its recent arrangements with BP and its breakthrough in entering the LNG market of the United States.
Gazprom also needs to understand that whatever little leverage it still has over gas exports of TurkmenistanChina pipeline comes into operation. and other Central Asian countries will evaporate by the end of this year when the
Basic Information on CAC Network
[The following information is copyright to ITAR-TASS]
Central Asia – Centre is a Gazprom controlled system of natural gas pipelines, which run from TurkmenistanUzbekistan and Kazakhstan to Russia. The eastern branch consists Central Asia – Centre (CAC) 1, 2, 4 and 5 pipelines, which start from the south-eastern gas fields of Turkmenistan. The western branch consists of the CAC-3 pipeline and a project to build a new parallel Caspian pipeline. The western branch runs from Turkmen Caspian Sea territories to the north. The branches meet in western Kazakhstan. From there the pipelines run north where they are connected to the Russian natural gas pipeline system. via
The system was built between 1960 and 1988. Construction began after discovery of the Dzharkak field, and the first section was completed in 1960. CAC-1 and 2 were commissioned in 1969 and CAC-4 was commissioned in 1973. In 1976, two parallel lines were laid between Shatlyk and Khiva. CAC-5 was commissioned in 1985 and in 1986-88, the Dauletabad-Khiva line was connected through a 1,420-mm pipeline. The western branch (CAC-3) was constructed in 1972-1975.
In 2003, the late President of Turkmenistan Saparmurat Niyazov proposed to renovate existing systems and construct a new parallel pipeline to the western branch. On 12 May 2007, Vladimir Putin of Russia, Nursultan Nazarbayev of Kazakhstan and Gurbanguly Berdymukhamedov of Turkmenistan signed a memorandum for renovation and expansion of the western branch of the pipeline. On 20 December 2007, Russia, Turkmenistan and Kazakhstan finalized an agreement on the construction of a new Caspian pipeline parallel to the existing CAC-3 pipeline (Bekdash-Europe pipeline).
Almost all Uzbek and Turkmen natural gas is delivered through the CAC pipeline system, mainly through the eastern branch due to location of production sites and poor technical condition of the western branch. CAC-1, 2, 4 and 5 pipelines are supplied from gas fields in the South-East of Turkmenistan, mainly from the Dauletabad gas field. The eastern branch starts from the Dauletabad field and continues through the Shatlyk gas field east of Tejen to Khiva, Uzbekistan. From there the pipeline system transports gas northwest along Amu Darya to the Kungrad compressor station in Uzbekistan. From Kungrad, most of the gas is carried via Kazakhstan to the Alexandrov Gai gas metering station in Russia. At Alexandrov Gai CAC pipelines meet with Soyuz and Orenburg-Novopskov pipelines. From there two lines run northwest to Moscow, and two others proceed across the Volga river to the North Caucasus-Moscow transmission system. The diameter of most pipelines varies between 1,020-1,420 mm. Current capacity of the system is 44 billion cubic meters (bcm) per year. An agreement is in place to increase capacity to 55 bcm per year by 2010 and through modernization there is potential to increase capacity to 90 bcm per year.
The western branch originates at Ekarem, near the Turkmen-Iranian border and runs north. It is supplied by gas from fields scattered along the Caspian coast between Okarem and Nebit Dag. It continues via Uzen in Kazakhstan to the Beyneu compressor station, where it meets the eastern branch of the CAC. South of Cheleken, the western system consists of 710 mm diameter pipeline, and between Cheleken and Beyneau 1,220 mm diameter pipeline.
On 20 December 2007, Russia, Turkmenistan and Kazakhstan agreed to construct a new Caspian pipeline parallel to the existing CAC-3 pipeline. The pipeline will be built between Belek compressor station in Turkmenistan and Alexandrov Gai compressor station. The capacity of the new pipeline will be 20 bcm a year. The construction of the pipeline will start in the second half of 2009.