Russia, Kazakhstan, Turkmenistan agree on Caspian gas pipe -2

15:50 | 12/ 05/ 2007

TURKMENBASHI, May 12 (RIA Novosti) – Russia, Kazakhstan and
Turkmenistan agreed to build a gas pipeline along the Caspian coast and
will sign the deal by September 1, a joint declaration of the three
presidents said Saturday.

The pipeline will run from Turkmenistan along the Caspian coast of
Kazakhstan and on to Russia, the sole re-exporter of the Turkmen gas.
It is a rival project to a U.S.-sponsored Trans-Caspian pipeline across
the Caspian Sea to carry Turkmen gas to southern Europe bypassing
Russia.

Following their summit meeting in Turkmenistan, Vladimir Putin,
Nursultan Nazarbayev and Gurbanguly Berdymukhammedov instructed their
governments to start the construction of the pipeline from the second
half of 2008.

Putin also said the restoration of Soviet-era Central Asia-Center
pipelines going to Russia via Uzbekistan and Kazakhstan would make it
possible to increase transportation by at least 12 billion cubic meters
by 2012.

Russia’s energy minister, Viktor Khristenko, said the 1974 pipeline
system was capable of transporting more than 90 billion cu m a year
after repair. "Two declarations that were signed today basically
outline the future development of the largest infrastructure projects
in the entire Central Asia," he said.

Alexei Miller, the chief executive of Russian energy giant Gazprom
[RTS: GAZP], said the Caspian pipeline project and the Soviet pipeline
system, once restored, would help raise supplies of Turkmen gas to 80
billion cu m a year within the Russia-Turkmenistan contract until 2028.

In September, Russia and Turkmenistan agreed on terms of Turkmen gas
supplies for 2007-2009 at a price of $100 per 1,000 cu m and set the
volume at 50 billion cu m a year.

In 2006, Russia imported via Kazakhstan 39 billion cu m of gas from
Turkmenistan, 9 billion from Uzbekistan, and 7.5 billion from
Kazakhstan proper. In 2007, Central Asian supplies to Russia are
expected to be 55.7 billion.

Despite the agreement on the Caspian pipeline, Turkmenistan’s president
said that the Trans-Caspian project bypassing Russia remained on the
agenda, thereby rejecting the Russian energy minister’s contrary
assurances.

"The whole world is looking for ways to diversify gas supplies,"
Gurbanguly Berdymukhammedov said.

Putin’s Central Asian tour of Kazakhstan and Turkmenistan coincided
with an energy summit in Poland May 11-13 aimed at reducing energy
dependence on Russia. Kazakhstan’s Nazarbayev, its key participant,
pulled out from the forum also being attended by Azerbaijan, Georgia,
Ukraine and Lithuania.

Turkmenistan gas production

The Russian leader signaled his country’s readiness to invest in the
development of Turkmenistan’s gas field on the Caspian shelf. "Russia
is ready to invest in gas production as well as in the pipeline
system," Putin told reporters. "Our energy companies have already
agreed on such investment."

Russia’s industry and energy minister, Viktor Khristenko, said Russian
companies would develop the gas field under a production-sharing
agreement (PSA), a format envisaging substantial privileges to foreign
investors.

"The best option is a production-sharing agreement," Khristenko said.
"This is the position of the owners of the field." He also said Kazakh
companies would fit well into the PSA.