EU, Turkmenistan Sign Long Awaited MoU on Energy Cooperation

nCa News and Commentary

Ashgabat, 27 May 2008 (nCa) --- The European Union and Turkmenistan signed Monday in Ashgabat a long-awaited memorandum of understanding on energy cooperation.

The MoU was signed on conclusion of talks between President Berdymuhamedov and a heavyweight EU delegation, led by Andris Piebalgs, EU commissioner for energy.

Later, the delegation traveled with the Turkmen president for the opening and foundation stone laying ceremony of two gas compressor stations in Daulatabat in southeastern Turkmenistan.

The contents of the MoU were not immediately available to the media but it was obvious that after rejection of several drafts the sides had reached common grounds.

Berdymuhamedov’s remarks sum up the hopes attached by both sides to the MoU. He said, “The present negotiations are a major step for further strengthening the friendship and mutually advantageous cooperation between Turkmenistan and the European Union.”

He added that the memorandum solidifies the legal base for bilateral cooperation.

The Turkmen president underlined that development of mutually advantageous relations with the countries of the European Union was one of the priority areas of the foreign policy of neutral Turkmenistan. The consistent basic principles of such cooperation are equality in partnership, mutual respect and mutual benefit, he said.

Andris Piebalgs, EU commissioner for energy, followed the basic drift but added some insightful observations.

Acknowledging the difficulty that Turkmenistan faces as centre of attention of diametrically opposed powers, Piebalgs said that in trying to stabilize, sometimes it is not easy to balance relations between [different] countries.

Piebalgs praised Berdymuhamedov for his recent visit to Baku. He termed it a ‘far reaching step’ that demanded ‘political courage.’

The closest anyone came to mentioning Trans-Caspian or Nabucco was Piebalgs who said that regional projects are sometimes slow. However, he emphasized that difficulties can be overcome and the benefits certainly outweigh the hard work.

The memorandum of understanding was signed by Piebalgs from the EU side and Tachberdy Tagiyev, deputy prime minister for oil and gas, from the Turkmen side.

After the signing of memorandum, Berdymuhamedov and European delegation flew by helicopters to Daulatabat where they participated in the foundation stone laying ceremony of Daulatabat-2 gas compressor station and opening of the Dadulatabat-3 compressor station.

Belgian company ENEX is main contractor for both the compressor stations.

The compressor stations are nearly identical in specifications. Each has the capacity of processing 20 billion cubic meters of gas annually. The price tag of each station is Euro 130 million.

The state-of-the-art compressor stations combine high end products of several market leaders. Dresser Rand has provided compressor units, General Electric has supplied gas generators, filtration and separation equipment is provided by PALL, automated control system are manufactured by Honeywell, precision instrumentation is from Emerson Process management, power supply system is produced by Schneider Electric.

Berdymuhamedov pointed out that Turkmenistan is investing heavily in the oil and gas infrastructure to increase its export capacity.

nCa Commentary

This MoU is not a breakthrough although it looks like one.

After more than a year of shuttle diplomacy and patient negotiations, the European Union and Turkmenistan have finally found enough common grounds to come up with a joint document.

Deducing from the context of talks Monday, one can say that even though the the MoU could be wide in scope, the real thrust is on obtaining Turkmen gas volumes for supply to the European buyers.

Turkmenistan has committed to put 10 billion cubic meters per annum in any pipe that suits the European Union.

As we have reported earlier, the combined output of the foreign PSA holders in Turkmenistan (Petronas, Dragon and Burren) would be enough to meet this commitment.

As far as Turkmenistan’s own priorities are concerned, it was obvious from Berdymuhamedov’s remarks Monday that he has no issues with the Russian route. He mentioned several times that the quadrilateral agreement between Turkmenistan, Uzbekistan, Kazakhstan and Russia would increase the throughput capacity of Central Asia-Centre Pipeline and Turkmenistan was increasing its output to make use of that capacity.

Now that Gazprom is willing to pay ‘European price,’ there should be no reason why Turkmenistan should go out of its way to prefer one buyer over the other. Moreover, when Turkmenistan says that it is in favour of multiple export routes, it doesn’t mean that it would ultimately like to stop supplying gas to and through Russia.

The EU has shown great flexibility and the MoU is a proof of that. As we have said, it is not breakthrough. The real breakthrough would be when construction work begins on some EU-backed pipeline.

For that to happen, we would remind once again that EU must demonstrably detach itself from the US foreign policy goals and practices.

The success of good intentions enshrined in the MoU would depend on three areas where the EU would need to come out with its best diplomatic talent: 

• Settlement of disputed Caspian fields should come under a formula satisfactory to Turkmenistan. The offer of sharing one field is hogwash.
  

• There is no need to annoy Russia.
  

• EU must engage Iran. The forthcoming French presidency of EU should make it a point of priority.