Last updated: December 20, 2007 6:12 pm

Russia seals Caspian gas pipeline deal

Russia, Turkmenistan and Kazakhstan finalised a landmark agreement on Thursday to build a pipeline to transport gas to Russia, tightening Moscow’s control over Central Asian gas exports.

The deal comes at a time of intense competition for the region’s rich energy resources. Dubbed Pricaspiysky, the new pipeline will skirt the east coast of the Caspian Sea carrying 20bn cubic metres a year of Turkmen and Kazakh gas north to Russia’s Saratov region.

The accord, signed in the presence of Vladimir Putin, the Russian president, and Nursultan Nazarbayev, Kazakhstan’s leader, is a setback for Europe, which is courting Caspian producers for gas supplies to reduce its dependence on Russian imports.

Julia Nanay, of PFC Energy, said, “The agreement on this pipeline marks a strengthening of energy relations between Central Asia and Russia and fulfils one of Putin’s key policy goals of tying large supplies of gas from Central Asia into the Russian system.”

Gazprom, the state­controlled Russian gas company, needs Central Asian gas to compensate for a fall in production from its Siberian fields, a decline that threatens to undermine its $37bn (€25.5bn, £18.4bn) a year European gas export business.

Mr Putin said the Pricaspiysky pipeline would be “a serious investment by our countries in strengthening energy security, not just in Eurasia but more widely, bearing in mind our main consumers in west Europe”.

Separately, Russia, Kazakhstan, Turkmenistan and Uzbekistan plan to modernise and expand a Soviet-era pipeline, currently the only large gas export route out of landlocked Central Asia.

Viktor Khristenko, the Russian energy minister, said the Pricaspiysky pipeline would be built by late 2010. Each republic would take responsibility for financing construction of the pipeline on their territory, he said.

Mr Putin and Mr Nazarbayev earlier spoke by telephone with Gurbanguly Berdymukhammedov, the Turkmen president, who came into office a year ago after the death of Sapurmurat Niyazov.

Mr Berdymukhammedov has begun construction of a gas export pipeline to China that will end Russia’s stranglehold on Turkmenistan’s gas export routes by the end of 2009.

He has also held frequent talks with western governments about a project to build a gas pipeline across the Caspian Sea to Azerbaijan to link up with the planned Nabucco system supplying Caspian gas to Europe. Nabucco is central to the EU’s strategy to diversify gas imports away from Russia.

Finalisation of the Pricaspiysky project, first announced in May, has been postponed several times despite intense lobbying by Russian diplomats.

Meanwhile, Turkmenistan has persuaded Gazprom to accept a 30 per cent increase in gas prices, despite an earlier contract fixing the price at $100 per thousand cubic metres until 2009. The price will rise again to $150 per thousand cubic metres in the second half of next year.

Analysts said it would be difficult for prospective investors in the trans-Caspian pipeline to compete with the higher price Gazprom has agreed to pay Turkmenistan.

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