18 months following Kazakhstan’s signing of a three-party agreement for the construction of a Caspian gas pipeline, the government of the country went through with the ratification of the document. The law effectively embodying the country’s commitment to the project was signed by President of Nursultan Nazarbaev on April 13.

The pipeline project is considered to be the most significant joint venture of the three biggest regional producers of natural gas, including Russia, Kazakhstan, and Turkmenistan. As a result of the project’s completion, the throughput capacity of the CAC (Central Asia to Center) gas transportation system will be increased to 40 billion cubic meters of gas per year.

Denis Borisov, a consultant of Solid financial services company noted that the measures taken by the government of Kazakhstan reflect the country’s decision not to participate in the Nabucco gas project. 

Mr. Borisov suggested that the quantity of gas exports to Russia that Kazakhstan stated in its official announcement does not show that the country indeed has a need to increase its exports by 40 billion cubic meters through alternative routes if the pipeline would not be constructed. Additionally, since the Caspian project is targeted more intensely at increasing natural gas exports from Turkmenistan, Kazakhstan’s ratification is only a technical step in a larger process. The final determination of where the project will go will be made by Turkmenistan, whose government did not yet approve the pipeline agreement. 

The pipeline capacity for natural gas exports from Turkmenistan was planned to be 30 billion cubic meters per year. Russia has, however, not yet received assurances from the Turkmen side that the pipeline capacity will be fully utilized. Production at gas fields in the parts of Turkmenistan close to where the pipeline is expected to lie is relatively modest. Exploration and further development presents a need for substantial investment. The expectation of the government of Turkmenistan was that one more pipeline would be constructed to connect East-West the world’s largest Iolotan gas fields with the coast of the Caspian Sea. At Turkmenistan’s insistence, Gazprom was to fund the construction of that pipeline. However, during his visit to Moscow, President of Turkmenistan Gurbanguly Berdymuhammedov refused to sign the agreement. The government of Turkmenistan stated that it was considering a decision to hold an international tender for the project. The relations of Ashkhabad and Moscow became tenser following an explosion of the CAC pipeline that completely blocked the exports of natural gas from Turkmenistan. Since the supply infrastructure had not yet been restored at the time of the state-level visit, and Turkmenistan’s production had to be significantly reduced, Russian-Turkmen relations have entered a chilling-down phase. 

Analysts believed that the problems between Turkmenistan and Russia may result in Ashkabad’s establishing closer relations with Europe. At the same time, at a spring summit in Prague, Turkmenistan’s officials did not agree to the country’s participation in the Nabucco project. 

Industry experts believe that Turkmenistan in effect leaves itself extra buffer space in order to conduct negotiations with Moscow. The Caspian coastal pipeline is much more likely to be constructed because it presents no transit risks. The unresolved issue of the status of the Caspian Sea renders the construction of the trans-Caspian gas pipeline improbable.