Is Ashgabat outraged by Baku's intractability on the issue of swap gas supplies?

A couple of days ago, the Iranian media, citing the National Gas Company of Iran (NIGC), reported on the suspension of swap gas supplies from Turkmenistan to Azerbaijan through Iran. The temporary nature of the problem was emphasized - until a new agreement was reached between Baku and Ashgabat.

Today, the Eurasianet portal (USA), with reference to a certain Amsterdam site Turkmen.news, published an article stating that the parties cannot come to an agreement on a new contract. Moreover, Ashgabat is outraged that Baku seems unwilling to pay more than $140 per 1,000 cubic meters of gas. Unknown sources of the site claim that "SOCAR then resells Turkmen gas at twice the price." Another version of the problem, Turkmen.news called the shortage of Turkmen gas available for export. According to the authors of the article, this is the result of corruption and mismanagement in the state monopoly Turkmengaz.

Neither side has yet published an official confirmation or refutation of these statements. Nevertheless, the Interfax-Azerbaijan news agency released news with reference to a source in the country's oil and gas market, who stated that Azerbaijan may do without importing gas from Turkmenistan in 2024 if the agreement with Ashgabat on a swap through Iran is not extended.

"Considering the fact that in 2024 Azerbaijan is projected to significantly increase the volume of commercial gas supplies to the domestic market, primarily from the “Umid” and “Absheron” gas condensate fields, the need for gas imports from Turkmenistan may disappear," the agency interlocutor believes.

According to him, gas production is being accelerated at the “Umid” field due to the commissioning of new production wells. The annual volume of gas production at this field in 2024 is expected to reach 3 Billion cubic meters, and “Absheron” - a peak of 1.5 billion cubic meters. These volumes of gas, along with gas supplies to the domestic market from other fields (from SOCAR, “Shah Deniz” and the “Azeri-Chirag-Guneshli” block) - in the amount of about 17 billion cubic meters - will fully cover the demand for gas in Azerbaijan and fulfill contractual obligations for supplies to Georgia.

It means that the Azerbaijani side is most likely not going to make concessions on the price issue, and the decision on whether the agreements will be extended depends on the compliance of Ashgabat and the efforts of Iran.

Turan agency recalls that on November 28, 2021, Azerbaijan, Iran and Turkmenistan signed a trilateral agreement on swap gas supplies in Ashgabat within the framework of the 15th summit of the heads of state of the Organization for Economic Cooperation (ECO) member states. The ceremony was attended by the Presidents of the three states, Ilham Aliyev, Ibrahim Raisi, and Gurbanguly Berdimuhamedov. The contract provided for the supply of Turkmen gas through Iran to Azerbaijan in the amount of 1.5 to 2 billion cubic meters of gas.

Turkmenistan has started supplying gas to Azerbaijan since the beginning of 2022.

Referring to the bulletin of international Trade of the Republic of Azerbaijan, prepared by the State Statistics Committee of the Republic of Azerbaijan,  Turan agency reports that by the end of January-October 2023, Azerbaijan imported 1 billion 326.7 billion m3 of gas from Turkmenistan; 1,000 m3 of Turkmen gas cost Azerbaijan $142.93.

By the end of 2022, Turkmenistan supplied 857.1 million m3 of gas to Azerbaijan.