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Gazprom Losing its Grip on Central Asia?

Today the Wall Street Journal is running an interesting piece about a summit to be held on Friday including all the potential participants of the Nabucco pipeline project, breathing fresh live into the embattled EU energy transit project.  Though still quite far from becoming a reality, it seems as though Gazprom’s total dominance over Central Asia ain’t what it used to be.

According to Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies in England, a sudden collapse in demand and prices for natural gas as a result of the downturn is changing at least part of that equation.

On April 9, an explosion on the pipeline connecting Turkmenistan to Russia prompted an angry response from Turkmen leaders, who also floated the idea of the need to diversify export routes. The explosion, which the Turkmen government blamed on Russian gas monopoly OAO Gazprom, halted supplies that were losing Gazprom large sums of money. The gas had been contracted last year, when fuel prices were at their peak, and Gazprom’s export markets were drying up. The head of Russia’s Oil and Gas Institute blamed the explosion on the poor state of Turkmenistan’s pipeline network.

“We are in a situation we never expected to be in,” says Professor Stern, noting that until last year, Russia had been scouring the region to sign long-term contracts, buying up all the gas it could find. Now, instead, Gazprom has angered countries such as Turkmenistan, which says it suspects the company of trying to wriggle out of buying the contracted gas.