The Natural Gas Revolution and Central Asia

Article excerpt

This article examines the ongoing natural gas revolution and assesses its impact on the energy industry and societies of Central Asia. The natural gas revolution consists of three related technological developments - hydraulic fracturing, horizontal drilling, and the increasing build-out of the world liquid natural gas (LNG) infrastructure. For this article, Central Asia is taken as the five "Stans" that were formerly part of the Soviet Union but that are now independent countries: Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan.

The article focuses on Turkmenistan and its rich reserves of natural gas and explores the conditions under which Turkmenistan currently reaches international markets through pipelines to China, Iran, and Russia. It also assesses Turkmenistan's future prospects for reaching additional world markets and for sustaining the markets it presently serves. Finally, the article analyzes the difficulties that Turkmenistan's gas industry, and other Central Asia energy industries, are likely to face and the implications these continuing energy industry tribulations will have for social development in Central Asia.

Key Words: Energy; Natural gas; Natural gas revolution; Liquid natural gas; LNG; Central Asia; LNG; Pipelines; China; Iran; Kazakhstan; Kyrgyzstan; Russia; Tajikistan; Turkmenistan; Uzbekistan; Social development.

I. Introduction

This paper assesses the impact of the so-called natural gas revolution on the countries of Central Asia, taken as the five "Stans" of the former Soviet Union - Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. The "natural gas revolution" refers to the sudden increase in available current supply, a dramatic fall in natural gas prices, and much enlarged estimates of world proven reserves of natural gas, developments that are due primarily to the development of new technologies. These new technologies include hydraulic fracturing, horizontal natural gas well drilling, and the maturation of the LNG (liquid natural gas) infrastructure. Natural gas produced using hydraulic fracturing and horizontal drilling is termed "unconventional gas" and contrasts with "conventional" natural gas accessed by individual wells that are purely vertical and do not involve hydraulic fracturing.

These five nations are not active participants in the natural gas revolution. They are drilling conventional wells to access their resources and are not utilizing hydraulic fracturing or horizontal drilling. Also, they are far removed from open seas, which could allow them to ship their natural gas as LNG. Nonetheless, the natural gas market has increasingly become a world market, and the natural gas of Central Asia will compete in a market in which unconventional natural gas and LNG have an increasing role.

The paper is organized as follows. Section II reviews the essential elements of the natural gas revolution, including the technological and operational basics of hydraulic fracturing and horizontal drilling, the falling prices of natural gas, the development of LNG infrastructure, and the ecological risks associated with this new technology. Section III, "Natural Gas and the Future of Central Asia," begins the central analysis of the paper. In particular it examines the production and reserves of each nation and the means by which each nation can hope to bring its gas to market. Because all five countries are landlocked, they must rely on pipeline transmission, and these pipelines must cover long distances to reach lucrative markets such as China or western Europe. As the discussion shows, these countries are surrounded by other nations, some with their own rich reserves of natural gas, and all with their own economic and geopolitical ambitions, factors which will have a strong effect on the ability of the "Stans" to capitalize on their very considerable energy resources.1

Of the five "Stans," Turkmenistan holds the largest natural gas reserves, and has the best prospects of delivering gas to a world market, and it will also be the country most affected by the natural gas revolution. …