TURKMENISTAN'S HIGH DOMESTIC NATURAL GAS CONSUMPTION

UNCLAS SECTION 01 OF 02 ASHGABAT 001579

SENSITIVE

SIPDIS

STATE FOR SCA/CEN; EEB; NEA/IR
ENERGY FOR EKIMOFF/BURPOE/COHEN
COMMERCE FOR EHOUSE

E.O. 12958: N/A
TAGS: EPET PGOV EINV TX
SUBJECT: TURKMENISTAN'S HIGH DOMESTIC NATURAL GAS CONSUMPTION

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1. (U) Sensitive but unclassified. Not for public Internet.


2. (SBU) SUMMARY: Turkmenistan has one of the highest per
capita natural gas consumption rates in the world, which is
quite unusual for a country with a population between five and
six million and a generally undeveloped industrial sector.
The main reasons for the high consumption rate are reportedly
inefficient use of energy by industries and households,
deteriorating local gas distribution networks, the general
presumption of endless gas reserves, and the government's
"free gas" policy. Although the inefficient use of natural
gas raises concerns among industry experts, the GOTX has yet
to develop a program to encourage energy efficiency. Public
opinion on gas consumption is that the people of Turkmenistan
have an inalienable right to use the natural resources of the
country as they please. END SUMMARY.


3. (SBU) Turkmenistan's natural gas consumption has almost
doubled over the last decade and is now about 20 billion cubic
meters (bcm) per year, which brings the per capita consumption
to approximately 4,000 cubic meters per person annually. The
sharp increase in natural gas consumption can be explained by
the increased number of electric power stations that utilize
natural gas to produce electricity. The Turkmen Government
has built four new power stations since the mid 90s with a
total capacity of 880 megawatt-hours. Although the new power
stations reportedly have good energy efficiency features,
the GOTX chooses to light not only minor streets, but also the
exteriors of all new public and residential buildings, which
remain illuminated all night long, giving Ashgabat a Las
Vegas-esque quality.


4. (SBU) Moreover, according to a former employee of the
Ministry of Energy, the Mary power station, which is the
largest such facility in the country and the largest consumer
of natural gas, produces electricity at a very low efficiency
rate, due to the poor condition of the station's equipment.
Of the station's eight power-generating units, only one unit
was renovated in 2006, and the other seven consume more gas
than they would consume if they were properly maintained.


5. (SBU) Turkmen citizens have been getting natural gas for
their households free-of-charge since 1993, which has resulted
in increased and inefficient consumption at the household
level as well. Moreover, people residing in rural areas have
taken advantage of free natural gas to develop greenhouse
agriculture production. They build greenhouses at their plots
of land and use natural gas, which they receive free-of-charge
for their household, to heat their greenhouses by directly
burning natural gas in greenhouses instead of installing steam
heating systems that are more energy-efficient, but are
expensive.


6. (SBU) In general, people believe that they do not get much
benefit from natural gas exports, which are the main source of
revenue for the Turkmen government. As a result, they feel
entitled to use as much free gas as they want. Also, many
Turkmen assume that natural gas reserves are an endless
resource. The GOTX regularly fuels this assumption stating
that natural gas reserves will last for hundreds of years.
Nevertheless, during severe winters, some rural areas have
reported shortages of natural gas caused by high export
demands and leaks from distribution networks.


7. (SBU) Deteriorating local gas distribution networks, which
service more than 90 percent of the population, also
contribute to increased gas consumption. Most of the gas
distribution networks servicing rural areas were built in the
late 80s and early 90s and have seen very little of

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maintenance since that time. As a result, gas leaks are
reportedly common throughout the local distribution system and
can lead to significant losses. The GOTX has contributed
little toward upgrading local distribution networks,
reportedly because they are not crucial for revenue-generating
exports.


8. (SBU) COMMENT: Turkmenistan's domestic natural gas
consumption is set to grow in the short and mid-term.
Consumption growth will be driven by the GOTX's plans to
increase electricity production through the construction of
new power plants and upgrading existing ones. At the same
time, the inefficient use of natural gas by the public has
been exacerbated by the notion that, for many people, free gas
in their homes is the only tangible benefit they see in a
country that has abundant natural gas. END COMMENT.

ECKSTROM