TURKMENISTAN OIL & GAS NEWSLETTER
Editor: Charlie Bartholomew
Turkmenistan New Oil and Gas Fields Discovered in April
A new oil and gas field "Mydar" in central Kara-Kum has emerged on Turkmenistan's geological map, as industrial flow of oil was obtained from it April 7 during trials of the first exploration well. According to the "TurkmenGas" state concern, the well's flow-rate at the depth of over 2,000 meters has exceeded 200 tons of oil per day.
Attending to the task of increasing the reserves, Turkmenian geologists are currently engaged in exploration operations throughout Turkmenistan. A "Tek-Tek" prospect has thus been discovered in the Southeast of the country with estimated natural gas reserves of over 100 billion cubic meters. There are quite a few of such prospects on this pre-license area, with total reserves evaluated at 500 billion cubic meters of gas.
In the south, a powerful flow of gas was obtained from "Toreshikh" field in the process of exploratory drilling in February. The field is believed to possess 600 billion cubic meters of gas.
Alok Sen, joint secretary for Central Asia, said the pipeline had come up for discussion with the Foreign Minister of Turkmenistan, Boris Shikhmuradov, during his two-day visit to India, which ended Wednesday. "They plan to lay the pipeline via Afghanistan to Pakistan and a possible extension to India. There are no comprehensive details available on this. Where is the money going to come from? "It has too many imponderables. One major concern is the situation in Afghanistan. It was not discussed in great detail during the talks," Sen said. He said Shikhmuradov had "fruitful and frank" discussions with his Indian counterpart Jaswant Singh, also met Prime Minister Atal Behari Vajpayee, and Defense Minister George Fernandes. "We view Turkmenistan as an important country in Central Asia due to its rich gas and oil reserves, its geo-strategic location and secular polity," Sen said. "Both the ministers held comprehensive meetings on bilateral and regional issues," he said. He said the two countries decided to form a joint working group on energy and cooperate over commercial farming. "We expressed our concerns over Afghanistan, with which Turkmenistan shares its border, on terrorism and drug trafficking," Sen said.
This could be considered a substantial triumph for the
Turkmen president's "get-tough" policy, if the pipeline were actually close
to being completed. However, just two weeks after having achieved
this victory, President Niyazov himself acknowledged that there is little
hope that the pipeline's construction will even begin in the near future.
President Niyazov's obstinacy and blunt words compelled the Azerbaijani government to meet his terms, despite pressure from the US and Turkey for him to soften his stance. Will he be able to achieve similar results with the international oil tycoons? Prior to his success in the pipeline quota deal with Azerbaijan, one might have said no, but perhaps President Niyazov's negotiation methods (or lack thereof) are exactly what is necessary in this situation.
ASHGABAD, April 4 (AFP) - Sitting on top of a marble pedestal, the golden statue of the president of the central Asian republic of Turkmenistan, is like a rotating sun-dial reigning over a vast expanse of natural gas deposits.
President Saparmurat Niyazov called himself the leader of the Turkmen after the collapse of the Communist Party in the Soviet era. Today he reigns over five million people and a gas-rich desert of 500,000 square kilometres (200,000 square miles), with a rich deal with Turkey to prove it, during a recent visit by Turkish President Suleyman Demirel. His rotating statue, entirely gold-plated and 15 metres (50 feet) high, arms outstretched, overlooks the Turkmenian plain in a country that is totally devoted to his personality cult. It rises with the sun and rotates to all points of the sundial until twilight.
The customs of the time when the country was a satellite of Moscow still rule, and every street is decorated with several of his large-size portraits, sometimes to encourage agricultural productivity, sometimes to decorate the front of a discotheque and sometimes to exalt the slogan of "Turkmenbashi, one people, one nation."
Saparmurat, or Turkmenbashi, who is just 60, has failed
to forge a national identity for his countrymen, a mosaic of central Asian
peoples mixed with a strong Russian minority, but has been busy
refurbishing his image as an apparatchnik.
This distant cousin of the Turkish-speaking peoples, which
have been brought together by the collapse of the Soviet Union, at one
stage tried to adopt Ataturk as his name before he was dissuaded by Turkish
leaders, who have cultivated relations in recent years.
Following Turkey's example, the Turkmenbashi introduced the Latin alphabet
to replace the Cyrillic version.
Enhancement of gas supplies to Iran up to 13 billion cubic meters per year was on the agenda. Such projected amount of fuel export results from the growth of Iran's north provinces' industrial sector and the country's gas supply policy. In this respect, a possibility to operate the Korpeje-Kurt-Kui gas pipeline at full capacity was under consideration. According to the program of Turkmenistan's oil and gas sector development, endorsed by Saparmurat Turkmenbashi, this year gas exports to Iran will be 5 billion cubic meters. For the first two months 700 million, cubic meters of gas have already been exported to the neighboring state. Before the end of 2002, the Turkmen-Iranian gas pipeline will be running at full capacity, transporting 8 billion cubic meters per year. The projected capacity of the pipeline is up to 13 billion cubic meters.
Under Saparmurat Turkmenbashi's initiative, a decision to assign experts from Iran and Turkmenistan to prepare in 1.5 month's proposals on a number of joint projects which will become a basis of relevant government agreements was made. They will focus on the enhancement of Turkmen gas exports, at issue will be the alternative projects of oil pipeline construction from Turkmenistan to the Iranian port of Neka and an opportunity of joint development of off-shore deposits on the Caspian.
He stressed that the mentioned period was a deadline and the Joint Venture, where each party would have a 50 percent block of shares, could be built up even earlier. In Graham's word, the establishment of the joint venture is number one priority for the company, for right this consortium will be authorized to hold the negotiations with the Turkmen Government on making five product-sharing contracts (PSC) to develop the gas fields in eastern and central parts of Turkmenistan with about 700 billion cubic meters of gas reserves.
The PSC negotiations with the Government of Turkmenistan, despite pessimistic comments of some mass media, are developing very fruitfully, he said. However, prior to discussing product-sharing principles, it is necessary to specify major provisions of the cooperation program, believes Graham, and what should have been done after incorporation of a joint venture with Turkmengaz. Further, Shell is planning to enter the consortium with Turkmenneft, currently developing the Ekerem field on the west of Turkmenistan. The deposit is considered a potential source for the prospective Trans-Caspian pipeline project implementation.
Gavin Graham noted, his company has a long-term interest in Turkmen gas projects, far beyond the scope of the Trans-Caspian pipeline project (TPP), in which Shell shares sponsorship with American PSG. In case of the TPP successful implementation, what Mr. Graham deeply believes in, it will be the first economic project of Turkmengaz-Shell joint venture. At the same time, he said, the company "is ready to consider other export alternatives for the Turkmen gas".
It should be mentioned that already in 1997 Shell executed feasibility studies of three potential alternatives of gas export from Turkmenistan to the markets of Turkey and Europe via the Caspian Sea, Iran and Russia.
Currently, believes G. Graham, both Iran and Russia are potential consumers of the Turkmen gas in the amounts exceeding the present purchases. As to the Turkish market, he assumes, the Trans-Caspian project is the most preferable alternative today.
Over 300 companies presented their technologies and machinery at the international exhibition "Oil and Gas of Turkmenistan-2000" last week in the Turkmen capital. The large number of exhibitors proves great interest in Turkmenistan, which has succeeded in creating a comprehensive legislative basis for international partnership and most-favored-nation conditions for foreign investors. As President of Turkmenistan Saparmurat Turkmenbashi stressed in his address to the participants in the exhibition, the large-scale goals of the fuel-and-energy sector in the 21st century imply mutually advantageous partnership. So, acquaintance with the products and capabilities of potential participants of the partnership is necessary.
The organizers of the exhibition are the Chamber of Commerce, the Ministry of Industry and Mineral Resources, the Ministry of Communications of Turkmenistan, and the International Exhibition Company ITE (Great Britain). Integration of the Turkmen fuel and energy sector into the world energy network is demonstrated by the exhibition's key foreign partners, Exxon Mobil, Baker Hues, Shell, Lasmo, Man, Bentek, General de Geophysic, Technip, Botash Petroleum pipeline Corporation, Turkish Petroleum, Sumy Association, Petronas Charigali, Dragon Oil, and the Iran National oil company. Many of them became familiar with Turkmenistan at TIOGE-2000.
A specific feature of the current exhibition is in intensified activity of Russian, Ukrainian, Kazakh companies and enterprises. Among them are Uralmash, Chelyabinsk rolling-mill, Vladimir electric motor, Ishimbay Machine building, Ryazan machine-tool, Taganrog metallurgical plants, Motor SICh J.-S.S., Nizhnedneprovsk rolling-mill plant, Zhairemsk mining works, Azimut J.-S.S. Their proposals on delivering oil and gas equipment and services to Ashgabat are supported by prospective supplies of the Turkmen gas to Russia. The payment mechanism will include a clearing mechanism to be developed by the Turkmen side. The position of Turkmenistan's goal is equal long-term and mutually beneficial partnerships. Many offers have been made in the course of the exhibition.
Turkey and Turkmenistan signed an accord in 1999 to realize the Trans-Caspian pipeline (TCP) project to deliver 16 billion cubic meters (bcm) annually to Turkey, portrayed as the fastest growing gas market in the world, with political and technical backing from the United States. But Ankara's $2.4 billion deal to get 16 bcm of gas from Russia, already Turkey's top gas supplier, through a pipeline passing underneath the Black Sea from 2001 in a project called Blue Stream has angered its ethnic kin in Central Asia.
Azerbaijan also wants to sell Turkey some 14 bcm
from the offshore Shakh Deniz project, being developed by BP Amoco. "World
politics affect this big project," Niyazov said. "Azerbaijan naturally
gives priority to their own interest and from time to time they stand in
our way," he said. Turkey said its gas projects with Russia, Turkmenistan
and others were not rivals, but options to satisfy its gas needs, projected
to reach 82 bcm in 2020 from 12 bcm now. "This is not just a gas project.
This is also political and a matter of prestige," Demirel told reporters
on the plane back from Turkmenistan. "The project is a bridge from Central
Asia to Europe."
RUSSIAN-TURKMEN DEAL CASTS DOUBT ON TCP
Niyazov said: "I want to speak openly...the policies of Iran and Russia sometimes make our task difficult. Some people portray this as a race but if Russia can pay a suitable price, we are willing to sell them gas, too. The same goes for Iran," he said. Turkmenistan wants to sell 120 bcm by the year 2010 and earn an income of between $10-12 billion, he said.
Both Niyazov and Demirel said there were some problems with the PSG consortium, made up of Royal Dutch Shell, U.S. construction group Bechtel and General Electric Capital Structure, which will build TCP. They did not give details of the nature of problems. Niyazov said negotiations with PSG would be completed by the end of this year when construction of the pipeline would begin. Its completion is scheduled for late 2002.
"We are preparing to conduct a road show for 32 blocks on the Turkmen Caspian shelf in April and May, in Ashgabat, London and Houston," said the official who asked not to be named, said. Turkmenistan hoped the road show would help it to hold direct talks with investors in future. The country recently cancelled tenders it had announced for exploration on these sites and said it would instead rely on direct negotiations. The official said several parties including BP Amoco, ExxonMobil, Agip Spa, Shell, Unocal , Japan National Oil Company and Iran's oil ministry, had bought reports on seismic tests in the area.
Turkmenistan recently said proven reserves on its Caspian
shelf amounted to 11 billion tonnes of oil and 5.5 trillion cubic metres
The official told Reuters under condition of anonymity that the pipeline could stretch from Serakhs town in eastern Turkmenistan to northern Iran.
"We need to lay out just 60 kilometers of pipeline from Serakhs in the east to the northern provinces of Iran in order to boost the gas export flow...to 30 bcm a year," he said.
France's Total is said to be interested in doing a feasibility study for the project.
Turkmenistan contains some of the world's largest reserves of natural gas but is hard pressed to export this wealth to markets, which pay in hard currency. It is mulling various export routes including a $2.0 billion trans-Caspian link to Turkey.
Other potential markets are Iran, Pakistan and Russia.
It receives $40 per thousand cubic meters of gas through the line, a better price than for exports currently moving to Russia.
Gas exports to Iran are likely to be discussed in detail during a visit to Turkmenistan by Iranian President Mohammed Khatami expected shortly.
"The EBRD intends to partly finance the project to expand the capacity of the Lam and Zhdanov oilfields in Turkmenistan's part of the Caspian Sea, with a sum of up to $60 million," the EBRD's Bossan Annayeva told Reuters. She said a credit agreement had already been signed.
Ireland-based Dragon Oil Plc is developing the fields based on a 25-year production sharing agreement with the Turkmen government. Reserves at the fields are estimated at about 80 million metric tons. The project aims to boost daily output at the fields to 10,000 metric tons or 10 times higher than current production rates. Its total cost is yet to be revealed.
Turkmenistan said recently that its Caspian offshore oil reserves were estimated at 11.0 billion metric tons while gas reserves were 5.5 trillion cubic meters.
Government of Turkmenistan tenders offshore oil fields in the Caspian Sea march 24, 2000
On March 16, 2000, the first day of the fifth Turkmenistan international oil and gas conference, the GOTX announced a new hydrocarbon investment initiative in the central and south Caspian shelf. The GOTX invites foreign companies to participate in the exploration and production of hydrocarbon resources in this offshore area where it believes 73 percent and 35 percent of the country's total potential oil and gas reserves are located. See contact information in paragraph 7. End summary.
Turkmenistan's oil and gas reserves and perspectives
The GOTX has given high priority to the development of oil reserves in the Caspian offshore fields.
GOTX Caspian sea tender
4. On the first day of the oil and gas conference deputy oil and gas minister Khoshgeldy Babaev presented the terms of Turkmenistan's tender for 76,000 square kilometers offshore in the Caspian. The area has been divided into 32 individual blocks of approximately 2,500 square kilometers each. The area's southern border is a line equi-distant from Iranian and Turkmen coastal points running approximately 200 kilometers out into the Caspian. Its northern border is a similar line running out approximately 120 kilometers from the Turkmen -Kazakh land border.
5. The GOTX has developed a new licensing system based on the 1997 Turkmenistan law on hydrocarbon resource development and invites foreign investors to participate in technical seminars in April and may 2000 in Ashgabat, London and Houston. As a prerequisite, companies are required to register with the gotx competent body on hydrocarbon resource development and western geophysical. During the seminars, interested companies will learn about direct negotiations with the GOTX and relevant tender procedures and have an opportunity to conduct preliminary negotiations with GOTX officials. A set of tender materials developed by western geophysical will also be sold during the seminars.
6. Western geophysical has prepared several data packages, which are available for sale to companies interested in tender participation. These data packages include the following reports:
-- Seismic data package for marine (US$ 450) and for transition zone/land well tie (US$ 1,800);
-- a data package consisting of general information, environmental report, and commercial overview (logistics, infrastructure, business climate, etc.) (US$ 5,000); and
-- a geological report, including location maps, well logs for selected wells, well to seismic ties, geological overview, and grativity/magnetics, (US$ 40,000).
The seismic data, data package and report will be available for viewing at the upcoming technical seminars hosted by western geophysical. Additional information, including copies of relevant legislation, will be published on the Internet. The address of the website, which will be updated periodically, is: Www.Turkmenistan2000.Com
7. For more information about the tender terms,
interested U.S. Companies should contact:
"It is expected that a production sharing agreement will be reached within the next few months," a joint statement released by the two sides said. It said talks were being held to discuss technical and commercial aspects of the deal. No reasons were offered for the delay. The deal was originally due to have been signed on February 19.
Shell, with local firms Turkmenneft and Turkmengaz, is carrying out seismic exploration at several gas wells including Malai and Shatlyk in the east of the country, with reserves put at 165 billion cubic metres and 460 bcm respectively.
Other sites are Ekerem in the west and Naip in the Kyzyl-Kum desert. They are all meant to feed a planned $2.0 billion Trans-Caspian gas pipeline which is intended to transport Turkmen gas to Europe via Turkey.
Shell is also part of the consortium that is building the 2,000-kilometer (1,250-mile) link.
Although Turkmenistan is officially committed to the pipeline, President Saparmurat Niyazov said late on Thursday that he would hold talks on increasing gas exports through Russia, raising doubts about the pipeline's viability. Other foreign companies with production sharing agreements in Turkmenistan are Malaysia's Petronas, Britain's Monument and U.S. Mobil.
Baku, - SOCAR announced a tender for crude supplies on 28 January. Oil is needed to produce fuel oil at the two refineries in Baku, Azer-press learned from the company president Natig Aliyev. 'We have not decided yet who will be the supplier. However, we have certain arrangement with Elf Trading, the Turkish-Arabian Bashlam that transits Turkmen oil across Azerbaijan and Georgia) and with other companies shipping Turkmen crude to Iran, for instance, Veba Oil from Germany,' said Mr. Aliyev. 'So, if it is found to be effective and commercially suitable for us, we shall make the contract with the company that we choose.' He added that the crude deliveries would be paid for in hard currency. 'I should like to repeat that the problem is made all the more difficult by the general fuel oil deficit in the market,' remarked Mr. Aliyev. According to him, not more than 20 Th tons of processed fuel oil would come to Azerbaijan over the next several days. 'The problem is that Turkmenistan does not produce export-oriented fuel oil, considering it more expedient to sell oil,' said Mr. Aliyev. Besides, Turkmen refineries are said to be closed down for upgrading, therefore, fuel oil exports from them is not to be expected.
SOCAR specialists say that the above-said move is the only existing solution, with all its 'unpopularity' (they will evidently have to take out the money from the Petroleum Fund or from the gold/currency reserve of the country). Experts say that, considering the current situation, the traders or oil exporters on the Eastern coast are unlikely to agree to let Azerbaijan to borrow their oil and have it paid for in the summer. As a rule, the world crude and products' prices drop in the summer season, and companies may lose on such a deal. Another way out may be to use the so-called hedging, i e insuring the deal for a certain period; in this mode, seller is protected against reduction of prices in the world markets. However, expert nearly dismisses this solution as hardly feasible: for as long as exporters and traders are happy with the existing export mechanisms, they will not want to change it. As regards the hypothetical importation of fuel oil, it is commercially untoward to SOCAR.
The company will have to import fuel oil at $130-140 per ton, and then sell it in Azerbaijan at the internal price of $52 per ton. SOCAR does not even think about buying the needed volumes from AIOC. Such a deal would be violation of the law on protection of overseas investments and would be regarded as a pressing on overseas companies. Pity, for it would be a nice way out of the energy trap. 'But this is more on the political side and is therefore the matter of principle with the Azeri side,' we were told at SOCAR.