FUEL AND ENERGY COMPLEX POTENTIAL
Despite the ongoing pandemic that put on hold almost all international travels, Turkmenistan successfully held three major international oil and gas forums in 2020 that proved the great interest on the part of the international business community in mutually beneficial partnership with Turkmenistan as one of the most important player in the global energy market.
At the outset of the year, on February 24–25, the State Concerns “Turkmengaz” and “Turkmenneft” organized “Oil and Gas of Turkmenistan – 2020” road show in Dubai (UAE) with the view of developing cooperation on construction of the transnational gas pipeline Turkmenistan – Afghanistan – Pakistan – India (TAPI), as well as attracting foreign investment in the country’s oil and gas industry.
The Dubai road show was attended by 300 delegates representing 13 large companies from 40 countries. They were informed that foreign companies operating in Turkmenistan on the PSA terms produced about 80 million tons of oil and condensate and about 120 billion cubic meters of natural gas in the course of implementation of their projects. Among them are Dragon Oil (UAE), Petronas (Malaysia), CNPC (PRC), ENI (Italy), Buried Hill (Canada), international group of companies ARETI that in aggregate invested over USD 27.2 billion in Turkmen projects.
At the same forum, a number of companies announced their intention to join new oil and gas projects in Turkmenistan, including French Total and Technip FMC, Italian Marie Technimont, Saipem and Pietro Fiorentini, Emirati Horizon Energy and Transpetrol, Romanian Komet Group, Arab Dana Group. At the same time, Petrofac company (UAE) expressed willingness to continue cooperation in developing the Galkynysh gas condensate field.
In the autumn, on October 28–29, Ashgabat hosted the XXV International Conference “Oil and Gas of Turkmenistan 2020” (OGT). Because of the global pandemic, the organizers of this business forum, SC “Turkmengaz” and SC “Turkmenneft” jointly with “Turkmen Forum”, decided to hold it for the first time in a hybrid format, combining offline and online events.
However, the partial shift to the online space did not restrict but rather expanded the scope of the conference. According to the organizers, this year OGT attracted the greater attention of international companies, as they had the opportunity to join the discussions of the prospects for the oil and gas market of Turkmenistan from anywhere in the world. About 200 conference participants gathered in the Chamber of Commerce and Industry of Turkmenistan alone, and about a hundred more delegates joined the forum online. The online mode was available to participants from over 70 countries.
As was noted at the forum, Turkmenistan’s status of one of the largest energy suppliers is proved by the assessment of natural gas reserves, including the Galkynysh field, the world’s second largest reserve. As part of the first stage of industrial development of this field, three plants with a total capacity of 30 billion cubic meters of commercial gas per year were put into operation.
China is currently the largest importer of Turkmen natural gas. Three lines (A, B and C) of the Turkmenistan – Uzbekistan – Kazakhstan – China gas pipeline are used to supply about 40 billion cubic meters of gas per year, and in the future the volumes will increase to 65 billion cubic meters per year. Turkmenistan also supplies gas via the Central Asia – Center (CAC) gas pipeline to Russia, and it has all the technical capabilities and resource base for exporting natural gas to the south.
Other than gas exports, Turkmenistan is also increasing deep processing of natural gas, which is expected to occupy a significant place in the national economy in the future. In recent years, several gas chemical complexes have been commissioned in the country. New similar enterprises for production of goods with high added value will be built.
In particular, production of environmentally friendly automobile fuel from natural gas has been set up at a new plant in Akhal province that was put into operation in June 2019. Its annual production capacity is 600 thousand tons of ECO-93 gasoline, which is now exported to Uzbekistan, Afghanistan, Bulgaria, Great Britain, Georgia, Denmark and Russia. Upon completion of the construction of the second phase of this gas chemical complex, its production capacity and the export potential of the country’s oil and gas complex in general will increase.
Inviting potential partners to cooperation, the Deputy Prime Minister in charge of this industry referred to the stable economic and political situation in the country, favorable legislative framework, as well as state guarantees for protection of foreign investments as the main factors of Turkmenistan’s attractiveness.
According to the statistics cited by SC “Turkmengaz” at the forum, the hydrocarbon reserves of Turkmenistan are estimated at more than 71 billion tons of oil equivalent, including more than 20 billion tons of oil and over 50 trillion cubic meters of natural gas. The further development of the Galkynysh field, construction of the TAPI gas pipeline and new processing facilities, including for the gas chemistry sector are part of the immediate plans of “Turkmengaz”, and it intends to attract foreign partners for their implementation.
Energy diplomacy of Turkmenistan as a factor of energy security and sustainable development of the entire region was among the main topics of the conference. This topic was discussed both as an aspect of neutrality and as a specific example of implementation of a large-scale transnational project such as the TAPI gas pipeline.
“Turkmenistan’s neutrality is of great importance for ensuring peace, security and prosperity in the Central Asian region,” head of the British-Turkmen Business Council Ronald Nash said at the OGT 2020. He stressed that Turkmenistan channels enormous natural resources and actively uses diplomacy for these purposes. As an example, Nash cited Turkmenistan’s assistance to neighboring Afghanistan. “The government of Turkmenistan takes practical steps to provide economic support to its southern neighbor, primarily in transport and energy, including the TAPI gas pipeline project,” Nash said.
Speaking at the conference, UN Resident Coordinator in Turkmenistan Elena Panova highly appreciated Turkmenistan’s position on diversification of energy exports. She noted that restoring stable energy supplies to the international markets could play a critical role in combating the pandemic and accelerating economic recovery.
“We support the position of Turkmenistan that economic recovery should take place on fair and transparent principles based on equality, recognition of interests of all participants of this process and reasonable pricing policy. Diversification of energy exports is the most important aspect in achieving this goal,” Panova said.
She recalled that for this purpose Turkmenistan systematically promotes initiatives aimed at increasing the reliability and stability of energy supplies to the international markets. This work resulted in the adoption of two UN General Assembly resolutions in 2008 and 2013 titled “Reliable and stable transit of energy and its role in ensuring sustainable development and international cooperation.” “Turkmenistan also calls for the establishment of a special body – the UN Energy Council, as well as the UN Expert Group on Energy Security,” Panova noted.
Attracting investments in the development of fields in the Turkmen sector of the Caspian Sea divided into 32 license blocks was another important topic of the conference. At present, PETRONAS, Dragon Oil, Buried Hill Serdar Limited, ARETI are carrying out exploration and oil production on some of them under the PSA, while the remaining blocks are subject to negotiations for interested parties.
It is possible that Russian LUKOIL will join the work on development of offshore fields in the Turkmen sector of the Caspian Sea in the future. Speaking online at the forum, head of LUKOIL Vagit Alekperov said, “We are now discussing opportunities for implementation of joint projects, including development of offshore fields. We are very optimistic about prospects for cooperation with Turkmenistan.”
In 2020, Alekperov met with President Gurbanguly Berdimuhamedov twice, in February and September. At that time, the head of LUKOIL confirmed his company’s interest in cooperation with Turkmenistan in production and processing of hydrocarbons, as well as oil and gas chemistry. Berdimuhamedov recommended that LUKOIL together with “Turkmenneft” and “Turkmengaz” work out proposals and submit them for to the government for discussion.
By the way, the State Concern “Turkmenneft” informed the forum participants of its successful experience in drilling super deep wells in the Caspian region. Seven wells have already been drilled to the depth of more than 7 thousand meters at the Uzynada field, obtaining the industrial flow of hydrocarbons. Several more similar wells are currently being drilled. According to the “Turkmenneft” specialists, the discovery of the Uzynada field located near the Turkmen sector of the Caspian Sea multiplies the prospects of discovery of other new fields on the shelf, making development of promising license blocks more attractive for foreign investors.
In March 2019, the SC “Turkmenneft” signed a memorandum of understanding with ARETI that provides for the possibility of ARETI’s participation in projects for development of the Uzynada field.
Promoting the TAPI gas pipeline construction project was another important topic of the forum. It was reported that at the end of August 2020 Turkmenistan and Afghanistan signed a memorandum on selection of plots of land along the Afghan part of the TAPI route. At that time, the Executive Director of “TAPI Pipeline Company Ltd” consortium, Mukhammetmurat Amanov, said that following the completion of the process of purchasing and registering of land plots along the TAPI route, the practical implementation of the project will begin in Afghanistan. It was also reported that construction of the Afghan section would start in the first months of 2021.
On September 30, the SC “Turkmengaz”, “TAPI Pipeline Limited” and “Afghan Gaz Enterprise” signed a memorandum of understanding in the capital of Afghanistan. The memorandum provides for establishment and development of a natural gas market in Afghanistan.
The 1,814-km long TAPI gas pipeline with the design capacity of 33 billion cubic meters of gas per year will run from the Turkmen Galkynysh field through the Afghan cities of Herat and Kandahar, Pakistani cities of Quetta and Multan to the city of Fazilka in western India. The construction of the Turkmen section started in December 2015, and the founding stone for the Afghan section of the gas pipeline was laid in February 2018. The project was approved by Russia, the USA and a number of other countries. The total cost of the project is estimated at USD 8–10 billion.
In September 2020, Gurbanguly Berdimuhamedov and Pakistani President Arif Alvi discussed over phone the timeframe of the start of construction of the TAPI gas pipeline in the Pakistani territory. At the end of November, Deputy Prime Minister and Foreign Minister of Turkmenistan Rashid Meredov, speaking at the High-Level Conference on Afghanistan in Geneva, confirmed that Turkmenistan would start building the TAPI gas pipeline in Afghanistan in 2021.
On December 1, Ashgabat hosted an international conference titled “Sustainable cooperation in the energy sector – the most important condition for global development” in celebration of the 25th anniversary of Turkmenistan’s neutrality. Given the ongoing global pandemic international travel restrictions, this event was held in a mixed format. Nevertheless, the forum brought together delegates from 59 companies from 33 countries, half of which participated online.
As part of discussions of issues relating to international cooperation in the oil and gas sector, the forum participants emphasized the successful implementation of energy diplomacy of Turkmenistan that is based on the principles of neutrality and aimed at implementing joint economic and investment projects. This is also evidenced by the implementation of such a large-scale project as the construction of the TAPI gas pipeline. According to the project participating countries, the TAPI gas pipeline will give a powerful impetus to the economic progress of the region.
Speaking online at the forum, Executive Director of the Global Gas Center Valerie Ducro said that “Turkmenistan can play a significant role in the region thanks to its resources and ongoing projects. I will be pleased to work closely with you, including on promotion of Turkmen gas in Central Asia and Europe.”
Ranking the 4th in the world in terms of natural gas reserves and being the most important exporter of natural gas, Turkmenistan develops its export infrastructure by creating a multi-vector pipeline system. Promising large-scale projects will allow the country to become the largest energy bridge between East and West, Valerie Ducros said. In her opinion, despite the fact that the COVID-19 crisis has now led the world to a deep recession, huge opportunities remain for natural gas, as the technologies in this area are well developed and the final product is quite accessible.
It is noteworthy that within the framework of all forums there were held online meetings of the leaders of the Turkmen fuel and energy complex with potential partners, discussing strategic directions of cooperation in the energy sector.
In early December, President Gurbanguly Berdimuhamedov held a working meeting on development of the fuel and energy complex of Turkmenistan, reviewing the implementation of projects to increase production and export of hydrocarbons, oil and gas processing and prospecting of new fields.
It was reported that “Turkmengaz” together with foreign partners continues developing the Galkynysh field, increasing gas production, building the second phase of the gas-to-liquid plant in Akhal province and installing equipment on the Turkmen section of the TAPI gas pipeline.
“Turkmenneft” conducts prospecting and exploration work on the Caspian coast, takes steps to attract investors to new projects in the Turkmen sector of the Caspian Sea. It was also reported that together with foreign partners Turkmenistan continues work at the Goturdepe field as well as drilling and commissioning of dozens of new wells at the North Goturdepe field.
During the meeting, Gurbanguly Berdimuhamedov outlined the priority areas for development of the industry, including further modernization of the fuel and energy complex enterprises, increasing production and processing of hydrocarbons. He issued instructions on attracting foreign investments and applying the best international experience and modern technologies.