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2022  N3-4(204-205)
ECONOMY
INVESTMENT PRIORITIES
The International Forum on attracting foreign investment in the oil and gas industry of Turkmenistan discussed the priority areas for development of the fuel and energy complex and specific projects in this area. The forum was held in Ashgabat in the spring of 2022 with some participants joining the forum online. It brought together representatives of more than 100 companies from 35 countries, which is evidence of the growing investment attractiveness of Turkmenistan.
It is noteworthy that among the traditional areas for investment in this industry, including exploration, production, processing of hydrocarbons, development of pipeline infrastructure, there emerged a new promising niche, such as hydrogen energy and the so-called green technology of renewable energy sources. It is this area that becomes increasingly attractive for international investors which Turkmenistan plans to establish and actively develop.
As was emphasized at the forum, Turkmenistan is the largest player in the Asian oil and gas market. The country’s hydrocarbon resources are estimated at more than 71 billion tons of oil equivalent, including more than 20 billion tons of oil and more than 50 trillion cubic meters of natural gas. Thus, Turkmenistan ranks fourth in the world in terms of proven natural gas reserves after Russia, Iran and Qatar.
It was also noted that a stable economic and political situation in the country, an effective legal framework that makes Turkmenistan a reliable partner for cooperation and investment in the oil and gas industry are among the main factors of Turkmenistan’s attractiveness for foreign investors.
One of the world largest gas fields called “Galkynysh”, whose reserves together with the nearby “Yashlar” and “Garakel” deposits are estimated at 27.4 trillion cubic meters, is currently being developed as part of specific projects in partnership with foreign companies.
The transnational gas pipeline Turkmenistan – Uzbekistan – Kazakhstan – China launched in December 2009 is an example of successful mutually beneficial cooperation. About 40 billion cubic meters of natural gas are exported to China through this pipeline annually. In general, over 320 billion cubic meters of Turkmen gas have been exported since the start of operation of the pipeline, consisting of three parallel lines (A, B and C). In the near future, the route of the 4th line of this gas pipeline will be constructed, helping to increase its capacity by another 25 billion cubic meters of gas per year.
According to Vice President of the China National Petroleum Corporation (CNPC) Huang Yongzhang, in the future, under the leadership of the heads of the two states, the sides will strengthen cooperation in the area of natural gas, open up opportunities for Turkmenistan to enter the large Chinese market and contribute to the large-scale development of the oil and gas industry of Turkmenistan.
Turkmenistan currently exports natural gas to China and Russia. In 2021, about 34 billion cubic meters of gas were exported to China, and about 10 billion cubic meters were exported to Russia. In addition, a trilateral agreement on swap gas supplies took effect in January 2022. It was signed by Turkmenistan, Iran and Azerbaijan in December 2021. The agreement provides for supply of 1.5–2 billion cubic meters of Turkmen gas to Iran in exchange for supply of similar volumes of Iranian gas to Azerbaijan. Moreover, Tehran and Ashgabat are discussing the prospects of further increasing gas supplies under a trilateral swap agreement.
Taking into account the current situation in the world energy market, many European countries are reconsidering their views on energy security. In this regard, organizing exports of Turkmen natural gas to the European market is becoming ever more important.
In fact, during the investment forum, a proposal was made by Trans Caspian Resources (USA) to implement a project on the Trans-Caspian connector that will allow supplying Turkmen natural gas to Azerbaijan and further through the South Caucasus to Turkey and the EU countries that will have greater demand for natural gas.
It is expected that the Trans-Caspian connector will use the existing infrastructure in the Caspian Sea in Turkmenistan and Azerbaijan, allowing the supply of 10–12 billion cubic meters of Turkmen natural gas per year. According to preliminary estimates, the implementation of the project will take about four months and require investments worth of 400 million US dollars, which is much cheaper than the cost of the large-scale Trans-Caspian gas pipeline project that was on the table earlier.
As part of the forum, a teleconference was also held with Turkmenistan’s exhibition pavilion at the World Exhibition “EXPO–2020” (Dubai, UAE), discussing the role of Turkmenistan in ensuring regional energy security. At this session, representatives of foreign companies such as Dragon Oil, Fluxys, Gaffney Cline shared their experience of partnership with Turkmen enterprises.
The forum participants also discussed the construction of the transnational gas pipeline Turkmenistan – Afghanistan – Pakistan – India (TAPI). As was noted, implementation of this project will open up a great path for building partnerships between the countries of the region, developing their economic potential and contribute to strengthening peace in the region.
The forum participants were briefed on the work carried out by the Research Institute of Natural Gas of the State Concern “Turkmengas” to solve the problem of a man-made crater in Darvaza, where natural gas has been coming out and burning for more than 50 years. The task of extinguishing this crater, widely known outside of Turkmenistan as “Gates of Hell”, and stopping harmful gas emissions was set by the government of the country for the specialists of the oil and gas complex in January 2022. As of today, proposals for solving this problem have been received from scientists from Belarus and Slovenia. The European Bank for Reconstruction and Development (EBRD) also offered its financial assistance on this issue. An international scientific conference will be held in Ashgabat this summer for comprehensive discussion and search for solutions to the problem of the Darvaza crater.
New projects aimed at the large-scale development of the oil and gas industry and its integration into the international energy system will be implemented as part of the National Program on the Socio-Economic Development of Turkmenistan for the next 30 years that was adopted in March 2022. This program provides for an important aspect, such as the establishment of innovative industries for processing of hydrocarbons, diversification of the export potential of the fuel and energy complex, establishment of a multi-vector pipeline system for exports of energy resources. These plans will be implemented with the support of to-be-constructed modern complexes specializing in the processing of oil and natural gas, acceleration of the industrial development of promising fields through the use of digital technologies, modern equipment and software.
This program provides for a phased increase in the capacity of the Turkmenistan – China gas pipeline, construction of the TAPI gas pipeline, commissioning of new fields, construction of large industrial petrochemical facilities, commercial gas production plants and gas compressor units. In each region of the country, new gas chemical complexes will be built to produce polyethylene and polypropylene, rubber and other products.
The priority tasks include increasing exploration work to search for new oil and gas deposits, drilling exploratory wells, developing new 3D modeling methods and introducing 4D technologies to optimize oil and gas production at oil and gas fields. It also provides for the introduction of advanced technologies to increase productivity of wells in oil and gas fields, boosting drilling operations, establishment of high-tech industries based on highly efficient and environmentally friendly technologies. At the same time, a complete chain will be created – from extraction and processing of raw materials to production and sale of competitive products with high added value.
Greater attraction of foreign investment and involvement of companies to solve these tasks is the key aspect of the state strategy in the fuel and energy sector. In this context, a favorable investment climate and conditions for long-term, mutually beneficial cooperation in the energy sector are being created. To date, Turkmenistan has established business contacts with large foreign companies with advanced technologies, as well as financial institutions and international organizations.
Among them is the China National Petroleum Corporation (CNPC), participating in the development of the largest gas field “Galkynysh”, exploration and development of the contract area “Bagtyyarlyk” on the basis of a production sharing agreement, commissioning of a powerful gas compressor station at “Malay” field. Well-known companies such as Dragon oil (UAE), Petronas (Malaysia), Eni (Italy) and others have for many years been successfully operating in the Turkmen sector of the Caspian Sea and its coastal zone on the basis of production sharing agreements. New prospects for increasing the production of hydrocarbon resources of the Caspian Sea are opening up following the memorandum on joint exploration and development of “Dostluk” field signed in January 2021 between the governments of Turkmenistan and Azerbaijan.
The high level of oil and gas production in Turkmenistan is ensured by the use of efficient technologies and methods of field development. In this regard, cooperation with experienced foreign companies is of particular importance. One of the successful examples of such partnership is cooperation of the State Concern “Turkmenneft” with the public joint-stock company (PJSC) “Tatneft” (Republic of Tatarstan, Russian Federation) under an agreement for the provision of services to enhance oil recovery at “Goturdepe” field, signed in 2010. Following the ground work carried out at the wells of this field using Tatneft’s technologies, the period of their maintenance-free service increased 6 times. As a result, hundreds of thousands of tons of extra oil were obtained. In March this year, the partners signed an additional agreement that provides for work on at least 550 oil wells at “Goturdepe” field to increase their productivity through the introduction of modern technologies and equipment.
The Conceptual Strategy of Development of the Turkmenbashi Complex of Oil Refineries (TCOR) and the Seydi Oil Refinery is currently being worked out with the view of further developing the oil refining industry. There will be defined the specific parameters of their development, justified expediency of increasing the range of petroleum products that are in demand in the world market and explored opportunities for modernization of existing processing installations and construction of new ones based on demand in the foreign markets.
The commercial products manufactured by the TCOR include many types and brands of refined products. Among them are liquefied petroleum gas, various brands of motor gasoline and diesel fuel, kerosene, synthetic and semi-synthetic oils, petroleum and calcined coke, petroleum bitumen of various grades.
The range of products by the TCOR has recently been complemented with A-1 jet fuel, new brands of polypropylene film and synthetic oil for cars. Production of high-octane environmentally friendly AI-98 gasoline in accordance with Euro-5 and Euro-6 standards has also been launched.
Setting up the production of hydrogen fuel is viewed as a new and promising area for Turkmenistan. In January this year, the government approved a roadmap for development of international cooperation in the field of hydrogen energy for 2022–2023. It is aimed at creating an export-oriented hydrogen energy industry with highly qualified specialists and using modern technologies. The introduction of advanced technologies for production of low-carbon energy is a priority aspect for implementation of the roadmap. It is of great importance for solving problems related to protection of environment and climate change.
Production of alternative and renewable types of energy on the basis of solar and wind energy technologies will also be widely developed, and investments in “green” energy technologies will be increased. The country’s first solar and wind power plant with a total capacity of 10 MW will be built by 2025 in Serdar district of Balkan province. It will supply electricity to the residents of settlements near the Turkmen lake “Altyn Asyr”. Funds for construction of this power plant will be provided by the Abu Dhabi Development Fund (UAE) under a loan agreement worth 25 million US dollars. Implementation of this pilot project will help train national professional staff and create new jobs.
Turkmenistan actively cooperates with the OSCE Center in conducting research in the area of renewable energy sources and developing a national policy in the field of energy security. This contributes to the development of major directions of Turkmenistan’s strategy on the gradual transition to the low greenhouse gas emissions economy, efficient use of natural gas and oil products and greater use of alternative energy sources.

Oleg LUKIN


©Turkmenistan Analytic magazine, 2005