Turkmenistan is important to world energy markets because it contains over 100 trillion cubic feet of proven natural gas reserves. It also borders the Caspian Sea, which contains major oil and natural gas reserves.
Note: Information contained in this report is the best available as of July 2000 and can change.
Turkmenistan has two refineries, located at Turkmenbashi (formerly Krasnovodsk) and Chardzhou. Crude capacity for the two refineries totals 236,970 bbl/d (116,477 bbl/d at Turkmenbashi and 120,493 bbl/d at Chardzhou). Both facilities are slated for modernization and expansion to meet the country's expected increases in oil production and demand.
Work is underway on a $1.4-billion upgrade and modernization of the Turkmenbashi refinery with financing from German and Japanese sources, scheduled for completion in 2004. Meanwhile, Technip was awarded a contract in July 1999 to build a lubricants blending plant in Turkmenbashi. The plant is expected to be completed in 2001.
Turkmenistan contains proven natural gas reserves of between 98-155 trillion cubic feet (Tcf), The largest natural gas fields are in the Amu-Dar'ya basin, with half of the country's gas reserves located in the giant Dauletabad-Donmez field. In addition to Amu-Dar'ya, Turkmenistan contains large gas reserves in the Murgab basin, particularly the giant Yashlar deposit, which contains an estimated 27 Tcf.
With the assistance of foreign investors, Turkmenistan is counting on its large natural gas reserves and potential exports to be the focal point of its economic recovery. The primary short-term task for Turkmenistan is solving the problem of getting its gas to consumers, more than exploration to find new reserves.
Currently, Turkmenistan must rely almost entirely on the Russian pipeline network and a pipeline link to Iran to get its natural gas exports to foreign markets. In 1998, Turkmenistan produced 470 billion cubic feet (Bcf) of natural gas, down from 1.31 Tcf in 1996 and 2.29 Tcf as recently as 1993.
The sharp fall in production in 1997-98 was largely the result of the cutoff of gas supplies to Ukraine due to Ukraine's $1.5-billion debt for previous gas supplies.
There was also a dispute with Gazprom over payments for transportation, with Gazprom demanding to be paid in hard currency rather than in gas. The problems were resolved in late 1998, and gas again began to flow to Ukraine, but supplies were suspended again in mid-1999 due to Ukrainian payment arrears. Negotiations are continuing for a resumption of Turkmen gas deliveries to Ukraine.
Russia is slated to become a major importer of Turkmen gas, under an agreement signed by the Russian and Turkmen presidents in May 2000. Turkmenistan is to sell 350 Bcf of gas to Russia in 2000, rising to 1.4 Tcf by 2002. If fully implemented, this will make Russia the primary export market for Turkmen gas.
As part of its strategy to increase natural gas exports, Turkmenistan is developing alternatives to Russia's pipeline network. The most important proposed project is the Trans-Caspian Gas Pipeline (TCGP), which would run from Turkmenistan under the Caspian Sea to Azerbaijan, through Georgia, and deliver its gas supply to Turkey.
The first phase of the pipeline would handle roughly 565 Bcf per year, with the possibility of an eventual doubling of capacity if transportation onward to Europe can be arranged. Turkey signed a preliminary agreement with Turkmenistan in March 1999 for gas purchases, pledging to begin taking deliveries in 2002.
Another piece of the puzzle fell into place when Shell, which had earlier studied a route across Iran, endorsed the TCGP plan in August 1999. Shell agreed to take a 50 percent stake in the pipeline, with the rest being held by the pipeline developer PSG, a joint venture between Bechtel and GE Capital.
The TCGP has run into difficulties in 2000, however. Negotiations have been protracted, and demands by Turkmenistan for a higher price for the gas and advance payments have been rejected by the consortium backing the project.
In June 2000, PSG partners Bechtel and GE Capital announced that they were suspending their efforts to push the project forward. Shell continues to back the project.
Another Turkmen gas export pipeline runs from Turkmenistan to Iran. In late December 1997, Turkmenistan and Iran opened the 124-mile pipeline linking the Korpedzhe gas field in western Turkmenistan to the town of Kurt-Kui in northern Iran.
The $190-million line currently has a capacity of 141 Bcf, and is expected to rise to 283 Bcf by 2006. During the first three years of operation, approximately 65 percent of gas supplied through the line is to go to Iran as payment for construction costs.
The pipeline is the first in Central Asia to bypass Russia, and was intended to support exports through the Iranian gas grid to Turkey. The prospects for this, though, are clouded by the fact that Iran also wants to export gas to Turkey, and will have much more available once its South Pars field is fully developed.
Another possible route for Turkmen gas exports which was considered in the past was a pipeline stretching from Turkmenistan to Pakistan and possibly India via Afghanistan.
In July 1997, officials from Turkmenistan and Pakistan and representatives from Unocal and Saudi Arabia's Delta Oil signed an agreement to build the Turkmenistan-Afghanistan-Pakistan line.
The 900+mile pipeline would have cost between $2 billion and $2.7 billion, and would have carried approximately 700 Bcf of gas from Turkmenistan's Daulatabad gas field to the central Pakistani city of Multan. In October 1997, Unocal set up the Central Asian Gas Pipeline (CentGas) consortium to build the pipeline.
Construction was scheduled to begin in 1998. However, in early August 1998, Unocal announced that CentGas had not secured the financing necessary to begin the work, and on August 22, 1998, Unocal suspended construction plans due to the continuing civil war in Afghanistan.
Unocal stressed that the pipeline project would not proceed until an internationally recognized government was in place in Afghanistan. The governments of Turkmenistan and Pakistan have continued to discuss the possibility of a pipeline through Afghanistan, including the possibility of exporting gas across Pakistan to India, but it seems unlikely that such a scheme could secure financing in the near future given the risks involved.
A final proposal is a 4,161-mile gas pipeline running from Turkmenistan to China and possibly on to Japan. In September 1998, a final deal between Turkmenistan and China was delayed due to unfavorable results from a preliminary feasibility study.
The presidents of China and Turkmenistan discussed the issue during a meeting in Ashgabat in July 2000, and the China National Petroleum Corporation (CNPC) signed a preliminary agreement with Turkmenistan for natural gas supplies, but it is unclear when or if any concrete action will take place to implement the plan.
Turkmenistan has excess electric generation capacity and has the potential to boost its electricity exports. In 1998, Turkmenistan produced 8.8 billion kilowatt hours (kwh) of electricity of which 2.7 billion kwh was exported.
In May 1998, Turkmenistan announced that a new 220-400 kilovolt power transmission line from Belek, Turkmenistan would be extended through Kum-Dag, Madau, and Kizyl-Atrek to Turkmenistan's border with Iran. The line will enable Turkmenistan to export up to 3.5 billion kwh of electricity to Iran annually.
Turkmenistan and Iran also signed an agreement on the export of Turkmen power to Turkey via the Iranian grid in July 1999. Supplies are expected to commence in fall 2000. Turkmenistan also concluded an agreement with the Taliban authorities in Afghanistan in July 2000 for the supply of electricity to the western Afghan city of Herat.
OIL and GAS INDUSTRIES:
Organization: Turkmenistan's official government agenciesresponsible for natural gas operations, oil production and exploration are Turkmengaz, Turkmenneft, and Turkmengeologiya, respectively.
Major Oil Fields: Kotur-Tepe, Nebit-Dag
Major Oil Refineries (1/1/00 Capacity): Chardzhou (120,493 bbl/d); Turkmenbashi (formerly Krasnovodsk) (116,477 bbl/d)
Major Gas Fields: The Amu-Dar'ya region contains two supergiant fields (including Dauletabad-Donmez) and nine giant fields. The Kopet Dag Trough is the location of additional gas fields.
Source: United States Energy Information Administration
© 2000 Mena Report (www.menareport.com)