IHS Global Insight Perspective | |
Significance | Turkmenistan state television has reported that Chevron, ConocoPhillips, Houston-based TX Oil, and Abu Dhabi-based Mubadala Oil and Gas have been named as preferred bidders for the rights to drill in Blocks 9 and 20 in Turkmenistan's sector of the Caspian Sea. |
Implications | The invitations to the four foreign companies come as President Gurbanguly Berdymukhammedov is pushing for better progress in the development of Turkmenistan's offshore hydrocarbon reserves and seeking an increase in the Central Asian country's overall gas production. |
Outlook | Western companies are slowly making inroads in Turkmenistan, but progress remains frustratingly slow, and the Central Asian country's vast onshore gas reserves remain off-limits—except to China. |
Another Baby Step
If progress is measured in small victories, then the news announced on Friday (13 August) on Turkmenistan state television can be considered progress for Western oil companies seeking to break down the door to the Central Asian country's oil and gas reserves. State television reported that U.S.-based Chevron, ConocoPhillips, and TX Oil, together with Abu Dhabi-based Mubadala Oil and Gas, have been named as preferred bidders for the rights to two blocks offshore Turkmenistan. President Gurbanguly Berdymukhammedov ordered the State Hydrocarbon Management and Use Agency to "choose the most attractive proposals for Turkmenistan for the development of blocks 9 and 20", according to the report.
Although nothing is official—and issuing the rights to Block 9 is problematic in that part of the block lies in waters that are disputed with Azerbaijan—the "invitation", such as it is, still represents a step forward in Turkmenistan for Western oil companies in general and U.S. companies in particular. Berdymukhammedov came to power in 2007 pledging to open up Turkmenistan to foreign investment in its oil and gas sector, leaving Western energy firms salivating over the Central Asian country's vast gas reserves, but three-and-a-half years later, not a single U.S. company has clinched a concession or a production-sharing agreement (PSA) in Turkmenistan (see "Related Articles"). Several European firms—notably RWE Dea and Wintershall—have secured exploration rights in Turkmenistan's sector of the Caspian, as has Russia's Itera, and the China National Petroleum Corp. (CNPC) even has the rights to a prolific onshore gas deposit in south-eastern Turkmenistan, but thus far, U.S. firms have been shut out.
However, this looks likely to change, perhaps in the not-too-distant future. Berdymukhammedov, following a working meeting earlier in the week with government officials to review progress in projects related to the energy sector, ordered the acceleration of oil and gas projects in the Turkmen sector of the Caspian, effectively serving notice to Nuri Muhammedov, chairman of state gas company Turkmengaz, that his job was on the line. Berdymukhammedov gave Muhammedov the tongue-lashing now familiar to virtually all senior Turkmen energy officials, complete with the standard reprimands for poor performance and shortcomings in his official duties, but for once—at least for now—the president opted not to simply sack Muhammedov and replace him with another official in the seemingly constantly rotating door of bureaucrats.
Duly warned, Muhammedov apparently got straight down to business—or, more likely, Berdymukhammedov went about making it his own business. Aside from making the invitations to Chevron, ConocoPhillips, TX Oil (whose chairman, Neil Mallon Bush, is the brother of former U.S. president George W. Bush), and Mubadala, the Turkmen president told government officials to make environmental studies of Block 21 (Itera) and Block 22 (RWE Dea) their top priorities, adding that officials should also make preparations post-haste for the signing of a PSA with Italy's Eni on the Nebit Dag area. The Italian firm was a relative latecomer in the Western push for Turkmenistan acreage, having acquired Burren Energy and its Turkmenistan assets in 2008, but Eni CEO Paolo Scaroni nevertheless has seized on his company's good fortune, solidifying Eni's relationship with Turkmenistan via a series of personal visits with Berdymukhammedov, thereby positioning Eni for potential expansion in the Central Asian state.
Outlook and Implications
Personal diplomacy has not worked for every country president or company CEO that has come to the capital, Ashgabat, to woo Berdymukhammedov since February 2007, however. Many an executive or government official has come to Turkmenistan, only to leave empty-handed, albeit with vague promises of co-operation and friendship. Convincing the Turkmens to sign on the dotted line has become an exercise in frustration, while the effort among Western companies and governments, in particular, to sway Berdymukhammedov to open up the country's vast onshore gas fields to foreign investment has been unsuccessful thus far. Nevertheless, the invitations to the three U.S.-based companies to bid on the rights to Blocks 9 and 20—coming just a week after Richard Morningstar, the U.S. Special Envoy for Eurasian Energy, met with Berdymukhammedov in Ashgabat—must be considered progress in Turkmenistan.
CNPC, which holds the rights to the Bagtyiarlyk field and gas fields on the right bank of the Amu Darya River in eastern Turkmenistan, owes its position in the Central Asian state to China's voracious energy appetite and the long-term gas supply deal that Turkmenistan signed with China in 2006, before Berdymukhammedov took over following Saparmurad Niyazov's sudden death. Although they have been shut out of the onshore bonanza, Western firms can only hope that a similar gas purchase and supply deal that cements Turkmenistan's ties to Europe will strengthen their hand in clinching exploration and development rights on Turkmenistan's sector of the Caspian. Turkmenistan estimates that its sector of the Caspian Sea contains 11 billion tonnes (80.6 billion barrels) of oil and 5.5 tcm of gas, but the only way to truly find out is by signing deals and getting down to actual exploration, development, and production. Turkmenistan needs to get beyond baby steps and begin to walk if it ever wants to truly tap into its Caspian hydrocarbon potential.
Related Articles
- Turkmenistan: 4 June 2010: Eni Aiming to Team Up with SOCAR to Ship CNG from Turkmenistan to Azerbaijan
- Turkmenistan: 24 May 2010: Turkmenistan Opts to Begin Construction of East-West Gas Pipeline on Its Own
- Turkmenistan: 15 April 2010: Turkmenistan Touts Increase in South Yolotan Gas Reserves
- Turkmenistan: 4 February 2010: Turkmen President Invites French Companies to Invest in Hydrocarbon Projects on Caspian Shelf
- Turkmenistan: 30 December 2009: Foreign Firms Win Contracts to Develop Gas Field Infrastructure in Turkmenistan
- Turkmenistan: 14 December 2009: Chinese, Central Asian Leaders Celebrate Historic Launch of Gas Pipeline
- Turkmenistan: 26 November 2009: Eni, Turkmenistan Sign MoU on Co-Operation in Energy Sector
- Turkmenistan: 18 November 2009: Western Firms, Governments Renew Push for Access to Onshore Gas Projects in Turkmenistan
- Turkmenistan - Azerbaijan: 2 October 2009: Turkmen President Aims for Compromise in Caspian Dispute with Azerbaijan
- Turkmenistan - Azerbaijan: 28 July 2009: Risks and Rewards Abound in Turkmen Plans for Caspian Legal Action