TURKMENISTAN - E&P Offers.

Onshore and offshore areas have been opened for exploration and JV developments since 1991. The first tender in 1998 was unsuccessful as Ashgabat included offshore blocks disputed by Azerbaijan and Iran. A second tender was not issued as planned on March 16, 2000. Instead, the oil and gas ministry held roadshows in Houston, London Ashgabat and negotiations with companies were direct. The results were not encouraging.

In 2001 the government offered 32 offshore blocks. Companies interested in the offers and still negotiating with Ashgabat include ConocoPhillips, ChevronTexaco, TotalFinaElf, Agip, Wintershall, Maersk, Petronas and JNOC. Negative experiences suffered by Bridas of Argentina and the Dutch company Larmag had persuaded several Western firms to hold back from entering the Turkmen energy scene.

Bridas' rights to export its oil output from the Keimir JV on the Caspian coast were suspended in Nov. 1995. Bridas later resorted to international arbitration. In Jan. 1997, a Paris court ordered Ashgabat to lift its ban. President Niyazov was angered by the company's action as it exposed his regime, while the government accused Bridas of having taken advantage of its lack of experience and exacted "unfair terms" in its 1993 PSA (see Part 2).

In the petroleum law, issued in March 1997, there are clauses increasing the state's proceeds from production as E&P ventures become more successful. Executives at the state agency for foreign investment said during a March 1997 conference that the Bridas case and other problems would not have arisen had there been a clear law before the Bridas PSA was negotiated.

According to the Oil and Gas Industry and Mineral Resource Minister, Kurbannazar Nazarov, Turkmenistan needs $25 bn in foreign investment into its oil and natural gas sectors between now and 2010. Although the country has attempted to ease restrictions on foreign investment, many layers of regulation remain in place. Turkmenistan maintains prohibitive rules that prevent companies from exporting oil or gas. Since foreign investors do not have access to export pipelines (state-run companies currently own all of the country's pipelines), they are forced to sell the oil and gas they produce in Turkmenistan through the state commodities exchange or send it to refineries.

Oil and gas are sold in Turkmenistan at fixed prices that are well below world market levels. As a result, several projects that could substantially increase Turkmenistan's oil production have stalled. In an effort to create a better business climate to attract foreign investment, in June 1998 the Turkmen government restructured its petroleum industry into several state-owned companies. The most important are the following:

TurkmenNeft accounts for the bulk of Turkmenistan's oil output and also produces some natural gas (see Part 2).

TurkmenGaz, a gas producer, accounts for the bulk of the country's output of natural gas.

TurkmenNefteGaz markets oil and gas in the country (see DT).

TurkmenGeologiya is the oil and gas explorer.

In Aug. 2001 TurkmenGeologiya found gas at the Yashul-Dele block on the right bank of the Amu Darya River in east Turkmenistan. The well, targeting Callovian/Oxfordian carbonates, flowed at 2.5 MCF/day. Earlier in 2001 it tested 35.3 MCF/day of gas in a fourth well it drilled in the Bereketli field, in the Amu Darya Basin. This field, discovered in 1993, is said to have proven and probable reserves of 131 BCF of gas and 2.3m barrels of condensate.

According to the Oil, Gas and Mineral Resources Ministry in 2002, Turkmenistan needed $25 bn in foreign investment into its oil and natural gas sectors between then and 2010. Although the country has attempted to ease restrictions on foreign investment, many layers of regulation remain in place. Turkmenistan maintains prohibitive rules that prevent companies from exporting oil or gas. Since foreign investors do not have access to export pipelines (state-run companies currently own all of the country's pipelines), they are forced to sell the oil and gas they produce in Turkmenistan through the state commodities exchange or send it to refineries.

Oil and gas are sold in Turkmenistan at fixed prices that are well below world market levels. As a result, several projects that could substantially increase Turkmenistan's oil production have stalled. In an effort to create a better business climate to attract foreign investment, in June 1998 the government restructured its petroleum industry into several state-owned companies. The most important are the following:

TurkmenNeft accounts for the bulk of Turkmenistan's oil output and also produces some natural gas (see Part 2).

TurkmenGaz, a gas producer, accounts for the bulk of the country's output of natural gas.

TurkmenNefteGaz markets oil and gas locally and controls the pipelines (see DT).

TurkmenGeologiya is the oil and gas explorer.

In August 2001 TurkmenGeologiya found gas at the Yashul-Dele block on the right bank of the Amu Darya River in east Turkmenistan. The well, targeting Callovian/Oxfordian carbonates, flowed at 2.5 MCF/day. Earlier in 2001 it tested 35.3 MCF/day of gas in a fourth well it drilled in the Bereketli field, in the Amu Darya Basin. This field, discovered in 1993, is said to have proven and probable reserves of 131 BCF of gas and 2.3m barrels of condensate.

Schlumberger is the only foreign service company operating at oilfields in western Turkmenistan, under a five-year contract with the state-owned oil producer TurkmenNeft worth $36m signed earlier in 2004. Schlumberger has worked in Turkmenistan since 1998. Its first five-year contract, signed in 1998, expired in November 2003.

In March 2000, Balkan Exploration Co. reported a discovery of 16 BCM of gas in the Karabogaz and Ekerem regions in the west of the country. This gas is suitable for export through the pipeline to Iran.