TURKMENISTAN - Part 3 - Exports & Logistics.

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*** Could Brent's Spot Price Continue To Overtake WTI's When The Heat Is On? - Will Crude Reach $40/B Level This Winter? But Some Predict A Mild Season Ahead

** CP Abdullah's Promise To Clinton Will Be Fulfilled

Turkmenistan's exports in 2000 are planned to average about 20,000 b/d (i.e., 1 million tons/year) of crude oil and 600,000 tons/year of refined petroleum products. They reached this average in June and the export volumes now are higher. Oil exports could reach almost 500,000 b/d by 2006/7 if the country has secured good outlets to the major markets in the meantime.

The government is eager to see oil exports increase as rapidly as possible, to cash in on high petroleum prices on world markets while demand is strong (see the global perspective for oil on pages 3-4 of this OMT edition).

Turkmen gas exports have fallen sharply from a 1989 peak of 62.4 million tons of oil equivalent. The fall in gas output and exports was particularly steep in 1997 and 1998 because the Russian gas monopoly Gazprom cut access to its pipeline system for Turkmen gas. In the previous years, most of Ashgabat's CIS clients had failed to pay their bills. They had reduced purchases since 1992, with the country still almost totally dependent on the old Soviet pipeline system for export.

A variety of gas pipeline projects have been proposed for exports to bypass the Russian system. Only one gas pipeline to Iran is in place, on stream since late December 1997, but with a limited capacity. Projects for Turkmen gas to be pumped to Europe and the east are being promoted by some of the biggest energy companies in the world. The US is pushing for a trans-Caspian system to Europe - to bypass Russia and Iran - for all the Central Asian exporters of oil and gas (see Gas Market Trends).

Crude oil exports are moving mostly to Iran in swap deals for the JVs involving foreign companies. Despite pressure from the US, Iran is projecting itself as the most viable outlet for Central Asian oil and gas exports. Tehran's Oil Minister Bijan Zanganeh says up to 1.5m b/d of crude oils from Central Asia and the Caucasus could be exported through swap deals with the state-owned National Iranian Oil Co. (NIOC) and through a pipeline from Iran's Caspian port of Neka to Tehran now under implementation.

A 2m b/d export pipeline to take crudes from Azerbaijan, the Russian and Kazakh sectors of the Caspian Sea, onshore Kazakhstan, onshore and offshore Turkmenistan and Uzbekistan across Iran's territory to its Gulf port of Shah Bahar is to be presented for the first time at the 14th Annual APS Conference.

The conference, Middle East Strategy to the Year 2013, is to be held at Holiday Inn Hotel, Nicosia, on Oct. 9-11, 2000. This project will be presented by Mr. Koichiro Nagata of Japan. Other prominent speakers will outline the project's geo-strategic importance and Japan's new strategy of backing projects that will fall in line with its energy supply security. (Apply to APS Conferences, FAX [phone]. E-mail: [e-mail]).

Bridas was the first foreign operator in Turkmenistan to sign a swap deal with NIOC in 1995. But the Argentinian firm saw its export licence suspended by Ashgabat in November that year (see OMT No. 11). Dragon Oil of Ireland, operator of the Larmag-Cheleken JV (SP 44), can only export about 9,000 b/d, with 6,000 b/d going through Iran under a swap deal signed in 1998, and the rest shipped to the Black Sea through Russia's Volga-Don canal.

Dragon and NIOC signed a ten-year swap agreement and its first cargo reached Neka on July 24, 1998. The volume to be swapped will rise above 60,000 b/d in the coming years. Dragon's capacity is planned to increase to 85,000 b/d by late 2000 or early 2001.

Monument Oil & Gas of the UK (now part of Lasmo, which bought it in 1999) and NIOC on April 23, 1998, signed a swap deal for 4,000 b/d in 1998/99 and for up to an average of 70,000 b/d to be reached between 2000 and 2005. The first cargo, a sweet crude oil 30-36[degree sign] API, reached Neka in June 1998. The crude was refined and distributed in northern Iran, as in the case of Dragon's Cheleken Blend of crudes. An equivalent volume of Iranian crude was exported from NIOC's Persian Gulf terminal for the company's account - as it is doing for Dragon and others.

ExxonMobil has taken its share of output in Turkmenistan to the Black Sea through Azerbaijan and through the Volga and Don rivers. In the latter route, the US super-major has used the tankers of a Russian-UK JV called Volga Sumo Transport & Trading (VSTT). This is a 30-day journey in which VSTT has a virtual monopoly.

Lasmo, whose Monument Oil & Gas first concluded a deal with VSTT as it began E&P negotiations with the Turkmen government, also uses the Don-Volga route to the Black Sea for exporting the rest of its share of the output (see the JV's profile in Gas Market Trends No. 11).

Burren Energy of the UK, an E&P firm which active in trading and shipping, exports oil from its Nebit Dag fields near Cheleken. It is the key partner in VSTT. Its fleet of tankers plies the Don-Volga canal system in the summer and ferries oil to Azerbaijan and Iran for on-shipment in the winter.

Neka has been refurbished to handle 300,000 b/d of crudes coming from Central Asia to Iran. Although such a volume is not likely to be reached soon, the amount of crudes being swapped in Iran from Kazakhstan is increasing. Iran intends to expand the port's capacity further to handle other trades from Central Asia.

NIOC has been swapping limited quantities of crude oil from Kazakhstan since early 1997. It receives the crudes by tanker at Iran's Caspian ports and delivers equivalent amounts of Iranian crude to Kazakhstan's customers in the Persian Gulf.