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Turkmenistan - Exploration/E&P Terms.

President Berdimukhamedov has taken steps to improve the legal policies and institutional capacity to facilitate E&P investment in the petroleum sector. In early 2015, the government got a new subsoil law passed to help IOCs get offshore blocks on improved terms. Chinese E&P investments in this country have risen sharply since 2009, when the first gas pipeline to that vast market went on stream. There is still scope for further improvement of Ashgabat's E&P terms, a further opening of this sector and increasing transparency related to information and reserve audits.

In March 2007, Ashgabat established a new petroleum regulatory body separate from the central cabinet to provide greater revenue transparency and initiate more foreign investment. Officials then hoped to attract $46bn in petroleum investment by 2010 - though this is yet to be attained; and the country allocated about $3bn in 2007. The European Bank for Reconstruction and Development (EBRD) estimated 2007 foreign direct investment (FDI) levels at $753m. But this has risen considerably thanks to China's further involvement in the petroleum sector.

Companies from the Canada, China, Germany, Italy, Malaysia, Russia, Turkey and the UAE are operating in Turkmenistan through EPSAs. In particular, such companies as the state-owned China National Petroleum Corp (CNPC - by far the biggest investor in Turkmenistan), Dragon Oil, Petronas, Burried Hill, RWE, Itera, Zarubezhneft, and ENI (which bought Burren Energy) are involved in the development of the Turkmen part of the Caspian Sea.

Ashgabat's priority is signing EPSAs with foreign companies on the development of capital-intensive fields in the Caspian Sea through direct negotiations. Negotiations with such companies as Chevron, ExxonMobil, Total, Gas de France, ENI, BP, Midland Oil & Gas, and several companies from the Far East and the Persian Gulf are being held.

Historically, Turkmenistan had been protective of its onshore basins, allow-ing IOCs to participate only in offshore developments. No EPSAs for onshore blocks are allowed. While President Berdimukhamedov has been receptive to foreign participation, primarily from Asian and Russian firms in onshore fields, he has invited several IOCs to develop the prolific Caspian basins.

In late March 2008, Berdimukhamedov invited IOC investors to participate in development of the South Yolotan-Osman gas fields, a super-giant accumulation of reserves now part of another group of fields called Galkynish. He stressed the importance of IOCs participating in major E&P investment. He has since said reserves at South Yolotan-Osman were estimated at more than 21 TCM. A development plan for this foresees Phase-1 output of 20 BCM/y.

The Darvaza well in Kara-Kum is a bizarre tourist attraction which indicates the presence of a great deal of natural gas beneath the desert sands. Known as "The Door to Hell" and "The Burning Gates", the crater is 60 metres in diametre and about 260 km north of Ashgabat. In 1971, a Russian exploration team was digging on the area when the drill-site collapsed, entirely swallowing the rig and leaving a massive hole which released a huge volume of natural gas. Thinking to reduce the gas discharge, geologists set fire to the escaping gas, believing it would be consumed by the flames in a short time. Remarkably, however, the gas has continued to burn ever since, for 45 years, continuously emitting a bright, eerie light which illuminates the site and can be seen from a great distance.

There has been little exploration in Kara-Kum since 1971, with Turkmen efforts focused primarily on the Caspian Sea, at Dauletabad-Donmez by the Iranian border and along the Amu-Darya Basin bordering Uzbekistan. Since early 2010, however, exploration has increased in the Kara-Kum Desert both at the massive South Yolotan/Osman gas fields (believed to be the world's largest for conventional gas) and at Gutlyayak.

In August 2008, the state news agency reported that more than a thousand oil- and/or gas-bearing areas had been found, over 150 of them had been explored and 50 of those had been or were being developed. In August 2008, the agency reported that gas had been found by TurkmenGaz with exploration well N1, drilled in the southern Gutlyayak section of the central Kara-Kum Desert. The well produced gas and condensate on test at 7.06 MCF/day from a depth 13,254-13,320 ft. The Gutlyayak section is the leading gas/condensate play in the Prikopetdag Low-lands of the oil- and gas-producing Kyrk-Gozli region.

Oil production in June 2009 began at the Yylakly oilfield in Akhal Velayat's Baharly district. Peak production of 1,065 b/d was achieved. TurkmenNeft then began oil and gas development in the near-by Mydar Field.

Turkmenistan's Ministry Oil and Gas & Mineral Resources made sure that development of the massive Galkynysh (including South Yolotan) group of gas fields began in 2012. Now Phase-I is on stream supplying China. An audit by the independent Gaffney, Cline & Associates found the Yolotan group was likely to hold up to 21 TCM of natural gas reserves, placing its reservoir among the world's largest like Qatar's North Field. The ministry in 2009 had said that, once the Kara-Kum Desert fields were fully developed, they will probably produce about 3.53 TCF/year (9,670 MCF/day).

Initially, Ashgabat planned to award the South Yolotan licence to CNPC, but the deal fell through. In May 2009, it was instead given for PetroPars of Iran, an affiliate of the state-owned National Iranian Oil Co. (NIOC), to develop under a fee-based service contract. Exploration and development were to be partly financed by a $3bn loan from China. But PetroPars could not do the job alone. So Ashgabat on Dec. 30, 2009, gave $9.74bn worth of service deals to develop South Yolotan to CNPC units, Sharjah-based Petrofac, and South Korean firms.

Total, ExxonMobil, BP, Chevron, Shell and ConocoPhillips have also sought access to Turkmenistan's onshore gas resources.
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Publication:APS Review Gas Market Trends
Geographic Code:9TURM
Date:Sep 19, 2016
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