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Turkmenistan - The Natural Resources And The E&P Prospects.

With an area of 488,100 sq km, Turkmenistan has huge natural resources, including the world's fourth proven reserves of conventional natural gas - next to Russia, Iran and Qatar. But if the vast US deposits of non-conventional gas from shales are taken into account, this country's ranking would be No. 5.

Turkmenistan has considerable oil resources, but with proven reserves of conventional crude oil put at 600m barrels for years. There is also a wide range of minerals. The world's third largest deposits of sulphur are found in the Kara-Kum desert, a land mass covering about 80% of the country's territory. There are deposits of potassium, chloride, sodium sulphate salt and other minerals.

Slightly larger than California, Turkmenistan is almost equidistant from the Atlantic and Pacific Oceans and occupies the south-western corner of what was formerly Soviet Central Asia. As the Soviet Union collapsed in late 1991, the Central Asian republics and Azerbaijan declared their independence. Former Soviet Union (FSU) states having ethnic Russian communities are threatened by Putin's regime. In August 2008 it invaded South Ossetia after Georgia took that break-away region (see omt7RusGloblProsp-Aug11-08); and in March 2014 it annexed Crimea (see omt12TurkmGlblProsp19Sep16).

Turkmenistan borders Uzbekistan, Kazakhstan, the Caspian Sea, Iran, and Afghanistan. But its huge energy resources are still partly tied to the Russia-centred FSU supply system.

Turkmenistan and Uzbekistan have abundant oil and gas resources. However, a lack of infrastructure, sufficient foreign investment in petroleum E&P other than China's, regional challenges, inadequate export pipeline infrastructure, and political certainty about the future have been deterrents of both states becoming major energy exporters to the West. Yet they are relatively closer to China, the world's second largest economy and the biggest investor in both countries. Recent E&P deals with IOCs and states may help Turkmenistan and Uzbekistan find alternative export routes outside Russia and leverage their petroleum competitiveness in the region (see gmt14TurkmGasExpts3Oct16).

The other petroleum-rich Central Asian and Caspian states with more favourable investment climates and greater access to markets pose competition for Turkmenistan and Uzbekistan. Both states are eager to diversify export routes for their resources outside of the Russian-controlled pipelines, with China and other East Asian powers having huge energy markets.

A major break-through for Turkmenistan occurred in late 2006 with the death of its Soviet-type dictator, President Saparmurat Niyazov (also referred to as Turkmenbashi) and the election of Gurbanguly Berdimukhamedov as president in early 2007. This has sparked interest and hope for a stable environment for IOC investors. Ashgabat's leadership has since re-invigorated diplomatic relations with China, other Asian powers, Turkey, Europe, and the US, as well as the other Central Asian neighbours after many years of isolation.

IOCs had experienced extreme political challenges and E&P investment impass during Niyazov's era, and several of them exited the country leaving a dearth of capital and technology. Since Berdimukhamedov became president, there has been a more business-friendly climate and international competition for Turkmenistan's petroleum industry has intensified.

There is still no over-arching accord among the five Caspian states on the division of the sea's resources. Russia, Azerbaijan and Kazakhstan in 2003 had signed a trilateral accord on sub-surface boundaries and collective administration of the sea's waters dividing the northern 64% of the Caspian into three un-equal parts using a median line principle, giving Kazakhstan 27%, Russia 19% and Azerbaijan 18%.

The main stumbling block is the position of Iran, which claims 20% of the water area. Offshore development in Turkmenistan and Iran, both having refused to sign the 2003 accord, could fall even further behind. Azerbaijan remains locked in disputes with Turkmenistan and Iran over competing claims to over-lapping petroleum fields. In 2001 Azerbaijan and Iran came close to confrontation as an Iranian gun-boat defied a BP-operated vessel exploring what Baku calls the Alov oilfield and Tehran calls Alborz. Since then, the field has remained un-explored. Disputes between Turkmenistan and Iran over petroleum-rich parts of the southern Caspian remain un-resolved (see the background in down1AzerCasp4July16 and survey of Iran to be serialised in Volume 88 in April 2017).
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Publication:APS Review Gas Market Trends
Geographic Code:7IRAN
Date:Sep 19, 2016
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