Turkmens Seek Foreign Bids for Offshore Gas Fields.
Turkmenistan, holder of the world"s fourth-largest gas reserves, is seeking bids from foreign producers to develop untapped Caspian Sea deposits as Europe, Russia and China compete for supplies.
The government is discussing investment in offshore blocks directly with several international producers, Acting Energy Minister Bayramgeldy Nedirov said last week in Abu Dhabi, declining to name the companies. KazMunaiGaz National Co., Kazakhstan"s state oil company, said it may bid.
?Russian and Asian companies are most likely to show an interest in new offshore acreage, along with some Western independents,? Julian Lee, senior energy analyst at the London- based Centre For Global Energy Studies, said in an e-mail. ?Offshore blocks will be of less interest than onshore opportunities, which remain off-limits to foreign investors.?
Turkmenistan, where foreign investment was held back until the 2006 death of isolationist President-for-Life Saparmurat Niyazov, ships gas to Russia and Iran, and opened a pipeline to China last year. The European Union, seeking less reliance on Russia, wants Turkmen gas for the proposed Nabucco pipeline, although plans to build a link across the Caspian Sea have been frustrated by unresolved marine borders.
International oil companies such as Chevron Corp., BP Plc and Royal Dutch Shell Plc have sought access to the country"s inland gas resources, while spurning less explored offshore deposits. Only China National Petroleum Corp. has succeeded in signing an onshore production-sharing agreement in 2007 to develop the Bagtyyarlyk area near the Uzbek border.
BASF SE"s Wintershall AG unit, operator of two offshore blocks, has informed the Turkmen authorities that it"s going to surrender the project because ?the exploration potential is too low,? Stefan Leunig, a spokesman for the Kassel, Germany-based company said by phone yesterday. Dubai-based Dragon Oil Plc, developing the Cheleken area, missed a 15 percent production growth target last year, the London-listed explorer said on Jan. 22.
Turkmenistan has five offshore production-sharing agreements with foreign producers in its part of the Caspian, including Malaysia"s state-owned Petroliam Nasional Bhd., and Itera, once Russia"s biggest gas producer after OAO Gazprom.
Turkmenistan now offers only service contracts to its onshore reserves, which include South Yolotan-Osman, one of the world"s largest untapped gas deposits.
KazMunaiGaz is studying the offshore blocks and may bid, Chief Executive Officer Kairgeldy Kabyldin said in Abu Dhabi. Kazakhstan"s sector of the Caspian Sea is home to the Kashagan development, its biggest oil deposit by reserves.
?Over the next five years Turkmenistan will be offering more offshore fields because they can"t tap them on their own,? said Alexei Kokin, an oil analyst at IFC Metropol in Moscow. ?They are a little late on offshore compared to Kazakhstan.?
CNPC and South Korea"s LG International Corp. won service contracts for as much as $9.7 billion for South Yolotan in December. They got no stake in the field"s reserves or output.
U.S. and European oil companies such as Exxon Mobil Corp. and BP Plc have yet to agree to a major investment in Turkmenistan. Chevron is interested in onshore projects as a partner, not a service contractor, said Douglas Uchikura, head of the company"s operations in the Central Asian country.
Turkmenistan is inviting foreign companies in a bid to boost gas output to 250 billion cubic meters a year by 2030, from about 78 billion cubic meters, Tim Lambert, vice president of Wood Mackenzie, said at a conference in Moscow on Feb. 4. That goal equals nearly half of the European Union"s gas consumption in 2008, according to BP Plc.
?It"s unrealistic,? Lambert said at the Russia Forum 2010 in Moscow. ?It wouldn"t be possible to get scale of the investment, to get people comfortable with the risks involved to achieve that expansion of production.?
Turkmenistan may still double output to about 150 billion cubic meters by 2020-2022, he said. The problem still remains how to deliver the fuel across the Caspian to Europe, without travelling across Russia through Gazprom"s pipeline network.
?Turkmen gas into Europe via the Caspian Sea is not something we expect to happen,? Lambert said. ?We do not see the construction of a trans-Caspian pipeline taking place.?
Disputes with Iran on the status of the sea create a political barrier to the construction of that link, he said.
China agreed last year to buy as much as 40 billion cubic meters of Turkmen gas annually. Russia resumed purchases of fuel from Turkmenistan in January after a nine-month halt, agreeing to buy 30 billion cubic meters a year. Iran increased gas imports to 14 billion cubic meters a year in January, which will reach 20 billion cubic meters ?shortly,? Nedirov said.