Turkmenistan Announces New Oil & Gas Licensing Initiative

The government of Turkmenistan has announced a new licensing initiative, "Turkmenistan 2000," which offers foreign investors the opportunity to negotiate for concessions on 32 blocks in the Turkmen Caspian Sea aquatory. Details were discussed at the 5th Turkmenistan International Oil & Gas Conference (TIOGE), which was officially opened in Ashgabat, Turkmenistan, by the President of Turkmenistan, Saparmurat Niyazov.

Developing the oil and gas industry, by integrating Turkmenistan into the worldwide oil and gas matrix is one of the government's highest priorities. The President noted that it was, therefore, desirable to create an attractive climate for foreign company investment, which could be achieved by means of an Open Door Policy.

The President stated that, "Oil, gas, and gas condensate production in Turkmenistan increased last year, and Turkmenistan's vast proven gas reserves (estimated to be the fourth largest in the world) are the target for a greater export drive to world markets." Significant discussions with Turkmenistan's Southern Caspian neighbor Iran have been taking place and a new gas pipeline from West Turkmenistan to Iran is now operational. Further, a new gas supply agreement has been signed with the Russian state gas company, Gazprom, and a dialogue continues with the Russian Government in a bid to increase the supply of gas to that country. Additionally, an important cooperation agreement was signed in November 1999, between Turkmenistan and Turkey to market Turkmenistan gas in Europe.

Acknowledging the President's initiative in developing an oil and gas strategy, Deputy Prime Minister Gorbanmuradov said, "that with the right amount of investment in the oil and gas sector, the next 10 years should see Turkmenistan production increase to 48 million tons of oil and 120 billion cubic meters of gas." Improvements to refining capacity, oil and gas transport routes, development of the petrochemical industry and gas liquification plants are part of the plan. Major international oil companies such as ExxonMobil, Petronas Carigali, Lasmo, Dragon Oil, the Chinese National Petroleum Corp., and a significant number of oil field service companies have made major investments in Turkmenistan, helping the country to reach this goal and guiding Turkmenistan in its adoption of international business standards.

Mr. Arazov, Minister for Oil and Gas Industry for Mineral Resources stated the stable political and economic climate of Turkmenistan should now be attractive to foreign investors, and cited the example of Western Geophysical, which has made a significant investment in collecting new scientific data in the Central and Southern Caspian to help with the understanding of the hydrocarbon prospectivity of the offshore Turkmenistan sector.

A new seismic interpretation study, commissioned by the government and based upon the latest data, suggests the presence of additional large structures and confirms known structures, according to Arazov. The government was assisted by a joint working group consisting of representatives from Minneft, State Concerns Turkmen Geology and Turkmenneft, and Western Geophysical. It is estimated that the reserve potential could be as high as 11 billion tons. Presentations from Western Geophysical described the Turkmenistan Caspian Sea as a unique geological province, featuring large untested structures.

Babaev, Deputy Minister of Oil and Gas, revealed the strategy and new licensing initiative, Turkmenistan 2000. "We have tried to understand the issues that would create a good investment and low risk climate for foreign companies and have built this into the strategy. Discussions with overseas experts have helped us to define the details of the strategy and the new interpretation study has provided us with a valuable insight into the nature of the hydrocarbon system that is active in our sector of the Caspian. This, in turn, has helped us to define a new license block structure that will be of interest to oil companies."

Following further technical seminars in London, Houston, and Ashgabat, oil companies will be invited to enter into direct negotiations with the Government of Turkmenistan for any of the 32 blocks now on offer, which covers 76,000 sq. km. Babaev further stated that, "A Model Production Sharing Agreement (PSA) with flexible terms will form the basis for our discussions with prospective investors and this will include sufficient provision to protect the investors from any geo-political risk."