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BMI View: Upstream interest in Turkmenistan's growing gas reserves remains strong, with foreign
players, particularly China, eager to gain access to the country's lucrative gas fields. The energy
relationship between Turkmenistan and China continues to strengthen, with continued upgrades to
existing long-term supply agreements and investment commitments. Turkmenistan has made ambitious
gas production targets, raising their own forecasts of gas production in 2030 to 250bcm from 230bcm
previously. Although 2030 is outside our forecast period, the ambitious figures highlight the country's
optimism, which is reflected in our forecasts gas production which we expect will more than double from
70bcm in 2012 to155bcm in 2021.
The main trends and developments in Turkmenistan's oil & gas sector are:
Turkmenistan and China continued to build on their strong energy relationship with a new
commitment in July 2012 for Ashgabat to supply Beijing with 65bn cubic meters per year
(bcm/y) of gas by 2020. Recent analysis conducted by CNPC, found that since the Central Asia-
China gas pipeline was inaugurated in 2009, some 30bcm of gas has been supplied to China
from Turkmenistan. Based on the 6.6bcm that have been traded between the two countries in the
first third of 2012, we expect total volumes to reach around 20bcm this year.
Upstream interest remains strong on the back of the most recent discovery, the South Yolotan
gas field, which has been confirmed as the world's second largest following an appraisal by
auditor Gaffney, Cline & Associates (GCA). The field is thought to contain 13.1-21.2trn cubic
metres (tcm) of natural gas. The former Soviet Republic holds the world's fourth-largest natural
gas reserves and plans to treble annual gas output to 230bn cubic metres (bcm) by 2030, 180bcm
of which would be for export.
However, despite strong interest from foreign players, Turkmenistan's business environment
remains challenging with limited opportunities for foreign players. China's CNPC remains the
only foreign player with an onshore PSC, with foreign firm's upstream participation limited to
onshore service contracts or PSA's for fields in the Caspian Sea.
Foreign participation in the oil sector will help raise output, but liquids production continues to
struggle as attentions increasingly shifts to gas. In 2011, Turkmenistan revised downwards its
targeted production number of 1.35mn barrels per day (b/d) by 2030, a reduction from a
previously reported goal of 2.2mn b/d. While oil production will rise to 217,000b/d in 2012, we
expect output to peak in 2017 at 377,000 b/d, well below government targets.
We are much bullish with regard to our forecasts for the country's gas output, which we predict
will increase at an average rate of 9.3% over the course of our forecasting period, rising from
70bcm in 2012 to 155bcm in 2021 as production rises with new and enhanced development of
exiting fields. While domestic demand will increase from 23bcm in 2012 to 45bcm in 2021,
increased production will still allow for exports of 110bcm.
However while we see significant upside potential to these numbers based on recent discoveries,
we highlight that the poor quality of remaining gas deposits will increase the costs of
development, with sour gas in high pressure, high temperature reservoirs making extensive
processing necessary. Increasing foreign participation in the gas upstream would ensure
Turkmenistan as access to the technical and capital requirements to best tap its extensive gas
Turkmenistan's dependence on oil prices leads to high volatility in the country's export revenues. Our
assumptions of tight supply due to booming demand in emerging markets is clearly an opportunity for the
country. We forecast OPEC basket oil prices to remain elevated and average US$107.05 per barrel (bbl)
in 2012, a figure similar to the 2011 average of US$107.52/bbl in 2012.