FUEL AND ENERGY SECTOR:
FUEL AND ENERGY SECTOR
Turkmenistan is one of the world's major energy states. The oil and gas sector is one of the leading sectors of the country's economy and plays a key role in ensuring the country's export potential. At present, Turkmenistan enjoys new opportunities and the prospect of attracting foreign investments to develop the country's oil and gas complex. The new Law of Turkmenistan "On Hydrocarbon Resources," dated 20 August 2008, forms a reliable legal base for this purpose. The said law governs relations arising in the course of petroleum operations in the territory, over which Turkmenistan has jurisdiction, including offshore operations and within inland water bodies. However, it should be noted that the old Law "On Hydrocarbon Resources" still governs PSAs executed earlier with respect to seven onshore and offshore projects:
• PETRONAS CARGALI (Turkmenistan), a Malaysian company, operates within the contract area Block-1 at Caspi under the Production Sharing Agreement (PSA) signed in 1996. The Company began oil production in 2006. The complex of offshore platforms was assembled onshore in Kiyanly village, where the gas processing unit is also being constructed. The Gas produced in the Block 1 contract area will be processed and exported.
• DRAGON OIL (UAE) operates in the contract area Cheleken at Caspi under the PSA signed in 1999. The Company produces oil from the Djeitun and Djygalibek fields and has already recovered its investment as well as made a profit.
• The exploration operations are also conducted fewer than two PSAs in the Turkmen Sector of the Caspian Sea. WINTERSHALL HOLDING AG (Germany), as project operator; MAERSK, a Dutch company; and ONGC MITTAL ENERJI LTD., an Indian company, conduct operations within the contract area Blocks 11-12 under the agreement signed in 2002, and BURRED HILL, a Canadian company, conducts operations within the contract area Block-3.
• The challenging projects conducted onshore under the PSA are also of interest. The consortium formed by GK TURKMENNEFT and the Austrian company MITROINTERNATIONAL have already operated successfully within the contract area Khazar for 9 years. BURREN RPL (United Kingdom) has also recovered its investment and is making a profit on the contract area Nebit-Dag.
Cooperation with such well-known international companies is one of the guarantees for the success of major international projects designated to improve regional cooperation and strengthen Turkmenistan's position as a world energy state, making the development of huge hydrocarbon reserves as well as their export to world markets a priority.
In the past 2 years, 2 major events of strategic significance for the Central Asia Region have taken place in the Turkmenistan oil and gas sector.
In May 2007, the heads of three countries, Turkmenistan, Kazakhstan and the Russian Federation, signed the Joint Declaration on Cooperation for Construction of the Pre-Caspian Gas Pipeline. The principle of long-term cooperation and the integration of gas sectors was fixed in this trilateral agreement on the implementation of the joint project for transporting Turkmen and Kazakhstan natural gas. The new pre-Caspian gas pipeline will stretch from the compressor station Belek (Turkmenistan) to the gas measuring station Alexandrov Gai (Russia). The length of the main line from the compressor station Belek to the border with Kazakhstan will be 272 km. Two compressor stations will be constructed and the infrastructure required to operate and service the main line will be developed.
On 17 July 2007, the State Agency for Hydrocarbons Management and Use and CNPC, a major Chinese company, entered into a PSA with respect to the contract area Bagtyyarlyk on the right bank of the Amudariya. The Chinese partners will develop the field, create the infrastructure and construct the gas processing plant. Such cooperation between the two countries is an integral element in the huge Turkmenistan–China gas pipeline construction project. In the near future, Turkmenistan will commence delivering natural gas to the People's Republic of China, increasing the volume of delivery up to 40 billion cubic metres per year.
AK Counsel takes an active part in the above-mentioned project and advises the leading Chinese participants.
On 23 March 2009, as ordered by the President of Turkmenistan, for the purpose of creating a reliable and stable system for promoting Turkmenistan energy carriers in international markets, the State concern TURKMENGAS announced an international tender for the design and construction of the East-West gas pipeline in the territory of Turkmenistan. The gas flow through this pipeline will be procured as a result of development of the South Yolotan – Osman gas field, one of the world's largest gas fields, located in the Southeastern part of the country. In the coming years, a large-scale development project envisaging the drilling of 120 production wells, the construction of eight gas gathering units and two sweeteners with a total capacity of 40 billion cubic meters per year will be carried out on this unique gas-bearing area. At the same time, a modern engineering infrastructure will be created there: motorways and railways, power transmission lines, carrying out water intakes, water treatment facilities and water mains.
Currently, a major gas-processing complex for the treatment of gas from offshore platforms is being built with the participation of a Malaysian Company PETRONAS CARIGALI (Turkmenistan) on the shore in the Kiyaly village district. It is anticipated that 2.5 billion cubic meters of natural gas from the Caspian Sea deposits developed by the company will be supplied to the Caspian Sea pipeline in 2010. In 2012 and 2013, 5 billion cubic meters is scheduled for production and from 2014 to 2030, 10 billion cubic meters of the blue-sky fuel will be produced annually.
On 16 April 2009, there was a signing ceremony for the Memorandum on Long-term Cooperation between the Government of Turkmenistan and RWE German Joint Stock Company, providing for cooperation in the fuel and energy sector on various levels, including the project for exploration and production of hydrocarbons in the Turkmenistan sector of the Caspian Sea, namely in the 23rd Licensed Block.
A high level International Conference entitled Safe and Stable Transit of Energy Carriers and Its Role in the Provision of Stable Development and International Cooperation took place in Turkmenistan on 23-24 April 2009. High-profile guests, including managers of major international organisations and companies visited the International Conference. This event once again reflects international recognition of Turkmenistan's international initiatives and its support of safe and responsible cooperation in the fuel and energy sector.