Turkmenistan should ease gas investment rules, U.S. official says


Dec 3 Turkmenistan should consider easing its rules on foreign investment in natural gas as it looks to develop the world’s fourth largest reserves amid rising competition, according to a senior U.S. official.

Ashgabat has long refused to sign production-sharing agreements with foreign firms for its major onshore gas fields, offering only service contracts.

It is now set to embark on its most ambitious project, the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline, a project meant to diversify exports away from China and Russia.

“Land-locked countries with potentially large resources, such as Turkmenistan, need to move expeditiously to capture market opportunities since their competitors are not idle,” Daniel Rosenblum, deputy assistant secretary for Central Asia at the U.S. Department of State, told a recent conference in Ashgabat.

Competition, in particular, comes from liquefied natural gas (LNG) suppliers such as Qatar which can deliver gas by sea.

“A critical element of success is to create the right mix of incentives,” said Rosenblum, referring to energy project contracts.

“Hesitation or delay might mean that potential buyers could find other solutions to meet their energy needs,” he said.

Other major gas export developments taking shape include projects in the United States, Australia, the eastern Mediterranean, Mozambique and Tanzania.

Oil giants such as Chevron, ExxonMobil, BP and Total have long expressed an interest in the TAPI project.

But a lack of access to Turkmen gas deposits and other concerns, such as security, have prevented any of them from getting involved.

Secretary of State John Kerry who visited Ashgabat last month also raised the issue with the government, according to another senior U.S. official.

One reason why Washington may expect a change of attitude is the impact of low energy prices on Turkmenistan’s economy.

The International Monetary Fund expects Turkmenistan’s goods exports, of which more than 90 percent are sales of hydrocarbons, to drop by a third this year to $12.8 billion and to fall by 20 percent in 2016.

Budget revenue is also likely to fall sharply, making it harder to invest in projects such as TAPI, which accounts for a third of its 2016 budget spending.

There is scepticism about the chance of change, however.

“I don’t expect any change in terms of foreign companies getting access to upstream any time soon,” said Samuel Lussac, research manager for the Caspian region at Wood Mackenzie in Edinburgh.

“I don’t think this (drop in export revenue) is enough to see a change in the Turkmen policy.”

Others say the TAPI project may be shelved as Turkmenistan has other less costly options to boost and diversify exports, such as Iran and Turkey.

“TAPI remains one of the less likely projects to materialise despite the announcement of the start of construction works in December,” said Martin Vladimirov, energy analyst at the Center for the Study of Democracy in Bulgaria.

Edward Chow, senior fellow at the Washington-based Center for Strategic and International Studies, also said he saw no indication that Turkmenistan would loosen its investment restrictions.

“I see little possibility for TAPI or Trans-Caspian gas pipeline coming to fruition anytime soon,” he said.

The only company known to be in talks on TAPI currently is Dubai-based Dragon Oil which produces oil off Turkmenistan’s Caspian coast. (Additional reporting by Marat Gurt; editing by Andrew Osborn and Jason Neely)


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