2013-02-25 10:12:25 - Recently published research from Business Monitor International, "Turkmenistan Oil & Gas Report Q2 2013", is now available at Fast Market Research
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 for gas production, which we expect will more than double from 72bcm in 2012 to 152bcm in 2022.
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.
* Upstream interest remains strong on the back of the most recent discovery, the South Yolotan gas field, which has been renamed Galkynysh and 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 230bcm by 2030, 180bcm of which would be for export.
* In November 2012, Turkmen officials announced plans to begin production at Galkynysh in 2013, with the field developed under a service contract by CNPC, Gulf Oil & Gas, Petrofrac and a Korean partnership comprised of LG International and Hyundai. Figures on initial volumes and exact delivery dates were not available at the time of writing.
* 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 the participation of foreign firms limited to onshore service contracts or PSAs for fields in the Caspian Sea.
* The Caspian will be key site of activity in 2013 as Dragon Oil, RWE, Hill Energy and Itera all plan exploration wells or increased liquids production throughout the year. 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 we expect oil production will rise to 256,000b/d in 2013, this figure is well below official targets.
* We are much bullish with regard to our forecasts for the country's gas output, which we predict will increase at an average annual rate of 8.6% over the course of our forecasting period, rising from 72bcm in 2013 to 152bcm in 2022 as production rises with new output and enhanced development of existing fields. While domestic demand will increase from 23bcm in 2013 to 44bcm in 2022, increased production will still allow for exports of around 108bcm.
* 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 has access to the technical and capital requirements to best commercialise its substantial gas resources.
Full Report Details at
- www.fastmr.com/prod/541283_turkmenistan_oil_gas_report_q2_2013.a ..
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$104.40 per barrel (bbl) in 2013, a slight decrease from 2012 average of US$109.50.
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