2013-08-21 09:13:30 - New Energy research report from Business Monitor International is now available from Fast Market Research
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 its own forecasts of gas production in 2030 to 250bn cubic metres (bcm) 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 67bcm in 2012 to 152bcm in 2022.
Full Report Details at
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The main trends and developments in Turkmenistan's oil
and 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 metres per year (bcm/y) of gas by 2030. In May 2013, Turkmengaz chairman Kakageldy Abdullayev said, during a gas congress in Ashgabat, that the second stage of development at Galkynysh would eventually boost annual gas exports to China by 25bcm to 65bcm per year (thus implying that current exports stood at 40bcm). At the same congress, Li Xiaoning, deputy director general at China Petroleum Engineering & Construction Corporation (a subsidiary of CNPC), said that this volume would be achieved by 2020, or 10 years before what was initially expected. According to Xiaoning, Turkmen exports to China have totalled almost 50bcm since December 2009. Turkmen data suggest that gas exports to China totalled 20bcm in 2012.
* Upstream interest remains strong on the back of the most recent discovery, the Galkynysh gas field (previously known as South Yolotan), 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 230bcm by 2030, 180bcm of which would be for export.
* In November 2012, Turkmen officials announced plans to begin production from the Galkynysh field in 2013. The start date was to coincide with the 56th birthday of President Kurbanguly Berdymukhmedov on June 30 but it was deferred to autumn 2013 so as to coincide with the official visit of Chinese President Xi Jinping. Figures on initial volumes and exact delivery dates were not available at the time of writing.
* Despite strong interest from foreign players and vast untapped resources, Turkmenistan's business environment remains challenging with limited opportunities for foreign players. China's CNPC remains the only foreign player with an onshore production sharing contract (PSC), with the participation of foreign firms limited to onshore service contracts or PSCs for fields in the Caspian Sea.
* Oil exploration is currently most active in the country's Caspian section with the most prominent investors including Dragon Oil, RWE, Buried Hill Energy and Itera. 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 to 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 more optimistic with regard to our forecasts for the country's gas output, which we predict will increase at an average annual rate of 8.5% over the course of our forecasting period, rising from 67bcm in 2012 to 152bcm in 2022 as production rises with new output and enhanced development of existing fields. While domestic demand will increase from 21bcm in 2012 to 36bcm in 2022, increased production will allow for exports to grow from 46bcm in 2012 to 116bcm in 2022.
* While we see significant upside potential to these numbers based on recent discoveries, we highlight that the nature of remaining gas deposits will increase the costs of development, with sour gas in highpressure, 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.
Turkmenistan's dependence on oil prices leads to high volatility in the country's export revenues. With the global oil and gas market having moved away from the cycle of tight global supply we saw in 2011 and the first half of 2012, and global production now comfortably meeting demand, we believe OPEC basket oil prices will decrease from their average of US$109.5 per barrel (bbl) in 2012 to US$103.0/bbl in 2013; thus putting clear downward pressure on Turkmenistan's export revenues. However, this negative price effect will be more than offset by the growth in output and we therefore see the country's oil and gas export revenues rising from US$28.6bn in 2012 to US$29.2bn in 2013 and then to US$36.7bn in 2017 and US $58.0bn in 2022.
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