TURKMENISTAN ISSUES AMBITIOUS OIL, GAS PROGRAM

The former Soviet republic of Turkmenistan has released a bullish outlook for exploration, production, refining, transportation, and export of its oil and gas during the next 25 years. The report envisions a production buildup to 560,000 b/d of oil and 12.57 bcfd of gas in 2000 from 100,000 b/d and 7.74 bcfd in 1994. Issued as the conception of Turkmenistan Pres. S.A. Niazov, it characterizes the country's oil reserves as world class and outlines plans to reactivate/expand refineries and

Nov. 8, 1993

4 min read

The former Soviet republic of Turkmenistan has released a bullish outlook for exploration, production, refining, transportation, and export of its oil and gas during the next 25 years.

The report envisions a production buildup to 560,000 b/d of oil and 12.57 bcfd of gas in 2000 from 100,000 b/d and 7.74 bcfd in 1994.

Issued as the conception of Turkmenistan Pres. S.A. Niazov, it characterizes the country's oil reserves as world class and outlines plans to reactivate/expand refineries and export oil and gas after local needs are met.

Niazov's conception of the development of Turkmenistan's oil and gas industry is based on the study of geological-geophysical data from 3,000 exploratory wells, 154,000 km of seismic profiles, 2,700 well logs, and analysis of a 2,440 production well data base by scientists, engineers, and other oil and gas specialists.

The report contains an estimate of original reserves for Turkmenistan's Amu Daria basin of 150 million bbl of oil equivalent. Such a figure would place the basin third in the world behind the Arabian-Iranian and West Siberian basins in terms of original reserves as ranked by the U.S. Geological Survey.

RESERVES, OUTPUT

Turkmenistan estimates reserves in the Amu-Daria and South Caspian basin at 46 billion bbl of oil and 548 tcf of gas.

The country expects production to rise as joint venture investments bear fruit. Bridas of Argentina, Larmag of the Netherlands, and Eastpak of the United Arab Emirates have formed joint ventures to operate in the country. Three more joint ventures were to be announced in early November 1993, the report said.

As early as 1996, the joint ventures are expected to be producing, a combined 220,000 b/d of oil equivalent, the report said. Of that about 100,000 b/d is to be exported via existing rail and seaways.

These exports are to include crude oil and refined products from the Krasnovodsk and Chardzhou refineries. Reconstruction of the Krasnovodsk refinery is planned during the interim.

Significant hydrocarbon discoveries are expected on the Caspian Sea shelf and coastal zone in a second stage starting in 1988, the report said. These fields in western Turkmenistan alone are expected to produce 560,000 b/d of oil equivalent in 2000.

Total production is forecast to reach 1.2 million b/d of oil and 19 bcfd of gas in 2004.

DOWNSTREAM WORK

Refinery expansions and pipeline construction figure heavily in Turkmenistan's expansion plans.

The country hopes to increase capacity of the Krasnovodsk and Chardzhou refineries to a combined 360,000 b/d with 100% utilization in 1998. That compares with an existing capacity of 240,000 b/d only 40% used.

Reconstruction of the Krasnovodsk refinery is planned for 1995 to refine Amu-Daria basin oil, increase total capacity, and improve the conversion rate and quality of products. Petrochemicals production capacity is to be added when the Chardzhou refinery is expanded and modernized in 1998.

Turkmenistan expects to continue selling gas through former Soviet pipelines, receiving a growing share in convertible currencies at prices slowly approaching world levels.

It is evaluating large diameter gas pipeline routes to Turkey via the Caspian Sea and Iran and separately via Azerbaijan and Georgia; to Pakistan via Afghanistan; to Europe via Iran and Turkey; and to Japan via China.

Turkmenistan also envisions construction of pipelines capable of transporting crude oil and heavy oil products to Iran's Persian Gulf coast; to the Mediterranean Sea via Iran and Turkey; and to the Black Sea via Azerbaijan and Georgia.

The oil and gas pipeline conceptions envision potential to transport oil and gas from Azerbaijan and include branch lines for deliveries of Iranian gas. The report said a railway is to be placed in service next year from Turkmenistan to Iran that will connect to existing lines to Europe and the Persian Gulf.

FINANCIAL ASPECTS

Foreign investment will be needed to achieve the goals listed in the report.

Preliminary calculations show that staged fulfillment of the program including production, refinery work, and pipeline construction will require capital outlays of $5.5 billion in 1996, a year in which production will generate only $2.2 billion.

Capital outlays are expected to be $7.3 billion/year in 2000, when production revenue of $13.7 billion is expected. The figures are $14.6 billion in outlays against $24.9 billion in production revenues in 2006 and $10 billion in outlays against $25.3 billion in revenues in 2010.

The report said the long term strategy, based on the resource potential, laws and regulations, development of transportation and other infrastructure, and stable political situation make Turkmenistan an attractive place to invest with a minimum of political and economic risk.