Currently, Turkmenistan's President Berdymukhammedov is visiting Saudi Arabia to arrange for oil and gas cooperation. Before that, he entertained OSCE representatives who proposed aid in environmental, educational, political and economic venues.
More diplomatic envoys over gas exports but little else about Turkmenistan whatsoever:
President Berdymukhammedov has said that long-term gas export agreements with China, Russia, and Iran must be met. At the same time, he is receiving delegations from other states who also wish supplies:
1. Georgia, still on the outs with Russia and “burning bridges” with its neighbor to the North, would like to see Turkmenistan's gas to Europe via pipelines running across the Caucasus. Georgia owes Turkmenistan USD 40 million already, which it will pay off over the next ten months, but Georgia also wants to initiate some bilateral investment between the two states.
2. Kazakhstan, with no bridges burnt but lots of contracts, would like to partner with Turkmenistan in northward natural gas distribution. Once Turkmen gas goes north, it could travel further northward into Russia; west in a Trans-Caspian line; or east, linking up to pipelines into China's Xinjiang Autonomous Region. Under this formulation, Turkmenistan can fulfill its April 2006 contract with China for 30 billion cubic meters of gas/year over the next 30 years. Turkmenistan also has a 25-year contract with Gazprom at a low price.
3. Ukraine is more than willing to buy Turkmenistan's gas, even at a 32% increase in price to $58 per thousand cubic meters (kcum).
4. Corporate or state diplomacy, or both? Dragon Oil opened the first foreign-owned refinery in Turkmenistan, adding a value-added component to Turkmenistan's largely resource-based exports. The company is 52% owned by a United Arab Emirates national oil company, but is registered in Ireland (figure that one out). Dragon Oil is also currently developing wells in Turkmenistan.
Barriers to Turkmenistan's new export opportunities:
1. Investment comes before revenue: First, existing pipeline networks are crying out for upgrade, and new distribution will be needed for new export contracts. The next five years of pipeline development are going to determine who gets the gas. The next five years are critical for Turkmenistan's growth.
2. The next ten years are going to decide how much gas Turkmenistan owns to fill its contracts. Existing and new wells cost money and time, also. Both Russia and Iran are interested in investing in Turkmenistan's energy infrastructure.
3. Two trans-Caspian lines are in the planning stages. One, initially developed in the 1990's from Turkmenistan to Baku, the TCP, was scrapped by Niyazov when he learned that he would have to defer income until it was built. The second one, from Kazakhstan to Baku, has some logistical and political challenges. A new pipeline from Turkmenistan that accesses Kazakhstan without use of Gazprom is also a weighty, multilateral political challenge.
4. The legal framework of the Caspian Sea is still disputed, with Iran objecting to Caspian partition (and Russia also). Keeping the Caspian in condominium is best for environmental concerns, fisheries, and navigational trade. However, de facto partition is in place, since Russia, Kazakhstan, Azerbaijan, and Turkmenistan all claim offshore oil and gas fields–even Iran has a few. This may look like a done deal, but the devil is in the details, which have yet to be worked out. Iran and Turkmenistan also have some existing border disagreements in offshore Caspian fields which have yet to be settled, even if some portion of condominium v. partition is arranged.
President Berdymukhammedov has abolished the old Energy Ministry and undertaken its administration himself. Given that this move is undemocratic, can anyone doubt energy is a major priority? And it is Turkmenistan's main lever (a good one) to developing a diversified economy. Cotton, though critical to Turkmenistan's economy, continues to be a losing proposition because of water issues.
Turkmenistan plans to boost 2007 gas production by 20%, oil production by 15%. This is a bid for more income and more friends, but shortens the window of income for Turkmenistan over the long haul.
Recently Turkmenistan announced a new, significant gas find, but did not say where it was. The international market remains skeptical. But given the amount of dollars needed in Turkmenistan, the number of customers clamoring for a share of Turkmen gas, and the need to fund pensions and other social services, and the increased rate of production, it is easy to see why Turkmenistan would make such an announcement.
It seems pretty clear that Turkmenistan without petroleum is a Turkmenistan without international friends. Note to friends: That OSCE list has some diversified propositions, and is a good place to start. Turkmenistan needs you now, and not just for gas and oil. One passport in might be non-petroleum related infrastructure, or support for Turkmenistan's stated domestic priority of better education.
Let's hope the OSCE continues to develop a nuanced, multivalent effort. It doesn't look like there's a lot of nuance thick on the ground thus far.
RFE/RL Newsline provided much of the event reporting
Photos: NASA; NRCU, Ukraine state broadcasting
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