Wednesday, October 28, 2009

How much natural gas does Turkmenistan have?

The pipeline from Turkmenistan to China is now almost complete, the section running through Turkmenistan, from the Malai field will take the gas to Uzbekistan (albeit Gazprom helped build the pipeline) and thence to Kazakhstan and on to China, with deliveries of up to 40 billion cu. m. (bcm) (1.5 trillion cu ft) per year.

This volume, and where it comes from, has suddenly become a little more important in the overall global supply of natural gas, given that, two weeks ago, the Turkmenistan President fired the folks leading the energy companies, and it is suggested that this was over a report of false data having been provided to a firm auditing the volumes of gas reserves remaining in the Turkmen cupboard. (Hat tip to Gail)

Back in 2008 these reserves had been reported to be around 10 – 14 trillion cubic meters (Tcm). However there has been a considerable question as to the accuracy of these numbers. The IEA has noted the increase in volumes with recent discoveries
Estimates of Turkmenistan’s natural gas reserves vary considerably, introducing a large element of uncertainty into projections of its future contribution to global gas supply. Representatives of Turkmenistan have put total gas reserves in the country at more than 20 Tcm, an amount approaching the range of proven reserves in Iran or Qatar – and far more than the 2.7 Tcm included by BP in its statistical review (2008).

Since 2006, Turkmenistan has announced new gas discoveries, the South Yolotan and Osman fields in the southeast of the country, and in August 2008 also a new gas condensate field, South Gutlyayak. The Turkmenistan government announced in April 2008 its intent to undertake an international audit of the country‘s gas reserves, and first findings of this audit were announced in October 2008. While more appraisal work is needed to confirm the reserves, the vast South Yolotan-Osman field (this is now considered to be a single structure) could hold an optimum 6 Tcm of gas, with estimates for the field ranging from a low of 4 Tcm to a high of 14 Tcm.
As an alternative point of reference the CIA thinks that the reserves are only 2.83 Tcm.

It is the results of that audit that are now being questioned.
On October 12, two separate sources -- Russian journalist Arkady Dubnov, writing for the Russian newspaper Vremya Novostei, and a Germany-based non-governmental organization called the Eurasian Transition Group (ETG) -- alleged that the Turkmen government misled the independent auditors by providing them with inaccurate, hyped data. The end result was that Turkmenistan’s actual reserves are probably far lower than the estimate contained in the 2008 Gaffney Cline report.
However, while denying the accuracy of the story, the President purged the energy sector leadership, for reasons other than the above .
President Gurbanguly Berdymukhamedov has sacked the heads of Turkmengaz, Turkmenneft and Turkmenneftegazstroy for showing an "irresponsible attitude" toward their jobs.
Russian media outlets are linking the top-level purge to allegations that Turkmenistan’s gas reserves have been grossly overestimated.

As a result of the purge, Nura Mukhammedov is replacing Dovlet Mommayev as the head of Turkmengaz. Mommayev had held the post only since July. But, according to a Turkmen state news agency report, Mommayev was around long enough to be guilty of "a number of shortcomings and omissions."

Orazdurdy Hojamuradov was relived from his post of chairman of Turkmenneft "due to transfer to another job."

Berdymukhamedov charged Hojamuradov with "not taking the necessary measures to increase oil production" and allowing the state-owned enterprise’s production to be eclipsed by foreign companies that are "twice as efficient." Annaguly Deryaev, the former minister for the oil and gas development, is taking over the top position at Turkmenneft. Oraznur Nurmuradov was appointed oil & gas minister in his place.

?tamurad Durdiyev was sacked from Turkmenneftegazstroy. According to Berdymukhamedov, the state oil and gas construction company is failing to "cope with its tasks." Durdiyev is being replaced by Akmurad Egeleev.
The Russian newspaper Vremya Novosti reported that a number of senior figures are now under investigation following the delivery of confidential information to western companies hoping to invest in the Turkmen oil and gas industry
The gas fields that were audited are not the ones that are being used to supply China, and China itself is involved in the assessment and production from those.

Having been given permission to develop the gas fields that will supply the pipeline. It will be developing fields along the right side of the Amu Darya river, itself part of the major gas field reserves found in the Amu Darya Basin.
“Turkmenistan guarantees that the Turkmen side will supply Turkmen natural gas in the volumes stipulated by the agreement,” the Turkmen president’s press service said.

“The Bagtyyarlyk territory is a major part of the promising gas area Sagkenar (on the right bank of the River Amu Darya)”, a Turkmen government official told ITAR-TASS on Wednesday.

Its gas reserves are 1.7 Tcm of natural gas, according to official data. The territory includes Samandepe and Altyn Asyr (Golden Age) gas fields. The former’s proven reserves are 100 bn cu.m. of sulphur-containing gas. The 500-square-kilometre Altyn Asyr has Bereketli, Pirguyy, Yanguyy and Sandykly gas fields, where seismic surveys have been recently carried out
Having a quick look through Google Earth, the Amu Darya river is currently being extensively dredged in the region.

Amu Darya River showing the dredges at work (Google Earth)

There are several gas fields in Turkmenistan – the largest being in the Amu Darya Basin, with the Dauletabad-Donmez, which straddles the Iranian border. It is considered to hold around 45 Tcm of recoverable gas.
Other major gas fields in the Amu Darya Basin include Gagarin and Yelkui, which are to be developed, and more recent discoveries at Beshir, Chayyrly, Sarykum, Severnyy Yankui and Yuzhnyy Shorkel which have combined reserves of 10.2 BCM. Work on developing the gas field of Byashgyzyl, in the south-eastern Kara Kum region, began in early 1998 and the field's gas reserves have been estimated at 100 BCM.

Yangyguyy, a major gas field on the right bank of Amu Darya River, is to be developed as well
There has also been some question as to the role of Gazprom in this whole affair. Until last year Turkmenistan was only able to sell the majority of its gas through Russia (it also sells some 8 bcm to northern Iran). This amounted to around 50 billion cu m per year, but as the IEA notes the Turkmen have only just started to get a decent price for their product (relative to what the Russians were selling it for – as I had noted in my earlier post on the subject).
Turkmenistan was receiving $60 per thousand cubic metres (tcm) for gas exports delivered at the Turkmenistan border. From the last quarter of 2006 the price paid by Russia increased to $100/tcm, then to $130/tcm in the first half of 2008, and to $150/tcm in the second half of 2008. Prices paid for gas from Kazakhstan and Uzbekistan have followed a similar trajectory.

In March 2008, Gazprom and the heads of the national oil and gas companies from Turkmenistan, Kazakhstan and Uzbekistan announced that trade in Central Asian gas would, from 2009, take place at European-level prices.
The problem is that Russia fixed the price, and it was significantly higher than the current price at which Gazprom can sell its product.

In fact Gazprom is in dispute with Western Europe because they are failing to purchase the volumes that they had promised in earlier deals, to the current tune of around 10 Bcm.

As a result there was no demand for the gas from Turkmenistan and so there was an accidental explosion in the pipeline leading into Russia, and no gas has been delivered since. Although there have been several meetings but apparently things are now so bad that even they have stopped.
For years, Gazprom has tried to monopolize gas supplies from Central Asia, but when European gas demand and prices dropped, Turkmenistan’s gas pipeline to Russia blew up just like two gas pipelines to Georgia a few years ago. Now, after the pipeline has been repaired, Gazprom refuses to accept the contracted volumes or pay the agreed-upon price. Therefore Turkmen President Gurbanguly Berdymukhamedov did not go to the CIS summit. Instead, the Chinese are filling the gap by building a large gas pipeline to Turkmenistan. China will buy most of Turkmenistan’s gas exports, as it already does from Kazakhstan.
The problem that will arise for the West if China does end up taking most of the natural gas from Turkmenistan is as to where they will be able to replace that 50 bcm delivery. This might be of greater interest to the UK, which is increasingly having to go the world market for natural gas, but given that Russia supplies most of Europe with a significant portion of their needs it is worthy of consideration. Gas from the Yamal Peninsula is not yet available, or even developed while the Barents Sea deposits are even further into the future. However that has not stopped Gazprom from getting half the pipeline that will deliver the gas to Poland.

Readers may note there has been a change in plan. I had planned to write about the changes since I wrote my OMNI letter tonight, but I will postpone that since this is more of a developing story, and thus of more immediate interest.

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