TURKMENISTAN: ENERGY POLICY AND ENERGY PROJECTS

Sergey KAMENEV


Sergey Kamenev, Ph.D. (Econ.), leading research associate, Institute of Oriental Studies, RAS (Moscow, Russia)


Turkmenistans considerable gas reserves are responsible for the close attention with which its fuel and energy complex is studied. The war and a lower oil extraction in Iraq affected to a certain extent this sector of the republics economy as well as Ashghabads foreign policy. A contract on gas deliveries to Russia up to 2028 signed in April 2003 exerted the greatest impact on the Turkmenian gas industry. Unfortunately, Moscows obvious desire to obtain the contract practically at all costs led to its total neglect of the interests of ethnic Russians living in Turkmenistan. This explains why I shall be looking at the present state of the energy sector and its future from the point of view of Russias interests in this country and Central Asia as whole and within the context of Ashghabads domestic policies. They may greatly affect the republics further economic development including the future of its fuel and energy complex.

* * *

In 1993, the share of the oil and gas sector in the republics social product was 50 percent; in 1994, 66 percent. For several years the share remained on the 50 percent level; in 1998, it dropped to 11 percent because of an interrupted gas supply to Ukraine; late in 1999, the republic resumed its export to Russia and later to Ukraine that sent the sectors share in the gross national income up to 20 percent in 2000.1 The EBRD annual survey of the countries with transitional economies published in 2003 estimated the share of the fuel and energy complex in social product at 30 percent.2

This dynamics does not correlate with the economic growth rates though one would expect certain correspondence. According to official materials supplied by Turkmenmillikhasabat, in 2001 GDP increased by over 20 percent.3 According to official statistics, economic growth rates in 1998 were 7 percent; in 1999, 16 percent (though the republic did not export its gas at that time); in 2000, 17.6 percent4; in 2002, 21.3 percent.5 There is no doubt that starting with 2000 when export of gas to Ukraine, Russia and Iran stabilized and payments became more or less regular national economic development accelerated.

At the same time, contrary to what the republics official publications say, the improved situation in the fuel and energy complex could not radically accelerate economic growth and create a huge increase in GDP. The EBRD believes that in 2002 economic growth in the republic slowed down to 5.1 percent as compared with 11.8 percent of the previous year; the Bank expressed its serious doubts about the official figure of 21.2 percent of growth of GDP. According to the Banks experts, gas extraction (that accounts for 30 percent of the countrys GDP) increased by merely 4 percent; its export increased by 5.7 percent. Agriculture that accounts for about 25 percent of GDP was far from thriving: grain yield increased by 16 percent while cotton production dropped by 56 percent. The EBRD publication relies on these and other data to assess the GDP growth as 5.1 percent in 2002 and forecast the GDP growth of 5.3 percent in 2003. Turkmenistan is doomed to remain a raw materials source. The EBRD survey says: The nearest future of Turkmenian economy is directly connected with the prospects of gas export. The Bank believes that the long-term agreements about gas supplies to Russia and Ukraine may remain on paper while the limited carrying capacity and increasing pressure from other gas producers (Kazakhstan and Uzbekistan) will in the mid-term slow down economic growth to 3 to 4 percent a year.6

It is not easy to assess how much gas the republic has because different state and private structures quote figures ranging from 9 trillion or 13 trillion c m to 23 trillion. It seems that to obtain a more or less real estimate one should distinguish between the guaranteed, explored, and estimated reserves. The guaranteed reserves are being exploited; the explored have been confirmed by geological prospecting, while the estimated are based on simple extrapolation. On 3 February, 2000 the then Minister of Oil and Gas Industry and Mineral Resources R. Arazov told me referring to the third category that the experts of his ministry proceeded from a consideration that about 30 percent of the republic had been explored. They applied information inherited from the Soviet times to the rest of the republics territory. This simple operation produced an obviously inflated figure of 23 trillion c m. In his speech to the employees of the Embassy of Turkmenistan in Moscow on 29 November, 2001 President Niyazov quoted an even more improbable figure of 44 trillion c m.7

Extraction of Oil and Gas

I have already written that gas is the main export product: its extraction and export brings the lions share of hard currency to the republics coffers. In 1990, the republic extracted 82 billion c m; in 1995, 32 billion; in 1998, 13 billion c m, considerable decline being explained by diminished exports. In 1999 when Ukraine started importing gas from Turkmenistan gas extraction reached 22.9 billion c m. Kiev failed to pay in full yet official statistics registered as part of GDP the whole amount of value added that should have been created in the oil and gas sector. In 2002, the republic extracted 53.5 billion c m of gas according to official data.8

The situation in the oil and gas sector is far from simple: many of the fields have been depleted while export does not go smoothly. Geological prospecting is underfunded, therefore the huge amounts of declared reserves remain unproven. In recent years drilling has been proceeding on a much lesser scale therefore the republic has practically no explored and promising large-scale reserves and cannot as a result confirm its huge forecasted reserves.

There is no money to replace morally and physically depleted equipment therefore Turkmenistan will hardly live up to its export pledges under the April 2003 contract. Delayed payments and hard currency shortage are responsible for the depression in all gas-related industries.

According to the American Western Geophysical Company that was prospecting for gas in 2000, the theoretically possible figure of the republics overall gas reserves is 34 billion tons of oil equivalent of which 12 billion tons are liquid and 22.8 trillion c m are gaseous hydrocarbons. The American experts specifically pointed out that these strictly preliminary figures call for more detailed studies and confirmation. It should be said that so far only the Turkmenian shelf has been studied in any detail and found to contain probably about 11 billion tons of oil and slightly over 5 trillion c m of gas.9 These figures do not coincide with the West European experts geologically confirmed figure of not more than 4 billion tons of oil.10

To attract foreign investments to its oil and gas sector in summer 2000 the republican leaders hastened to carry out a series of presentations based on the still unconfirmed preliminary assessments. The hopes fell flat mainly because the countrys exporting capacities are virtually undeveloped. The regional context was not very encouraging either: the trans-Caspian gas pipeline project (TCGP) under construction and the Baku-Ceyhan oil pipeline that was expected to carry Turkmenian oil were pestered with problems.

There is another money-consuming problem: the local gas carries 1 percent of hydrogen sulfide and more which is unacceptable under the international standards that allow not more than 0.008 percent. So far the republic has not enough money to buy the necessary equipment and organize its servicing.

The hydrogen sulfide content is not the only problem: the local gas is found mainly at great depths (3.5 km and deeper), which requires special drilling equipment so far scarce in the republic. Turkmenistan has no money to buy more but declined Russias offer to supply it in exchange for imported gas on the ground that the country needed hard currency more than equipment.

Oil plays a less prominent role in the countrys economy: according to the Ministry of Oil and Gas Industry and Mineral Resources oil reserves are estimated at 6.3 billion tons.11 Annual extraction of oil and gas condensate in the 1990s was between 4 to 6m tons; in 1998, it reached 6.6m and in 1999, 7.4m tons.12 The oil extraction plan (10m tons) for 2000 remained unfulfilled. The president of Turkmenistan had to admit reluctantly that the republic extracted mere 7m tons. The official figure for 2002 is 9m tons.13 The locally extracted oil is used mainly inside the country. The following are the republics largest oilfields: Koturdepe (41 percent); Barsagelmes (22 percent); Burun (8 percent); Cheleken (5 percent); the Caspian shelf (9 percent).

The Caspian shelf is the most promising among them: according to various sources, it contains from 4 to 5.5 billion tons of oil. The Turkmenian marine sector has been more or less actively developed since 1996 at the town of Cheleken yet the still unresolved legal status of the Caspian makes full-scale development impossible.

The Turkmenian fuel and energy sector needs foreign money to become effective yet the prestige of the republic as a serious economic partner has been seriously damaged by the negative experience of its cooperation with Bridas of Argentina and Larmag of the Netherlands even if the blame could be laid upon both sides. One should not expect large-scale direct foreign investments in the nearest future despite the recent progress in creating new laws designed to protect foreign investments within equity participation agreements.

Foreign companies prefer to deal with hydrocarbon reserves with adequate potentials, little or no geological risk and cheap prospecting, development and exploitation.

Pipeline Transport

The republican leaders try to diversify oil and gas export to be able to deal with foreign policy and domestic problems. The advent of the golden age when according to the local media each of the citizens will prosper is expected when oil and gas export becomes considerably larger. In expectation of this President Niyazov not only manages to preserve political and social stability but also to confirm its autocratic rule. At the same time, it is expected with good reason that consistent oil and gas export will accelerate economic development.

Certain domestic and foreign problems are still limiting gas export to Russia and Ukraine. Turkmenistan has a ramified network of gas pipelines with the total length of about 20 thou km, the majority of them are 25, 30 or more years old and are depleted; at least 120 km of pipelines require annual major repairs. Money and skilled workers are two major stumbling blocks. In spring 2003, the republic withdrew from the Russian-Turkmenian agreement on dual citizenship thus causing an outflow of ethnic Russians from Turkmenistan among whom there are many skilled oil and gas specialists.

Today there are only two export main gas pipelines: Central Asia-Center (CAC) leading to Russia, Ukraine, and further on to Europe and Korpeje-Kurtkui that brings gas to Iran.

In fact, only one line of the pipeline built in the 1970s-1980s connects Russia and Turkmenistan. The rest is gradually falling apart; the Turkmenian stretch remained idle and neglected far too long after gas export to Russia had been interrupted in 1997. So far there is no final decision about major repair works either of the Turkmenian or Russian parts of the pipeline.

Korpeje-Kurtkui gas pipeline between Turkmenistan and Iran was commissioned late in 1997; it is about 200 km long; its construction cost is $195m, its carrying capacity under the 1995 agreement is 8 billion c m. In 1999, only 1.5 billion c m were moved, the figure for 2000 being 2 billion (instead of planned 4 billion). In six months of 2001, 2.2 billion c m were exported; on the whole, Iran got 9 billion c m of gas through this pipeline.14

Ashghabads obvious desire to increase gas exports to Iran is based on economic as well as political considerations: President Niyazov wants to demonstrate the United States that its refusal to contribute to alternative pipelines will do nothing but increase gas export to Iran by the same amount that was planned to transfer to Turkey along the trans-Caspian Gas Pipeline.

Economically gas supplies to Iran are hardly more attractive than export to Russia even if Iran pays more ($42 per 1,000 c m): 35 percent of the delivered gas is used to repay the Iranian loan issued for the construction of the pipeline. However, Turkmenistan obviously wants to escape its nearly complete dependence on its export to Russiahence its active promotion of the idea of large gas deliveries to Iran.

In the late 1990s and early 2000s, the Niyazovs government tried to realize the ideas of a trans-Caspian, trans-Afghan, trans-Iranian and trans-Asian gas pipelines of which the trans-Caspian one was considered the most attractive where the cost and carrying capacity were concerned. At the Istanbul OSCE summit in November 1999 the delegations of Azerbaijan, Georgia, Turkmenistan, and Turkey in the presence of President Clinton signed an intergovernmental declaration on their readiness to realize the TCGP and start gas export to Turkey late in 2002. A consortium set up for the purpose included large companies like PSG and Shell Exploration B.-V. with equal shares. The project authors intended to lay the pipeline from the pumping station Pustynnaia in Turkmenistan, on the Caspian seabed, across the above-mentioned states and reach Europe in future. It was planned that at the first stage the main pipeline will carry 16 billion c m and later up to 30 billion c m to Europe.

Late in 1999 and even in the first half of 2000 the four countries convinced by the regular visits of the then special advisor to the U.S. president and State Secretary for Caspian Issues James Wolf and his active support of the project believed that the project was gradually moving ahead. Yet in fact the situation was far from favorable. Bit by bit it became clear that construction was stalling while James Wolf and the then U.S. Energy Secretary Bill Richardson did a lot to realize the United States national interests in Central Asia and the Caucasus. They concentrated on the East-West energy corridor, that is, the trans-Caspian gas pipeline and the Baku-Ceyhan oil pipeline, on submitting the corridor-related countries to the American interests and on squeezing Russia out of them. If realized the U.S.-controlled states would have separated Russia from the East. In actual life after a while the ideas about the trans-Caspian line nurtured in Ashghabad and Washington began to diverge. The former wanted the line as promptly as possible while the latter looked at the problem of Turkmenian gas export as an issue of secondary importance. The United States was resolved to use the project to consolidate its influence in the region. All this happened prior to 9/11 when there were no signs of the future tragedy and the antiterrorist operation in Afghanistan.

The clash of interests was becoming more and more obvious as the date of construction of the trans-Caspian line was postponed. American support of Bakus claims for a 50 percent quota for the gas transfer in the future pipeline was the last straw for Ashghabad. It turned back to Moscow.

In 1998, a French firm Sofregaz prepared a feasibility study for the trans-Iranian gas pipeline: it expected to be 3,250 km long; the cost of the project was estimated at $4.84 billion. It was expected to start at the Shatly field and reach Ankara via Turkmenistan (810 km), Iran (1,270 km), and Turkey (1,170 km). If extended to Europe (to the Bulgarian border) something that the sides want the line will become 3,870 km long and will cost $7.58 billion. It is expected that Turkey and Europe will be getting 15 billion c m of Turkmenian gas each.

There are certain reasons to believe that the line will cost more: according to Itera, it will cost 10 percent more than the Sofregaz estimated cost. In fact the constantly growing material prices and wages will push up the price still higher.

On the whole one can say that the project is realistic yet it will be hardly accomplished in the nearest future for several reasons. Turkmenistan, Iran and Turkey either separately or together have not enough money to pay for the project. They will have to borrow heavily. It is highly unlikely that the United States will join a project that involves Iran (as a transit country). For the same reason no American financial structures will open credit lines for the consortium. This is further confirmed by a series of increasingly harsher statements coming from the United States (especially after the Iraqi war) that describe Iran together with North Korea, Syria and certain other Arab states as terrorist states engaged in nuclear arms programs.

The political situation in Iran and Turkey may interfere with the project: the line is expected to cross the northwest of Iran and eastern Turkey populated by the Kurds fighting for independence. Their leaders have already stated that they will use the threat of terrorist acts on the pipeline to put pressure on the authorities.

If extended to Europe the pipeline will become as expensive as the Yamal-Europe pipeline. This alone may cast doubt on the projects profitability and frighten off possible investors. It seems that Ashghabad is overestimating the readiness of the European gas market to accept Turkmenian gas. The European gas companies have no experience of dealing with Turkmenistan; there are doubts about the product quality and reliability of the supplier. In addition, the increased number of transit states will send the gas prices to an unacceptable level.

The trans-Afghan gas pipeline deserves special mention. In the post-Taliban time the idea has been winning the minds of the Turkmenian, Pakistani and Afghan leaders even though fighting is still going on. If realized the project will bring considerable material advantages to Turkmenistan and provide it with an outlet to the Indian Ocean and the South-East Asian markets.

Despite the tripartite agreement signed in Islamabad in May 2002 this huge project will hardly be realized in the mid-term perspectiveso far, nobody knows where the money will come from. One can expect the domestic strife in Afghanistan to go on indefinitely while Hamid Karzais promises to ensure the pipelines security and functioning will remain on paper.15

International terrorism in the politically and militarily turbulent area creates another serious obstacle. It has not yet been discussed by the potential partners yet certain states, Russia among them, are very much concerned. Even if the authoritarian regime of Turkmenistan will cope with the problem and even if Pakistan will do the same on its territory, the pipeline in Afghanistan will not be safe. It is absolutely necessary to elaborate a system of protective measures; this should be done while financial sources are being explored.

Will India buy the gas that will come to it from Pakistan? Indeed, Islamabad will be in control of gas suppliesthe consequences for Delhi are easy to imagine.

The trans-Asian pipeline is a castle on sand: hardly any firm will be prepared to get involved in the project and to pay not less than $11 billion for the pleasure. Turkmenistan is not particularly interested in it either mainly because it badly needs reliable gas export as soon as possible.

From this it follows that Ashghabads policy of multi-variant gas export will be hardly realized in the foreseeable future. Still, unwilling to abandon the TCGP project President Niyazov continues feeding the hopes of Tehran of the trans-Iranian variant, and of Islamabad, of the trans-Afghan line.

Niyazovs suggestion made at the 53rd Session of the U.N. General Assembly about the need of signing an international convention on the safety of main pipelines is directly related to the Turkmenian idea of a multi-variant export of gas. The Turkmenian president elaborated the idea by saying that all exporters of energy fuels should be allowed to use all functioning main pipelines and should be allowed to lay pipelines of their own in any direction; he also insisted that the convention should ban the use of pipelines as instruments of political pressure. The U.N. passed no resolution.

Exporting Energy Fuels

There are no doubts that Ashghabad aims at the maximally high level of export of energy fuels and, therefore, at the maximal level of their extraction, gas in the first place. Today, the more or less acceptable living standards are completely dependent on extraction and export of gas; by the same token President Niyazov has concentrated huge amounts of hard currency in his hands and can use the money at will: not only for production needs, but for pompous constructions to immortalize himself or for other similarly useless projects.

In his public speeches President Niyazov tries to convince the interested states (Russia, Ukraine, Iran, Turkey, certain European and South Caucasian countries) and energy companies that they badly need Turkmenian gas. One can even say that his actions in the gas export sphere are hard to predict and impossible to explain by economic considerations. One has to bear in mind that the Turkmenian gas is mainly sold to Ukraine, Russia, and Iran from which it goes further on to Europe. Balancing between them (or, rather, between Russia and Ukraine) ensures uninterrupted gas export and allows Niyazov to consistently raise gas prices.

In fact the countries wishing to strengthen their presence in the oil and gas rich region contribute to the Turkmenian presidents efforts to bring in politics into gas exports and gas prices. In its time Iran agreed to buy gas for an obviously inflated price of $42 per 1,000 c m, thus giving Niyazov a chance to bargain with other potential importers, Gazprom of Russia in the first place. In March 1997, when gas supplies to Russia were discontinued Niyazov being fully aware of new geopolitical developments turned to Washington for support. The United States immediately responded with the TCGP project to spite Russia.

One should admit that Niyazov showed a no mean amount of dexterity: having been caught in what looked like a trap to a superficial observer he skillfully exploited Gazproms deficit and Ukraines problems with gas supply to resume gas deliveries to the old customers. In fact, by setting Kiev and Moscow against each other he raised gas prices. Prior to March 1997 Russia paid $32 per 1,000 c m of Turkmenian gasthe new price was $36 per 1,000 c m. Forty percent of the deliveries were paid for with hard currency; the rest, with commodities.

The Agreement on Gas Deliveries signed on 10 April, 2003 became the apotheosis of Russian-Turkmenian cooperation. Under the contract Russia can expect to receive 1.5 to 1.7 trillion c m of gas in the next 25 years. This agreement hardly makes either economic or political sense for Moscow; some people doubt that the agreement can be fulfilled at all. Even according to the Turkmenian president, the annual carrying capacity of the Central Asia-Center rather depleted gas pipeline system is not more than 50 billion c m.16 Under the agreement Russia will pay $44 per 1,000 c m of which half will be paid in hard currency, another half in commodities. According to Gazprom Chairman Alexey Miller starting with 2007 the gas will be sold for world prices or according to the formula used in western contracts and tied to the oil product basket.17 Translated into plain language this means a gradual transfer to 100 percent payments in hard currency.

One could have reluctantly admitted that the agreement was a success especially if one takes into account that by signing a long-term document (something that the Russian side wanted) the Turkmenian president finally agreed to certain (merely certain) concessions by abandoning his preference for short-term contracts. However, it is next to impossible to regard the agreement as a success because of numerous highly negative developments. One can hardly doubt that the agreement was prompted by the fate of Saddam Hussein and by the Turkmenian presidents fear of finding himself in a similar predicament. His apprehensions are not totally unfounded: according to certain international organizations, Saparmurad Niyazov is one of the worlds ten most cruel dictators. Regrettably the Kremlin agreed to annul the Dual Citizenship Agreement that allowed the ethnic Russians in Turkmenistan to count on Russia when it came to protecting their interests. By doing this the Kremlin allowed Niyazov to step up persecution of the unwanted citizens of his republic and keep them in Turkmenistan by denying them exit visas to Russia.

One should say that long-term agreements with dictatorial regimes are fairly unreliable. Moscow has learned this from its sad Iraqi experience. As soon as Saddam Hussein had been deposed Moscow was denied access to the Iraq oilfields; on top of this the nearly $10 billion debt of Baghdad would probably remain unpaid. Can one be sure that the cooperation with Turkmenistan is immune to similar developments?18

Today, while the April 2003 Agreement has not been enacted Turkmenistan is moving the following amounts of gas across Russias territory: 10 billion c m of gas out of the total amount of 45 billion c m are sold to Itera; the rest goes to Neftegaz Ukrainy company (a twin of Gazprom of Russia). Itera that is fairly independent of Gazprom is in control of the Ukraine-bound transit that brings it good profits.19

In accordance with the contract, in three years time Gazprom will remain the only buyer of Turkmenian gas; Kiev will have to buy its share from the Russian company. This has become possible due to a Ukrainian-Russian gas transportation consortium: on the one hand, this gives Russia more control over the Ukrainian part of the line; on the other, Kiev is deprived of a possibility of influencing the relations between Moscow and Ashghabad in the gas export sphere. Finally, Ukraine and Itera will be squeezed out of the sphere.

On top of this, the bilateral agreement between Ukraine and Turkmenistan signed in May 2001 will remain valid until 2006; after that date Russia will concentrate gas supplies in its hands. At the same time, in April 2003, after his visit to Moscow President Niyazov met President Kuchma of Ukraine and informed him that he was contemplating a tripartite Russian-Ukrainian-Turkmenian agreement.

Iran is keeping away of this: its gas imports from Turkmenistan cannot be compared with those of Russias: in 2001, it bought about 6 billion c m; in 2002, nearly 5 billion c m.20 According to preliminary information, the figure for 2003 will be over 10 billion c m, that is, it will nearly exhaust the maximal carrying capacity of the Korpeje-Kurtkui pipeline. One should bear in mind that Tehran has considerable local gas reserves and is eager to join in gas exporting projects. Today, it is investigating a possibility of exporting its gas to Turkey, Armenia or Ukraine and across them to Europe.

An analysis of the more or less immediate future has shown that Niyazov has no alternatives to exporting the local gas to the north and to Iran. I have already written that several alternative gas pipelines are hardly realizable. It is still unclear whether one more pipeline (carrying capacity, 30-40 billion c m; cost, $1 billion) can be laid along the Caspian coast (via Kazakhstan).

Today, gas transfer to Russia is not problem-free. Suffice it to say that the technical condition of the functioning Central Asia-Center gas pipeline raises doubts: it has been unmercifully exploited since the late 1960s; today, failures are frequent; operating pressure has dropped to 40 atmospheres, much below the initial level. There is an opinion that if Niyazov failed to order major repairs of the Turkmenian stretch his country will never fulfill its obligations to Moscow, Kiev, and Itera.

Oil export is in a more or less similar situation: the oil extraction plan for 2000 was never fulfilled: the country extracted 7.1m tons out of planned 10m (a drop of 0.3m tons as compared with 1999). The republic exported about 1.5m tons. This happened mainly because Turkmenistan failed to attract foreign companies and foreign money to the oil sector. It was expected that in 2000 the companies working in the republic (Monument, Dragon Oil, ExxonMobil, Petronas Charigali, and Bridas) would increase oil extraction by 2m tons. This did not happen: together they extracted ten times less, that is about 220 thou. Later the situation improved: in 2002 according to official figures, they extracted nearly 9m tons of oil21 out of the planned 11m.22 About 2m tons were exported.

This can be explained by several reasons, lack of reliable export transportation means being one of them. The republic has no export oil pipelines, while the small amount of oil the country can sell abroad (having covered its domestic requirements) will never repay the cost of a more or less large oil pipeline. On the other hand, Iran has already started, on its own initiative, building a Neka-Tehran oil pipeline to bring Caspian oil to the Tehran refinery. A bilateral agreement with Turkmenistan on the project cannot be signed since Ashghabad has not enough oil to supply 8m tons needed to make the pipeline economically justified.

Future Prospects

An analysis of the local oil and gas fields, their exploitation, export potentials and transportation geography says that the prospects are fairly bright despite the problems described above.

President Niyazov has initiated a comprehensive program called National Program of President of Turkmenistan Saparmurad TurkmenbashiA Strategy of Social and Economic Changes in Turkmenistan for the Period of up to 2010. The fuel and energy sector will remain the key one in the countrys national economy; in the long run it will continue to create the largest share of hard currency incomes. The program says, in particular, that the strategy is oriented toward the republics huge oil and gas potential and envisages a complex of measures designed to develop the sector by extending deep exploration drilling and improving its efficiency to ensure an outstripping growth of commercial oil and gas reserves, commissioning new fields, and restoration of the old ones together with an increase in their yield.23 The strategy pays particular attention to the need to create more favorable conditions for foreign investors and to use the latest technologies in the energy sector.

This strategy is to be applied to the Turkmenian sector of the Caspian shelf and to the field-productive areas in the Amu Darya basin. Extraction volumes for the period of up to 2010 were set in full accordance with the republics raw material potentials and export needs. It is planned to extract up to 85 billion c m of gas in 2005, up to 120 billion c m in 2010 so that to export 70 billion and 100 billion c m, respectively. To achieve this aim the republic will have to extend domestic pipeline infrastructure and do its best to realize transnational gas pipeline projects.

It is expected that by 2005 the republic will extract 28m tons of oil, of which 16m tons will be exported; the corresponding figures for 2010 are 48m and 33m tons.

The figures quoted above show that the Turkmenian experts expected all parts of the oil and gas complex to work smoothly to produce the maximally possible amounts of raw materials. This is a wrong approach: in 2000, oil production missed the target figures by nearly 30 percent; in March 1997 gas supplies to Russia were discontinued while Ukraine failed to pay in full for the gas it received; the TCGP project failed; modernization of the Turkmenbashi oil refinery has not yet been completed; reconstruction of the Seidinskiy oil refinery has stalled, etc. It seems that the experts and those who compiled the Comprehensive Program were well aware that the targets were nearly unattainable yet the presidents instructions could not be challenged.

The strategic development trends of the energy sector are nearly unrealizable or simply too ambitious. This suggests that the Comprehensive Program as a whole and the section dealing with the fuel and energy complex in particular are designed to impress rather than to be fulfilled, therefore one cannot accept it as a real document that charts the countrys social and economic development. The program is designed to emphasize economic dynamics, to attract foreign investors and the maximally possible amounts of foreign money to the energy sector with promises of a more favorable investment climate.

However, it is wrong to belittle the achievements and to dismiss all plans as unrealizable. I am convinced that given a fairly stable inflow of foreign investments and under certain conditions the country will manage to carry out geological prospecting, industrial well drilling, extraction and processing, and to increase export. This will encourage other economic branches.

What is necessary to achieve sustainable growth? The country should obtain a stable contact with the foreign markets; it should do its best to reach an agreement on the Caspian Seas legal status (which is far from easy), to avoid waste of natural gas (its escape to the atmosphere and burning in flares), to maximally increase the net current asset value in the oil sector, to optimize incomes in oil refinery and adjust national legislation to create favorable conditions for foreign investments. On top of this, a flexible price policy is very much needed.


1 See: Sotsialno-ekonomicheskoe polozhenie Turkmenistana za 2000 god, National Institute of State Statistics and Information of Turkmenistan (Turkmenmillikhasabat), Ashghabad, 2001, p. 7.
2 Information supplied by the Reuters Agency published in the Internet www.watan.ru on 22 April, 2003.
3 Internet newspaper Turkmenistan.ru, 15 January, 2002.
4 See: Turkmenistan.ru, 4 December, 2001
5 See: Neitralniy Turkmenistan, 15 January, 2003.
6 According to information supplied by the Reuters Agency on www.watan.ru on 22 April, 2003.
7 See: Neitralniy Turkmenistan, 3 December, 2001.
8 See: Neitralniy Turkmenistan, 15 January, 2003.
9 See: Neitralniy Turkmenistan, 17 March, 2000.
10 International Petroleum Encyclopedia, 1996. It seems that these figures are much closer to reality since its information related to other states and regions (where independent studies were conducted) corresponds to reality: oil reserves of Russia have been estimated at 18.7 billion tons; of Middle East, 89.6 billion tons; of North America, 12.0 billion tons.
11 It should be said that in the program of economic development for 2001-2010 oil reserves were estimated at 12 billion tons (see: Strategia sotsialno-ekonomicheskikh preobrazovaniy v Turkmenistane na period do 2010 goda, Ashghabad, 1999, p. 209). Since I have failed to confirm this information in any of the republics ministers, departments or state concerns dealing with oil and gas I did not proceed from this figure in my analysis.
12 See: Turkmenistan. Country Report. The Economic Intelligence Unit, London, December 2000, p. 24.
13 See: Neitralniy Turkmenistan, 15 January, 2003.
14 See: Neitralniy Turkmenistan, 2 August, 2001.
15 See: Tripartite agreement signed in Islamabad. The text signed by the leaders of Turkmenistan, Afghanistan, and Pakistan, Turkmenistan.ru, 4 June, 2002.
16 See: Da, my ne idealnye Speech of Saparmurad Niyazov delivered in the embassy of Turkmenistan in Moscow on 29 November, 2001, Neitralniy Turkmenistan, 3 December, 2001.
17 Interfax, 10 April, 2003.
18 For more detail, see: M. Esenov (Stockholm), Posleslovie k vizitu diktatora Niyazova v Rossiu. Ekonomicheskie interesy ili vostochniy mentalitet? [www.gundogar org], 14 April, 2003.
19 Internet site www.polit.ru, 19 April, 2003.
20 See: Novosti Turkmenistana, 13 January, 2003.
21 See: Novosti Turkmenistana, 13 January, 2003.
22 See: Novosti Turkmenistana, 23 September, 2003.
23 See: Strategia sotsialno-ekonomicheskikh preobrazovaniy v Turkmenistane na period do 2010 goda, p. 209.

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