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TURKMENISTAN
Following several years of decline
after Turkmenistan's independence from the Soviet Union in 1991, Turkmenistan's
economy has rebounded in the past four years. Turkmenistan, whose economy relies
heavily on oil and natural gas production, suffered a 25.9% drop in its real
gross domestic product (GDP) in 1997 when Russia
closed off its natural gas pipeline network--Turkmenistan's sole natural gas
export option at the time. Since the resolution of the dispute with Russia,
Turkmenistan's natural gas exports have increased dramatically, spurring the
country's economy to three straight years of double-digit real GDP growth,
including an 18% increase in 2001. Turkmenistan's economy is forecast to grow an
additional 13% in 2002.
Nevertheless, Turkmenistan's real GDP
in 2001 was still only 70% of its 1990 level, and economic and political reform
have been stifled under the autocratic leadership of President Saparmurat
Niyazov, a former communist who has ruled Turkmenistan since independence and
was named president for life in 1999. The country's unemployment rate, although
down to 14% in 2001 from a high of 24.2% in 1998, is still problematic, and
foreign direct investment, over 90% of which flows into the country's oil and
natural gas sectors, has slowed over the past few years because of the
restrictive conditions that Turkmenistan attaches to foreign investment.
Privatization goals remain limited, and the country has not taken steps to
diversify its economy to reduce its dependence on natural resource exports.
Oil
Turkmenistan has 546 million barrels
in proven oil reserves, with possible reserves (mainly in the western part of
the country and in undeveloped offshore areas in the Caspian
Sea) of up to 1.7 billion barrels. The country's oil production, which
steadily declined after independence, from 110,000 barrels per day (bbl/d) in
1992 to 81,000 bbl/d in 1995, has increased dramatically in the past six years,
reaching 156,400 bbl/d in 1999 before leveling off in the past two years. In
2001, Turkmenistan produced 159,000 bbl/d of oil while consuming 52,000 bbl/d.
Turkmenneft, the state oil company, produced approximately 90% of this total,
with the remainder coming from the state natural gas company, Turkmengaz, and
several foreign oil companies operating under PSAs in Turkmenistan.
Although the country has attempted to
ease restrictions on foreign investment, many layers of regulation remain in
place. Turkmenistan maintains prohibitive rules that prevent companies using
subsurface resources to export hydrocarbons. Since foreign investors do not have
access to export pipelines (state-run
Turkmenneft, Turkmengaz, and Turkmenneftegaz, the oil
and natural gas marketing company, currently own all of the country's
pipelines), they are forced to sell the oil and natural gas they produce in
Turkmenistan through the state commodities exchange or send it to refineries.
Oil and natural gas are sold in Turkmenistan at fixed prices that are well below
world market levels.
As a result, several projects that could substantially increase Turkmenistan's oil production have stalled. Petronas (Malaysia), which is developing the Cheleken-1 oil and natural gas deposit under a PSA signed in 1996, suspended operations for more than a year, since the company determined it could not develop the field profitably under Turkmenistan's export restrictions. Swap arrangements, such as United Arab Emirate-based Dragon Oil's small-scale swap agreement with Iran, have proved modestly successful, but the Turkmen government has pledged to work on legislation that will expand the opportunities for foreign investors to export oil and natural gas, including liberalizing pipeline transport and easing the tax burden.
Downstream/Refining
Turkmenistan has two refineries, the
116,500-bbl/d refinery at Turkmenbashy and a 120,500-bbl/d refinery at Seidi.
Both facilities are slated for modernization and expansion to meet the country's
expected increases in oil production and demand, and Turkmen President
Saparmurat Niyazov is planning to call a tender in 2002 to build a new
100,000-bbl/d refinery. Work is underway on a $1.4-billion upgrade and
modernization of the Turkmenbashy refinery, with financing from German
and Japanese sources.
As part of the modernization, which
is scheduled for completion in 2004, France's
Technip was awarded a contract to build a lubricants blending plant. In April
2001, the catalytic cracking unit was launched by Technip and Iranian NINISC at
a cost of $300 million. The unit, with a capacity of 36,150 bbl/d, is designed
to produce high-octane gasoline, diesel, heating oil, and liquefied petroleum
gas. Complete reconstruction of the refinery will give Turkmenistan the ability
to produce motor oil, lubricants, and polymers to world standards, allowing the
country to cease importing lubricating oils.
Natural Gas
Turkmenistan has some of the world's
largest deposits of natural gas, with proven natural gas reserves of
approximately 101 trillion cubic feet (Tcf). The largest natural gas fields are
in the Amu-Dar'ya basin, with perhaps half of the country's natural gas reserves
located in the giant Dauletabad-Donmez field. In addition to Amu-Dar'ya,
Turkmenistan contains large natural gas reserves in the Murgab basin,
particularly the giant Yashlar deposit, which contains an estimated 27 Tcf.
During the last 10 years, Turkmenistan also has discovered 17 new natural gas
deposits in the Lebansky, Maryinsky, and Deashoguzsky regions of the
country.
Turkmenistan was a substantial
natural gas producer under the Soviet Union, but after the country became
independent, Turkmen natural gas became a competitor with Russian natural gas.
Since Turkmenistan's only natural gas export routes ran through Russia, Gazprom
limited Turkmen natural gas exports, and as a result Turkmenistan's natural gas
production sagged throughout the 1990's. Following the resolution of a pricing
dispute with Russia in 1998 and the construction of an export
pipeline to Iran, Turkmenistan's natural gas production began to climb
steadily. In 2001, the country's natural gas production jumped to 1.64 Tcf
against consumption of just 0.26 Tcf. Turkmengaz produced 85% of this total,
with Turkmenneft accounting for the remaining 15%.
With its large natural gas reserves,
Turkmenistan is counting on increased natural gas production and exports to fuel
its economic recovery. In May 2001, Turkmengaz started exploration and
prospecting work on a new field in Darganata, northeastern Turkmenistan.
Commercial exploitation of the Gagarinskoye deposit in Zaunguz Karakum is
scheduled to begin soon, while resumption of work in the Samantepe field on the
right bank of Amu Dar'ya in eastern Turkmenistan is planned. Under a
presidential program, Turkmengaz also is stepping up exploratory work in the
Karakum and Kyzylkum deserts. Through the first two months of 2002, Turkmenistan
already had produced 413 billion cubic feet (Bcf) of natural gas.
In order to reach its full natural
gas production potential, however, Turkmenistan must solve the problem of
getting its natural gas to consumers, as well as getting paid in hard currency.
The country has been unable to capitalize on its natural gas resources because
it lacks pipeline outlets to world markets. As a result, Turkmenistan is forced
to sell its natural gas to ex-
Soviet
states that either cannot pay fully in cash or are tardy with payments for
supplies already received; both Azerbaijan
and Kazakhstan are
indebted to Turkmenistan for natural gas supplies. In October 2000, Turkmenistan
agreed to resume the export of natural gas supplies to Ukraine
that had been suspended in May 1999 because of Ukraine's $281-million natural
gas debt.
In a bid to secure a market for its
natural gas, on May 14, 2001, Turkmenistan agreed with Ukraine on a major
natural gas export deal. Under terms of the deal, Turkmenistan will provide
Ukraine with 8.83 Tcf of natural gas between 2002 and 2006. Turkmenistan will
sell Ukraine 1.41 Tcf of natural gas in 2002 and 1.77 Tcf in 2003, with
remaining deliveries to be agreed later. Turkmen officials signed the deal on
the condition that Ukraine makes timely payments for supplies. Ukrainian
officials agreed to pay for the Turkmen natural gas 60% in cash, with the
remainder paid for through participation in 20 construction and industrial
projects in Turkmenistan worth a total of $412 million.
Coal
Turkmenistan has no coal reserves,
nor any coal production. Although the country consumed a minimal amount of coal
during the Soviet era, in the aftermath of the collapse of the Soviet Union,
Turkmenistan rapidly phased out its coal use, and the country's consumption fell
from 551,000 short tons in 1992 to zero in 1998.
Electricity
With 3.9 gigawatts (GW) of installed
capacity, 99% of which is thermal, Turkmenistan has sufficient
electricity-generating potential to power its own cities, unlike much of Central
Asia. In 2000, Turkmenistan's power sector generated 9.3 billion kilowatt-hours
(Bkwh) while Turkmen consumers used just 7.7 Bkwh, giving the country 1.6 Bkwh
in surplus electricity. However, owing to the country's inefficient, Soviet-era
power infrastructure that is in need of repair, power line losses wasted a
significant portion of the electricity Turkmenistan generated in 2000, resulting
in exports of only 0.9 Bkwh.
Most of the electricity that
Turkmenistan exports is sent to southwestern Kazakhstan
and northeastern Afghanistan,
although Armenia,
Turkmenistan, and Iran
have discussed greater cooperation in the energy sphere. A power transmission
line connecting Turkmenistan to northern Iran would allow Turkmen electricity
exports to Iran and to Armenia, since Armenia and Iran's electricity grids are
connected.
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