New discovery in Turkmenistan holds 3 tcm of gas

Mar 06, 2008 01:00 AM

Turkmenistan has announced that its newly discovered Osman-South Yoloton area in Mary province holds 3 tcm of gas reserve.
The government of Turkmenistan released the tentative estimates of the new finds as President Berdymukhamedov travelled to South Yoloton to ceremonially put some new gas and oil wells into service.

Exact volume of reserves would only be known after the audit by some international firms that Turkmenistan plans to commission soon but the past experience suggests that the reserves could be well above the estimates of the Turkmen experts. For instance, Turkmenistan maintained for years that the Dauletabad cluster holds 1.7 tcm of gas. However, someone who has seen the audit certificate by an internationally known firm told that the certified reserves are 2.4 tcm.
Similarly, according to Chinese experts, the Bagtiyarlyk group of fields at the right bank of Amudarya River that has been allotted to CNPC for Turkmenistan-China gas pipeline, holds 1.6 tcm, fairly above the initial estimates of the Turkmen specialists.

Osman-South Yoloton is a contiguous zone in the Mary province, spanning some 1,800 sq km. The thickness of gas reserves is believed to be more than 600 meters. This zone is defined by Minara in north, Osman in south, Gazanly in west and Yashlar in east.
During his visit the president put into service gas wells no. 17, 102 and 103. Initial combined output of these wells is 9 mm cmpd. He also commissioned well no. 6 which is basically yielding sweet crude. The crude is being sent to Seyidi refinery in Lebap province near Uzbek border.

All the new wells in Turkmenistan are being drilled with multilayer exploitation in mind, using directional drilling technology. Average depth of the new wells is 3,500 to 4,500 meters.
Discovered in the second half of 2006, some oil and gas fields in the Osman-South Yoloton zone are already productive. In Osman last year, an exploration well yielded daily output of 5 mm cm. During land and sea explorations, 150 oil, gas,oil-gas, and oil-gas-condensate deposits have been discovered so far. Of them 50 are being developed actively.

Commentary
Correct interpretation of timing is absolutely important if one wants to interact with Turkmenistan fruitfully.
The announcement that Osman-South Yoloton zone holds about 3 tcm of gas should be juxtaposed with the following seven current developments:

1. Medvedev, a man with substantial experience in gas business, has been elected to replace Putin, although the actual thing may not resemble replacement in proper sense of the word.

2. Ukraine has been dillydallying with payments to Gazprom, consequently tattooing pinpricks on the raw nerves of Europe.

3. Europe has been courting Turkmenistan individually and collectively, with ideas that could best be described as blurred vision.

4. New sanctions have been slapped on Iran, which will not serve any definite purpose except for making it more difficult for Europe to use the Iranian territory for transit of Central Asian Gas to home markets.

5. Turkmenistan and Azerbaijan are methodically resolving mutual differences.

6. Azerbaijan, that is going to run out of oil within a decade or so, needs Trans-Caspian pipeline more than anyone else.

7. Russia has been suggesting unconvincingly for a while that it met Ukrainian requirements of gas through its own volumes in January 2008, implying that Turkmenistan did not or could not pump full contract volumes in the coldest month of this winter.

If Turkmenistan tells the world at this stage that it has discovered 3 tcm of new reserves, calling its own bluff by inviting international auditors, this single news sends multiple messages in different directions:

a. China would be reassured that the gas from the fields committed to Turkmenistan-China pipeline would not be diverted to meet export demands from Russia. This is the second reassurance to China, following fast on the heels of a contract to a Russian company for building the Malay-Bagtiyarlyk pipeline across Amudarya River.
This pipe guarantees that if Bagtiyarlyk fields could not be developed in time for commissioning of the Turkmenistan-China pipeline in January 2009, substitute gas would always be available from across the river to fill the pipe. Moreover, giving the half-a-billion-dollars contract to a politically influential Russian company indicates that Russia is comfortable with the China pipe.

b. Russia under Medvedev would have no reason to be alarmed by the prospects of Trans-Caspian pipeline of any other alternative for sending Central Asian gas to Europe. After all, this is going to be the continuation of Putin’s Russia; rhetoric for the sake of rhetoric, follow the trail of pragmatism.
Under proper incentives, Russia could even be convinced to participate in the Trans-Caspian project. This would also remind Russia that the only way to partner with Turkmenistan is through equality and mutual respect. Moreover, the current attitude of Ukraine, as observed by everyone including Turkmenistan,suggests that Russia should first create a rock-solid option to bypass Ukraine before making further commitments to the buyers or sellers of natural gas.

c. The prospects of Trans-Caspian project suddenly brighten ahead of Berdymukhamedov’s visit to Turkey.
It doesn’t mean that Turkmenistan would bend over backward to lay a pipe across Caspian bed; at best it means that Turkmenistan is giving very serious thought to the idea without compromising on its own national interests.

d. The promoters and well-wishers of Trans-Caspian would need to understand that they must meet Turkmenistan half-way for any meaningful dialogue. Announcement of a massive discovery just before the start of a substantial round of Trans-Caspian dialogue means that entire Caspian gas of Turkmenistan could be dedicated for the project.
The other side would need to match the initiative by trying to convince Azerbaijan that it must acknowledge the ownership of Turkmenistan on at least two of the three disputed fields in Caspian.

e. Care must also be taken in choice of words when issuing statements. Ambassador Steven Mann, the US point man for Eurasian energy diplomacy, told after his recent meeting with President Berdymukhamedov that Turkmenistan should diversity its energy export options, proposing Nabucco as a viable alternative.
It is difficult to guess the reaction of the Turkmen government but as far as Turkmenistan is concerned diversification has already been achieved by starting the construction of the Turkmenistan-China pipeline.
Mann could have given at least a passing nod to Turkmenistan-China pipe by saying “further diversification” instead of just “diversification.”

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