The international gas market and Turkmenistan

Sep 15, 2009 02:00 AM

by Dowran Orazgylyjow, Master of Law, Law doctoral candidate

The energy policy of the President of Turkmenistan directs rich natural resources of the country to the improvement of people's well-being and to the service of entire mankind.
We must to create a manifold system of pipelines for stable and long-term delivery of Turkmen energy and raw resources to the world markets in the Great Revival epoch. Initiatives of Turkmenistan in this issue are oriented not to political interests but are grounded from an economic viewpoint.

An international audit of hydrocarbon raw resources has been held in South Yoloten-Osman and Yashlar fields, located in Amudarya basin of the eastern part of Turkmenistan. Not long ago, specialists of "Turkmengeologiya" State Corporation have successfully completed the test extraction in two wells in this big gas deposit.
About 1 mm cm of gas has been commercially produced round the clock in the 24th and 25th wells, situated in 4,500-4,600 meter depth gas stratum. It has become possible owing to seismic tests of prospecting and drilling operations.

It should be noted that recently, rich resources of natural gas have been discovered in the Minara field in the eastern part of Turkmenistan. Specialists of Turkmengeologiya State Corporation have developed 4,030 meters of depth of deposit and extracted 4,3 mm cm of free flowing production rate round the clock.
Geologists note that the production rate of such big wells is high and that they are promising. Location of the Minara field and the South Yoloten-Osman deposit on the same area makes it possible to create a single oil and gas complex zone and there should be no doubts of it.

Commercial production of gas and its export to world markets requires vast investments. Laws of Turkmenistan "On Foreign Investments" and "On Hydrocarbon Resources" have been adopted to solve these issues and mobilization of foreign investments, to establish legal bases of mutually beneficial cooperation. It is a guarantee of the state given to foreign investors.
As the Head of State notes that despite increased demand for alternative energy sources all over the world, in the nearest future oil and gas will remain a main fuel resource. Turkmenistan has rich resources of fuel. Turkmenistan is considered as one of the countries possessing rich hydrocarbon resources. It is interesting to dwell on potentials of the natural gas market.

World natural gas market
According to "BP Statistical Review of World Energy June 2009" of BP Company, announced in June of the current year, last year, the amount of natural gas resources increased by 7,97 tcm and its total amount reached 185,02 tcm. The last year share of Turkmenistan in the increase of gas resources made 5,51 tcm.
Thus, in accordance with the task of the President, the international auditing of gas resources of Turkmenistan has been carried out. It required introducing amendments to the data concerning natural gas resources of the world. Reserves of natural gas of Turkmenistan, Iran and Qatar have been included to the list of countries, which gas resources will be sufficient for more than 100 years.

Speaking about countries of the globe, the average amount makes up 60,4 years. According to the review, last year the production of gas in the world was increased by 3,8 % in comparison with previous one, and in total made up 3 tn 65,6 bn cm. In Russia, the volume of produced gas made up 601,7 bn cm, in the USA -- 582,2 bn cm and in Canada -- 175,2 bn cm and last year these countries became the leading states in gas production.
Last year, Azerbaijan (50 %), Brazil (22,4 %), and Qatar (20,9 %) took the leading places by increase of production capacity. It is mentioned in review that use of gas in the world was left high as well.

In comparison with previous years, in 2008, countries of the world used natural gas by 2,5 % more. Thus, the following countries became the leading ones in the world by consumption of gas -- the USA used 657,2 bn cm, Russia -- 420,2 bn cm and Iran 117,6 bn cm.
Speaking about yearly increase of gas consumption volume we can say that it was increased in Peru by 26,6, %, in the United Arab Emirates by 17,5 % and in Azerbaijan by 16 %. By amount of gas consumption, China takes the leading position. Last year, the amount of gas consumption in this country was increased by 11,2 bn cm in comparison with the previous one. Gas consumption will be left high in future years.

According to "International Energy Outlook-2009", published by the American Energy Information Administration (EIA), demand for energy in the world will be increased by 44 % in 2006-2030. In 2006, demand for gas all over the globe was 2 tn 968 bn cm and this index is being increased yearly in average by 1,6 %.
It is prognosticated that in 2030 this amount will be 4 tn 284 bn cm. It means that natural gas production capacity will be increased until that period by 1,316 tcm. According to World Energy Outlook-2008, published by International Energy Agency demand for natural gas will be increased yearly in average by 1,8 % until 2030, i.e. 4,434 tcm.

Large volume of gas produced in countries of the world is exported. Last year, about 813,77 bn cm of gas were delivered to the world markets. 587,26 bn cm of gas were delivered by pipelines and 226,51 bn cm were sold in liquefied natural gas (LNG).
Russia (154,41 bn cm), Canada (103,2 bn cm) and Norway (92,78 bn cm) were the leading countries in the world in export of natural gas by pipelines. The USA exported 104,41 bn cm of gas, Germany -- 87,1, bn cm and ltaly --75,31 bn cm of gas.

International sales of natural gas will be increased in the future. Countries of the European Union, Turkey, India and China are the main countries importing natural gas. As known, natural gas is delivered mainly by pipelines and liquefied gas is delivered with the help of tankers.
Summing up, the total length of gas pipelines in the world is 1 mm 209,554 km. According to the International Energy Agency, sales of liquefied gas willbe 340 bn cm in 2015, and 680 bn cm in 2030. At the end of 2007, 256 bn cm of gas was preserved in 24 LNG storages of the world. Presently, several LNG storages with total capacity of 146 bn cm of gas are under construction. Construction of LNG storages with total capacity of 417 bn cm of gas is planned as well.

European Union gas market
The price of natural gas for countries of the European Union is regularly increasing. According to data of "Green Paper-2006", countries of the European Union will consume 635 bn cm of natural gas in 2030. That year the amount of gas, produced by these countries will be about 100 bn cm because of little amount of gas resources and low production capacity.
It means that the amount of imported gas will be increased in EU countries.

More exactly, in 2030, these countries will import 535 bn cm of natural gas. Import of gas of EU countries will be increased by 86 %. Analysis of the present state of production, consumption and export of gas by EU countries shows that import of gas will be increased in future.
According to "Eurogas" organization, in 2008, EU countries produced 202 bn cm of gas. That year, the import of gas to EU countries made up 314,9 bn cm. In other words, in 2030, 220,1-265,1 bn cm of natural gas will be additionally imported by Europe. Thus, demand for natural gas will be increased in the nearest future.

Turkish gas market
Turkey, whose volumes of consumed natural gas are completely imported from foreign gas markets, in the near future would have to increase the volumes of imported gas. In accordance with the estimates of BOTAS Turkish Energy Corporation, by 2010 Turkey would be consuming 43 bn 806 mm cm, by 2015 -- 56 bn 183 mm cm, by 2020 -- 65 bn 867 mm cm, by 2025 -- 70 bn 546 mm cm, and by 2030 -- 76 bn 378 mm cm of natural gas, comparably to 36 bn cm of natural gas, consumed by Turkey last year.
In concordance with the concluded contracts, Turkey is capable of buying for 2010 year -- 51 bn 59 mm cm, whereas for 2015 and 2020 years -- 40 bn 791 mm cm of gas.

In other words, if Turkey is able to supply required volumes of natural gas for 2010 year under the international gas supply contracts, such contracts do not guarantee the required volumes of natural gas for 2015 and 2020 years. More precisely, in order to meet the required volumes of natural gas, Turkey would have to conclude new natural gas supply contracts, which would ensure the supply of another 15 bn 392 mm cm in 2015, and 25 bn 76 mm cm for 2020 year.
Considering the fact that international natural gas supply contracts, currently concluded by Turkey would expire by 2030, it becomes clear that Turkey would have to work on and conclude new contracts for natural gas supply.

China's gas market
If talking about China, it is a country currently consuming 15 % of the world's energy consumption, and after 2010 is expected to be the world's largest energy market. In accordance with estimates, by 2030 the 1/5 of the world's energy consumption would be consumed by China.
The volume of consumed energy is expected to double during the 2005- 2030 years. Thus, if currently the natural gas portion in total volume of the national energy consumption makes up 2 %, by 2030 this portion would increase to 5 %. And in accordance with other sources, by 2030 the portion of the natural gas in total volume of the national energy consumption would make up 10 %.

With the total natural gas reserves of 2,46 tcm, for the last year China has produced 76,1 bn cm of natural gas. In 2008, China has consumed appr. 80,7 bn cm of natural gas, and in accordance with the International Energy Agency, by 2030 this volume could increase up to 221-250 bn cm. The domestic production of natural gas for the same year is expected to make up 115 bn cm.
Such rapid increase in volume of consumption of natural gas, the shortage of natural gas resources of the country and limited domestic production of natural gas not satisfying the needs of the country would force China to import natural gas. Therefore, in near future more than a half of the country's natural gas consumption volumes would be imported from the foreign markets.

Indian gas market
Now, let us talk about one of the world's future largest energy markets, natural gas market of India! In 2008 with 30.6 bn cm of produced natural gas, the country in the same year has consumed 41.4 bn cm of natural gas. With the increase of the natural gas portion in the total energy volume of India, in 1997, 35 % of the total energy consumption volume had been covered by oil, whereas natural gas made up 7 %.
In accordance with the "India Hydrocarbon Vision -- 2025" report, with the decrease of oil's share in total energy volume to 25 % by 2025, such share of natural gas would increase up to 20 %. In accordance with the IEA data, by 2030 India would consume 117 bn cm of natural gas, from which 45 bn cm would be produced domestically. While considering the volume of India's natural gas resources which make up 1.09 tcm, itbecomes obvious that in near future the largest portion of the consumed natural gas would be imported from outside.

As shown from examples, the demand for the natural gas would considerably increase in future years. Population of countries, gas markets of which were analyzed in short in the above given examples, make up 3 bn people. Thus, by 2030 these countries would import 850 bn cm of natural gas.
It means that Turkmenistan, which will produce a large amount of natural gas, will export its natural gas on a basis of equal in right cooperation to gas consuming countries of the world in about ten years.

As the President noted at an enlarged session of Cabinet of Ministers, held on January 15 of the current year, this year, Turkmenistan is aimed at production of 75 bn cm of gas, and its export in accordance with signed concluded agreements. It should be noted that beginning from the end of the current year, Turkmenistan will export its natural gas to People's Republic of China by the Turkmenistan-China gas pipeline. Its year volume will be increased from 30 bn cm up to 40 bn cm of gas.
In accordance with the National Programme of Turkmenistan "Development of oil and gas industry of Turkmenistan until 2030", it is planned to export 140 bn cm of natural gas to foreign countries in 2020 and 200 bn cm of gas in 2030. Thus, under the leadership of the President, the economic potential of Turkmenistan will be increased in the nearest future.

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