CentGas to build Turkmenistan to Pakistan gas pipeline

Six international companies and the Government of Turkmenistan have formed Central Asia Gas Pipeline, Ltd. (CentGas) in formal signing ceremonies Oct. 25, 1997. The group is developing a project to build a 790-mile (1,271-km) pipeline to link Turkmenistan's abundant proven natural gas reserves with growing markets in Pakistan. The group is also considering an extension of the line to the New Delhi area in India.
"This is a truly significant step in the development of this project," said John F. Imle, Jr., president of Unocal Corporation. Unocal was appointed by the Government of Turkmenistan to lead the project development activities and form the gas pipeline consortium. A Unocal subsidiary will serve as development manager for CentGas. "The interest shown by major international companies underscores both the attractiveness of the proposed pipeline and the significant economic benefits it can bring to the region. This project could be the foundation for a new commerce corridor for the region-- often referred to as the Silk Road for the 21st century."
The CentGas consortium will initially include the following companies, either directly or through affiliates: Unocal Corporation, 46.5 %; Delta Oil Company Limited (Saudi Arabia), 15 %; the Government of Turkmenistan, 7 %; Indonesia Petroleum, LTD., 6.5 %; ITOCHU Oil Exploration Co., Ltd., 6.5 %; Hyundai Engineering & Construction Co., Ltd., 5 %; and the Crescent Group (Pakistan), 3.5 %. RAO Gazprom has indicated an interest in signing the consortium agreements formalising a 10 % share in the project in the near future.
The proposed pipeline will carry natural gas from the Dauletabad Field, in south-eastern Turkmenistan at a rate of up to 2 billion cubic feet per day (20 bn cmpy). The Dauletabad Field has independently certified reserves of more then 25 tcf (708 bn cm). The Government of Turkmenistan has guaranteed deliverability of 25 tcf (708 bn cm) of natural gas exclusively for the Central Asia Gas Pipeline. Much or all of this gas is expected to come from the Dauletabad Field.
The inaugural MoU between the governments of Turkmenistan and Pakistan for the CentGas project was signed in March 1995.
"The formation of the consortium is another major milestone achieved in accordance with the requirements of protocols and agreements previously signed with the Governments of Turkmenistan and Pakistan," said Marty Miller, Unocal Corporation vice president responsible for new ventures in Central Asia and Pakistan.
Miller pointed out that the project still faces significant economic, political and commercial challenges, such as finalising mutually acceptable commercial agreements and agreements with transit countries. "This project has exceptionally sound economic fundamentals, given the presence of proven gas reserves in Turkmenistan and the market needs of Pakistan and India. The Dauletabad Field has produced well over 2 billion cubic feet per day in the past and is capable of producing that volume today. With the right development program, the field will continue to be able to produce natural gas at this rate long into the future. No other import project can provide such volumes of natural gas to these markets at a lower price."
The proposed natural gas pipeline would stretch from the Turkmenistan/Afghanistan border in south-eastern Turkmenistan to Multan, Pakistan (790 miles, 1,271 km), with a 400-mile (640-km) extension to India under consideration. Estimated cost of the project is $ 1.9 billion for the segment to Pakistan and an additional $ 600 million for the extension to India.

Following is more information on the project and its members:

CentGas Consortium Members:
Unocal Corporation (U.S.), 46.5 %
Founded over 100 years ago, Unocal is one of the world's leading energy resource and project development companies providing regional integrated energy solutions. Unocal has reserves of more than 9.8 trillion cubic feet of natural gas equivalent (1.6 billion barrels of oil equivalent) and major oil and gas production activities in Asia and the U.S. Gulf of Mexico.
Delta Oil Company Limited (Saudi Arabia), 15 %
Delta Oil Company Limited, a private Saudi-owned company, was founded by its Chairman and Chief Executive Officer, Mr. Badr M. Al-Aiban. Mr. Al-Aiban established the original Delta entity in Saudi Arabia in 1978, and its activities have expanded significantly since its inception. Today, Delta and its affiliates comprise a diversified group of companies involved in the energy industry, real estate development, food processing and packaging, soft drink bottling and distribution, agriculture and manufacturing. The company's operations extend to Central Asia, South East Asia and other countries in the Middle East. Delta has developed a number of strategic alliances in the oil and gas industry. As a member of the Azerbaijan International Operating Company (AIOC) and the North Absheron Operating Company Limited (NAOC), Delta and its affiliates are involved in exploring and developing oil fields in Azerbaijan, as well as other Central Asian countries.

The Government of Turkmenistan, 7 %
Since declaring its independence from the USSR on Oct. 27, 1991, Turkmenistan has looked forward to increasing the economic strength of the new state. The country has strived to build on its traditions, values and history to form a political and economic system capable of increasing the well-being of its people, and strengthening the sovereignty of Turkmenistan. The leadership of Turkmenistan has met the challenge of reform head on, and has established many channels for swift economic development. As an independent state, Turkmenistan has much to offer to the Central Asian region and the international community. By effectively using its natural resources, continuing on a path of economic reform as can be seen in the agricultural industry, and promoting its economic potential to attract foreign investment, Turkmenistan can be assured of decades of successful economic growth. The government believes that by seeking international investment, technological and management support for its country, Turkmenistan can play a major role as the economic catalyst for the Central Asian region, and join the world leaders in the distribution of oil and gas.

Indonesia Petroleum, LTD., 6.5 %
Indonesia Petroleum, LTD., a Tokyo-based company, has been engaged in the exploration and development of petroleum resources, mainly in Indonesia, since 1966 in order to ensure a continued stable supply of energy resources to Japan. With its core activity area in Indonesia, INPEX is expanding its activities in East Asia, Oceania, CIS, the Middle East and Africa. INPEX and its subsidiaries are currently producing 280,000 boepd equity oil and gas in Indonesia, Australia and UAE.

ITOCHU Oil Exploration Co., Ltd., 6.5 %
ITOCHU Oil Exploration Co., Ltd. was formed in 1972 and is now involved in the exploration, development and production of hydrocarbons in Indonesia, U.K. North Sea, Australia, Pakistan, CIS Countries, Yemen, Oman and Gabon. CIECO is the core company responsible for all Hydrocarbon Exploration and Production activities within the subsidiaries and associates of ITOCHU Corporation, the largest trading company in Japan. With maximum utilisation to ITOCHU's world-wide network, CIECO is well placed to continue to expand its foreign activities in the future.

Hyundai Engineering & Construction Co., Ltd., 5 %
Hyundai Engineering & Construction Co., Ltd. was established in 1947, and its major role was rebuilding Korea's infrastructure. Growing rapidly during the early 1960s, Hyundai built dams, bridges, buildings and tunnels, as well as industrial plants that were desperately needed. Since it launched into the international market in 1968, Hyundai has taken a place among top global general contractors, with approximately $ 32 billion construction orders through 1996. As the core company of Hyundai Business Group, Hyundai has set the pace for the Hyundai Business Group which is now a $ 87 billion multi-national conglomerate specialising in engineering and construction, automobiles, shipbuilding, robotics, electronics, petrochemicals, aerospace and trading.

The Crescent Group (Pakistan), 3.5 %
The Crescent Group, in business for more than 50 years, is the premier industrial and financial conglomerate in Pakistan. More than 35 independent companies operating across Pakistan form the nucleus of the group and are leaders in textiles, jute, sugar, engineering, steel, investment banking, insurance, leasing and software development. The Crescent Group employs over 15,000 people and contributes to 1 % of GNP of the country and over 2 % of market capitalisation of Pakistan.
Strategic alliances have helped position the Crescent Group as a leader in its core businesses, such as textile and textile made-ups. Crescent is in partnership with some of the most well-known corporations from the United States and Europe.
The Group puts heavy emphasis on keeping its projects environment-friendly, promotes education, and spends considerably on the development of human talent in safe working conditions.

The Resource
Dauletabad Field is one of the largest gas fields in the world. DeGolyer & MacNaughton, an internationally recognised petroleum engineering firm, has thoroughly evaluated the field's reserves. These evaluations clearly show that the field's resources are adequate for project needs, assuming production rates of roughly 1.5 billion cubic feet of gas per day (15 billion cubic meters of gas per year) for 30 years or more. The Government of Turkmenistan has guaranteed deliverability of 25 trillion cubic feet (709 billion cubic meters) of natural gas exclusively for this project. Much or all of this gas is expected to come from the Dauletabad Field.

The Market
Forecasts based on reasonable gas purchase, sales price and other assumptions show sufficient demand for the imported gas at prices that support the project's economic viability. Market analyses indicate that Pakistan's electric power generation market will be the main consumer of the imported gas.

The Route
The 48-inch diameter pipeline will extend 790 miles (1,271 km) from the Afghanistan-Turkmenistan border, generally follow the Herat-to-Kandahar Road through Afghanistan, cross the Pakistan border in the vicinity of Quetta, and terminate in Multan, Pakistan, where it will tie into an existing pipeline system. Turkmenistan will construct a pipeline that will link with the CentGas line at the border and stretch approximately 105 miles (169 km) to the Dauletabad Field. A potential 400-mile (644-km) extension from Multan to New Delhi also is under consideration. Estimated cost of the project is $ 1.9 billion for the segment to Pakistan, and an additional $ 600 million for the extension to India.

Inter-Government Support
The project enjoys strong support from the governments and leadership of the three countries directly involved and has also attracted the interest of other countries. Turkmenistan and Pakistan have demonstrated inter-government support through various memorandums of understanding.

Regional Benefits
The project offers numerous long- and short-term benefits to the region. It will link plentiful supplies of clean-burning natural gas with growing regional markets, employ thousands of local people, foster regional co-operation, and enhance trade, transportation and communication. The development of pipeline-related infrastructure also will create opportunities for economic growth in other industries.
In addition to regional advantages, the pipeline offers specific benefits to the countries involved. Turkmenistan will reach new markets with its plentiful gas reserves, while Pakistan gains a reliable source of clean-burning fuel to drive its economic growth. Afghanistan will earn extensive economic benefits from the pipeline, both during construction and over the life of the project.