China Keeps Turkmen Galkynysh in Reserve

China is proving distinctly reticent when it comes to discussing progress at on the giant second phase of Turkmenistan’s Galkynysh gas field development, which is eventually scheduled to produce 30bn m³/yr. 

From what CNPC has disclosed, its main focus still seems to be on its own concessionary field at Bagtyyarlyk, where it has a production sharing agreement, and that it is still gearing up for major activity at Galkynysh, where it has one turnkey service contract to produce 10bn m³/yr from the initial 30bn m³/y Galkynysh Phase One and a second turnkey service contract to produce all of Galkynysh Phase Two’s projected 30bn m³/y.

In addition to this, the latest Chinese figures indicate that Turkmen exports are continuing to grow steadily, possibly amounting to around 35bn m³ in 2016, up from an estimated 29bn m³ in 2015.  

Addressing the annual Turkmenistan Gas Conference recently, Deng Minmin, General Manager, China National Petroleum Corporation (CNPC) International Turkmenistan, disclosed some key figures concerning the relative importance of gas produced and exported to China by CNPC itself at its Bagtyyarlyk field in northern Turkmenistan and gas exported to China by the state-owned Turkmengas.

Deng Minmin, speaking on 24 May 2016, said that as of 19 May 2016 Turkmenistan had exported a total of 138.6bn m³ to China, of which 46.5bn m³ came from Bagtyyarlyk and 92.1bn m³ from Turkmengas.

But he did not disclose the source of the Turkmengas contribution; in particular, whether the bulk of it came from either of the first two phases of Galkynysh. Nor did he relate current export figures to previous statements. However, as of 12 November 12, 2015, Turkmenistan had exported some 121bn m³ to China, with 39bn m³  coming from Bagtyyarlyk and 82bn m³  from Turkmengas.

This would seem to indicate that in just over six months, total exports amounted to around 17.5bn m³, with Bagtyyarlyk accounting for around 7.5bn m³  and Turkmengas for around 10bn m³ .

If this is so, then overall CNPC output at Bagtyyarlyk would appear to be currently running at around 15bn m³/yr, with export-related output from Turkmengas running at around 20 bcm/y.

However, Deng Minmin said that in 2015 CNPC actually produced some 12.52bn m³ and that it expects to produce fractionally less - 12.50bn m³  – in 2016. These figures are consistent with planned increases following the installation of the second gas processing plant at Bagtyyarlyk in 2013 and would thus seem to indicate that all, or almost all, of CNPC’s input into the export pipeline system is still coming from Bagtyyarlyk. 

This, in turn, would seem to indicate that whereas CNPC is delivering on its promises for development of Bagtyyarlyk, Turkmengas is not keeping pace. But with CNPC’s turnkey contracts playing such an important role at Galkynysh, this raises questions concerning the progress of Chinese activity at the the world’s largest onshore gasfield.

Under the original 2007 agreements for Bagtyyarlyk and the development of the Central Asia Gas Pipeline, by 2014, CNPC was to be producing some 13bn m³ /yr from Bagtyyarlyk, on the right bank of the Amu Darya river, and Turkmengas some 27bn m³/yr. The latter was to have come from fields on the left bank of the Amu Darya, notably the relatively new Malay field, and also from other existing Turkmen gas fields, including the well-established Dauletabad field near Turkmenistan’s border with Iran and Afghanistan, accounting for 13bn m³  and South Yoloten, subsequently renamed Galkynysh, 14bn m³ .

The slow pace of development at Galkynysh remains the easiest way to account for the shortfall in the Turkmengas' contribution to exports to China. But although CNPC is deeply involved in this project, figures presented by Deng Minmin would appear to indicate that CNPC is only just beginning the massive ramp-up of investment and development required to produce the massive amounts of gas it is eventually expected to deliver at Galkynysh.

Thus, according to Deng Minmin, CNPC is currently employing some 8,697 local staff at Bagtyyarlyk, but only 447 at Galkynysh. Deng Minmin did not provide a project breakdown for the 1,780 foreign staff employed by CNPC in Turkmenistan.

Meanwhile, CNPC is contributing to Turkmenistan’s balance of payments both through the value of its exports and through local taxation, with Deng Minmin saying that so far the company had paid the government $2.4bn in fees and taxes.

John Roberts, Chief Analyst