Turkmenistan Gives Little Away

At this week’s Caspian Offshore Summit in Astana, there were mixed signals on the prospects for a Trans-Caspian Pipeline, with Turkmenistan distancing itself from the project and an EU official insisting that Brussels was simply acting as a mediator. It seems that all sides are once again refusing to take responsibility for the lack of progress on the project.

One of the speakers at the conference on 13-15 June was Egenmamed Atamamedov, the head of the Turkmen Oil and Gas Ministry’s analytical department. As one Western energy observer noted, even the presence of a Turkmen official on a panel outside the country was quite unusual. Aside from occasional Turkmen energy roadshows in Europe, Ashgabat tends to have little interest in promoting its energy industry or exposing its policies to the scrutiny of outsiders.

Atamamedov gave a general overview of Turkmenistan’s energy policy, underlining the country’s world-class reserves base, its interest in diversifying energy export routes, and its enthusiasm for foreign investors.

One point that he made repeatedly was that the government “does its utmost to provide a stable political and economic environment for foreign investors”. This provoked some cynicism among international energy company representatives, who continue to decry the corruption, opacity and mismanagement of the energy business in Turkmenistan.

According to Atamamedov, “the attractiveness of Turkmenistan’s business climate has increased greatly recently thanks to President Gurbanguly Berdymuhammedov” – which, ironically, demonstrates the tendency towards autocratic centralising which has been so problematic for foreign investors.

A new Investment Promotion Law is apparently in the works which will encourage best international practices and attract more foreign investors. As expected, he reiterated that the government would continue to work on the basis of directly negotiated Production Sharing Agreements (PSAs), profit-sharing and risk-sharing contracts.

As usual in these cases, what Atamamedov didn’t say was as telling as what he did. He said that foreign firms are “especially interested” in Turkmenistan’s challenging but rewarding offshore resources, and welcomed any foreign investors with an interest in offshore blocks. Of course, the reason most foreign companies have focused on offshore blocks is that the government has blocked almost all of them from full PSAs onshore, insisting on far less lucrative service contracts.

On new pipelines Atamamedov was extremely circumspect. Although he said that Turkmenistan would welcome a Trans-Caspian Gas Pipeline across the seabed to Azerbaijan (and onwards to Turkey and Europe), he gave no hints that the Turkmen government was willing to invest in it, financially and politically. Foreign companies willing to study or build one would be welcomed, he said, but did not mention whether Turkmengaz would participate.

When pressed on a timeframe for a TCGP, Atamamedov gave a politician’s answer that “a schedule is a schedule”. Indeed. “Turkmenistan sells its gas on its border”, he continued. “If you can build a pipeline to our border, we will welcome you – we will sell our gas to you. That’s it.” The implication is that Ashgabat is unwilling to take the political and commercial risks of becoming actively involved in building a TCGP.

Another question related to the establishment of a third line of the Central Asia-China pipeline, which would allow Turkmenistan to boost its gas sales to China up to a remarkable 65bcm, as agreed recently in Beijing. Again, Atamamedov simply said that “we sell our gas at our border. Destination countries can work on any pipelines whatsoever. This is our position.”

After his speech a number of informal discussions focused on the intractability of Turkmenistan’s leadership. The general feeling among international energy-watchers is that President Berdymuhammedov is gradually tightening his control over the lucrative hydrocarbons sector. He appears to be entrenching the informal system under which all energy investment decisions pass through his office, by purging the oil and gas sector of all independent-minded officials. Although cooperation between the myriad state agencies is gradually improving, one company representative said, this was largely because all were now entirely under the thumb of the president.

This would be less of a problem if Berdymuhammedov, a dentist by training, really understood the energy industry and the best way to deal with foreign investors. But his knowledge is limited, and the culture of fear within the government makes it difficult to speak truth to power. For instance one energy expert told this author that “Berdymuhammedov simply doesn’t seem to understand the concept of booking [oil and gas] reserves. He thinks it means claiming ownership. And there is nobody that can actually explain this to him.”