Lack of Transparency, Reported Spills Plague Turkmenistan as TAPI Still Awaits a Major
Progress on the Turkmenistan-Afghanistan-Pakistan-India (TAPI) has been waiting for an oil major to agree to invest in the $7.6 billion 1,800-kilometer project, but with Ashgabat reluctant to sign production-sharing-agreements to enable investors to share in upstream profits, no company appears to be stepping forward. India has asked for a meeting of TAPI’s technical working group and reported that Turkmenistan was “quietly working with international oil companies to work a way around the question of upstream stake,” a senior government official said told India’s Economic Times May 4th.
While surprises are always possible, the quiet is likely a function of reluctance. After decades of carefully courting Ashgabat and avoiding negativity, oil major are growing more candid.
Ashgabat recently reported ambitious plans to produce 250 billion cubic meters of gas and export 200 bcm by 2020, but "western energy companies are increasingly wary of the country's energy export plans and the future of large-scale projects" such as TAPI, Tavus Rejepova reported for Central Asia-Caucasus Analyst/Universal.
“Moving from where Turkmenistan is today to where you want to be in 2030 will require long-term partnership and tens of billions,” Rejepova quoted Douglas Uchikura of Chevron Onshore Europe as saying.
President Gurbanguly Berdymukhamedov has called on work to "intensify" work on TAPI, but has failed to make any visible and substantial moves to take the project out of endless committee meetings into reality.
Turkmen say drilling in the vast Galkynysh oil fields will start this year; already Turkmengaz has granted service contracts worth nearly $10 billion to Asian and Middle Eastern companies, but has tended to shun Westerners and PSAs in general.
Even Russia’s Gazprom is hardly likely to get consideration, as Turkmenistan long ago ceased to get its asking price from Moscow and relations grew strained after a pipeline explosion in 2009. While some 10 bcm is still contracted for sale, Ashgabat has publicly rejected re-involvement with Russia for political and practical reasons, having shifted its business to China which has invested billions in its infrastructure.
The foreign ministries of Russia and Turkmenistan met in Ashgabad last week for talks only vaguely described as "related to implementation of agreements" but no mention of any pipeline projects was made.
American oil companies expressed interest in TAPI during the Asian Development Bank’s road show last fall, and the US government has struggled to create the political framework for this project to succeed not only for the sake of transition after troops withdraw from Afghanistan in 2014 but as part of an over-ambitious “New Silk Road” plan for stabilizing the region.
Robert O. Blake, Jr., the US State Department’s Assistant Secretary of State for South and Central Asian Affairs , speaking at the Turkic American Conference in March, said "In January, I had very productive meetings with President Berdimuhamedov and other senior Turkmen officials in Ashgabat, and later this month Foreign Minister Meredov will come to Washington to meet with Secretary Kerry." But when Meredov failed to show at month's end, State Department official could only tell a reporter, "Ask the Turkmen government.”
Chevron, ExxonMobil and others took part in the annual US Business Forum in Ashgabad May 1st, but executives did not get meetings with the Turkmen president as they had in past years and no news was available about progress on past pledges.
A minority staff report issued by the US Senate Committee on Foreign Relations in December 2012, Energy and Security from the Caspian to Europe, has now defined the US-Turkmen dialogue in ways those hopeful of greater cooperation on the southern corridor from Turkmenistan likely regret. The report is unequivocal in identifying the source of lack of progress: “Turkmenistan's ‘take our gas at the border’ policy could further hinder progress on TAPI and TCP.” It also makes very stark (and likely undoable) policy prescriptions:
“The Government of Turkmenistan should reform domestic energy laws to enable major investments by energy majors in natural gas exploration, production and transport. The energy majors not only have advanced technology and expertise to more capably develop Turkmenistan's challenging gas fields, but an energy major's ownership of part of the gas through production sharing agreements will be necessary to make advance sales to privately finance the Trans-Caspian and the [TAPI].”
The report also stressed the need for Turkmenistan to work with the World Bank and the Extractive Industries Transparency Initiative to "promote good governance in management of energy resources" which would "help address suspicions of IOCs".
When earlier this year Yagshigeldy Kakaev, deputy chairman of Turkmenistan’s Cabinet of Ministers responsible for the oil and gas sector, and director of the Presidential State Agency for Management and Use of Hydrocarbons Resources, received a reprimand for unspecified lapses, this may have been related to his failure to see the Senate Committee’s report coming and a high-profile conference of experts at the Atlantic Council, say Turkmen sources. The critical report was also believed to have prompted the postponement of the Washington trip as it indicated inability to “manage expectations” in the US.
Other developments have contributed to the growing sense of frustration with Ashgabat. Recently an inside account by Damir Li of the difficulties confronted by the ADB, the lead developer of TAPI, was published in Russian by the émigré Internet site Chronicles of Turkmenistan. In the 20 years ADB has attempted to nurture the project, it has faced nearly insurmountable obstacles in dealing with the reclusive, closed society of Turkmenistan.
“It was practically impossible to talk with specialists from the Turkmen oil and gas sector; nobody would contact you for unwritten but very weighty reasons -- it was not allowed. All conversations could take place only with preliminary written approval and in the presence of several persons, even if all the rest remained silent," says Li.
ADB began work in 2000 with two small projects, a road and some training for the national statistics institution. But Ashgabat at first demanded grants and refused to accept loans, although ADB had a policy of only giving grants to poorer, developing countries like Afghanistan, not to a country with large gas reserves like Turkmenistan. Furthermore, Turkmenistan refused to turn over any real statistical information to the ADB, forcing the Bank to use very scant information from the state-controlled press.
The ADB also differed with the Turkmen government on their insistence on providing free gas and electricity, a key element of state propaganda. The ADB reasoned that the state should make investments in the economy so that people could have salaries high enough to pay for their own utilities, then use that income to further improve services; Ashgabad didn't want to have to raise salaries, as that would mean raising prices; instead, they preferred to pump billions into vanity projects like the Avaza resort on the Caspian.
Through sheer persistence, the ADB was also able to open a permanent representative office in 2010 after ten years of negotiations, which in other Central Asian countries had taken only a few months. Then in March 2011, the first loan was approved for the North-South railroad and assessment of cooperation with Afghanistan’s energy system.
Another difficulty for ADB was that the contingent of Turkmen officials with whom they met kept changing, along with the attitude toward TAPI. Problems ensured in trying to coordinate schedules among all the participants, but the Turkmens also never seemed authorized to talk, and even obtaining a good translation of documents was mysteriously difficult. Getting meetings with the top ministers was an ordeal; the Turkmen leader would both shuffle his ministers and the institutions responsible for the project.
But TAPI seemed to come to life with the appointment to Turkmengaz of Baymurad Hojamukhamedov, a fairly young and educated official experienced with foreign projects. "Since most likely his future career will indirectly depend on the gas pipeline, we can conclude that the pipeline will come into being,” Li writes. Indeed, Hojamukhamedov has no other choice in the oppressive atmosphere of the Turkmen government where ministers are constantly kept off balance.
With the lack of civil society involvement and transparency, charges of neglect of environmental concerns have dogged Turkmenistan for years. Now, with the uses of satellite imagery, these concerns are getting more attention. Crude Accountability, an environmental monitoring group, recently released a report in conjunction with the American Association for the Advancement of Science (AAAS) regarding oil spills in the Caspian which they fear are a threat to human health, wildlife and the caviar industry.
From the images taken over time, AAAS was able to show that at least 150 oil spills have likely occurred in the last dozen years in Turkmenbashi Bay. Crude Accountablity and local colleagues in Turkmenistan worry that increased volumes of oil being shipped from Turkmenbashi's two oil terminals have led to local contamination, with Port East implicated as a primary source of pollution -- both newly-built structures and decaying Soviet-era facilities are a concern
Catherine A. Fitzpatrick