Paul Thomen

Wednesday 26 December 2012

2013 Turkmenistan Oil and Gas Market Industry Report Q1

BMI View: Upstream interest in Turkmenistan's growing gas reserves remains strong, with foreignplayers, particularly China, eager to gain access to the country's lucrative gas fields. The energyrelationship between Turkmenistan and China continues to strengthen, with continued upgrades toexisting long-term supply agreements and investment commitments. Turkmenistan has made ambitiousgas production targets, raising their own forecasts of gas production in 2030 to 250bcm from 230bcmpreviously. Although 2030 is outside our forecast period, the ambitious figures highlight the country'soptimism, which is reflected in our forecasts gas production which we expect will more than double from70bcm in 2012 to155bcm in 2021.

The main trends and developments in Turkmenistan's oil & gas sector are:

Turkmenistan and China continued to build on their strong energy relationship with a newcommitment in July 2012 for Ashgabat to supply Beijing with 65bn cubic meters per year(bcm/y) of gas by 2020. Recent analysis conducted by CNPC, found that since the Central Asia-China gas pipeline was inaugurated in 2009, some 30bcm of gas has been supplied to Chinafrom Turkmenistan. Based on the 6.6bcm that have been traded between the two countries in thefirst third of 2012, we expect total volumes to reach around 20bcm this year.

Upstream interest remains strong on the back of the most recent discovery, the South Yolotangas field, which has been confirmed as the world's second largest following an appraisal byauditor Gaffney, Cline & Associates (GCA). The field is thought to contain 13.1-21.2trn cubicmetres (tcm) of natural gas. The former Soviet Republic holds the world's fourth-largest naturalgas reserves and plans to treble annual gas output to 230bn cubic metres (bcm) by 2030, 180bcmof which would be for export.

However, despite strong interest from foreign players, Turkmenistan's business environmentremains challenging with limited opportunities for foreign players. China's CNPC remains theonly foreign player with an onshore PSC, with foreign firm's upstream participation limited toonshore service contracts or PSA's for fields in the Caspian Sea.


Foreign participation in the oil sector will help raise output, but liquids production continues tostruggle as attentions increasingly shifts to gas. In 2011, Turkmenistan revised downwards itstargeted production number of 1.35mn barrels per day (b/d) by 2030, a reduction from apreviously reported goal of 2.2mn b/d. While oil production will rise to 217,000b/d in 2012, weexpect output to peak in 2017 at 377,000 b/d, well below government targets.

We are much bullish with regard to our forecasts for the country's gas output, which we predictwill increase at an average rate of 9.3% over the course of our forecasting period, rising from70bcm in 2012 to 155bcm in 2021 as production rises with new and enhanced development ofexiting fields. While domestic demand will increase from 23bcm in 2012 to 45bcm in 2021,increased production will still allow for exports of 110bcm.

However while we see significant upside potential to these numbers based on recent discoveries,we highlight that the poor quality of remaining gas deposits will increase the costs ofdevelopment, with sour gas in high pressure, high temperature reservoirs making extensiveprocessing necessary. Increasing foreign participation in the gas upstream would ensureTurkmenistan as access to the technical and capital requirements to best tap its extensive gasresources.

Turkmenistan's dependence on oil prices leads to high volatility in the country's export revenues. Ourassumptions of tight supply due to booming demand in emerging markets is clearly an opportunity for thecountry. We forecast OPEC basket oil prices to remain elevated and average US$107.05 per barrel (bbl)in 2012, a figure similar to the 2011 average of US$107.52/bbl in 2012.

Table Of contents

BMI Industry View
SWOT Analysis
Turkmenistan Oil and Gas SWOT
Industry Forecast Scenario
Oil And Gas Reserves
Table: Turkmenistan Proven Oil And Gas Reserves and Total Petroleum Data, 2010-2016
Table: Turkmenistan Proven Oil And Gas Reserves and Total Petroleum Data, 2015-2021
Oil Supply And Demand
Table: Turkmenistan Oil Production, Consumption And Net Exports, 2010-2016
Table: Turkmenistan Oil Production, Consumption And Net Exports, 2015-2021
Gas Supply And Demand
Table: Turkmenistan Gas Production, Consumption And Net Exports, 2010-2016
Table: Turkmenistan Gas Production, Consumption And Net Exports, 2015-2021
Refining And Oil Products Trade
Table: Turkmenistan Refining - Production And Consumption, 2010-2016
Table: Turkmenistan Refining - Production And Consumption, 2015-2021
Revenues/Import Costs
Key Risks To BMI's Forecast Scenario
Country Risk/Reward Ratings
Turkmenistan Upstream Rating - Overview
Turkmenistan Downstream Rating - Overview
Regional Risk/Reward Ratings
Table: Central And Eastern Europe Risk/Reward Ratings
Table: Upstream Risk/Reward Rating
Table: CEE Downstream Risk/Reward Ratings
Turkmenistan Energy Market Overview
Overview/State Role
Licensing And Regulation
Government Policy
International Energy Relations
Table: Upstream Projects
Oil And Gas Infrastructure
Oil Terminals/Ports
Oil Pipelines
Gas Pipelines
Competitive Landscape
Executive Summary
Table: Key Domestic And Foreign Companies
Table: Key Upstream Players
Table: Downstream Players
Company Monitor
Eni
Dragon Oil
Petronas - Summary
China National Petroleum Corporation (CNPC) - Summary
Gazprom - Summary
Itera - Summary
RWE - Summary
Others - Summary
Service Companies
Regional Energy Market Outlook
Global Market Overview
Table: Global Oil Demand Forecasts - A Comparison
Central And Eastern Europe - Regional Appendix
Table: Oil Consumption - Historical Data & Forecasts, 2009-2016 ('000b/d)
Table: Oil Consumption - Long-Term Forecasts, 2014-2021 ('000b/d)
Table: Oil Production - Historical Data & Forecasts, 2009-2016 ('000b/d)
Table: Oil Production - Long-Term Forecasts, 2014-2021 ('000b/d)
Table: Refining Capacity - Historical Data & Forecasts, 2009-2016 ('000b/d)
Table: Refining Capacity - Long-Term Forecasts, 2014-2021 ('000b/d)
Table: Gas Consumption - Historical Data & Forecasts, 2009-2016 (bcm)
Table: Gas Consumption - Long-Term Forecasts, 2014-2021 (bcm)
Table: Gas Production - Historical Data & Forecasts, 2009-2016 (bcm)
Table: Gas Production - Long-Term Forecasts, 2014-2021 (bcm)
Table: LNG Exports - Historical Data & Forecasts, 2009-2016 (bcm)
Table: Net LNG Exports - Long-Term Forecasts, 2014-2021 (bcm)
Methodology And Risks To Forecasts
Glossary Of Terms
Table: Glossary Of Terms
Oil & Gas Risk/Reward Ratings Methodology
Ratings Overview
Table: BMI's Oil & Gas Business Environment Ratings - Structure
Indicators
Table: BMI's Oil & Gas Upstream Ratings - Methodology
Table: BMI's Oil & Gas Business Environment Downstream Ratings - Methodology

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