It is an enormous opportunity, worth very serious consideration. The scope is vast, possibilities endless.
On Thursday (26 March 2020), President Berdimuhamedov said during the cabinet meeting that he conducted through the digital video link that there was the need to “diversify partnership with foreign companies operating in Turkmenistan.”
Addressing DPM Meredov (oil and gas), the president specifically mentioned the long term partners of Turkmenistan including Petronas, Dragon oil, China National Petroleum Corporation, Kawasaki, Sojitz, TOYO, Mitsubishi, ITOCHU, LG, Hyundai, Eni, Mitro International, Petrofac, Tatneft, and Rönesans Holding.
The president said, “The dynamic development of the national economy depends on the efficient use of the hydrocarbon resources of the country. There is the need to create new industries specializing in deep oil and gas processing and expand the export routes of Turkmen energy to the world markets.”
A day earlier, on 25 March 2020, the Turkmen president had a meeting with DPM Meredov (oil and gas) and Baygeldiev, the chairman of state concern Turkmenneft.
The president said, “The state concern Türkmenneft should develop new forms of cooperation with international oil and gas companies, including in the field of exploration, development and processing of hydrocarbons, attracting investments for the development of new oil deposits and the extraction of residual oil reserves in the long-term exploited fields.”
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The latest amendments to the law of Turkmenistan on hydrocarbon resources, published by the print media of Turkmenistan on 28 March 2020, open the downstream hydrocarbon sector of Turkmenistan for the foreign companies.
The foreign companies can apply to the management bodies such as Turkmenneft and Turkmengaz for license for processing of the hydrocarbon resources.
The amended article 1, clause 11 reads: Oil work – all exploration, production and processing work carried out in accordance with the contract and the corresponding license.
Clause 30 – hydrocarbon resources – Crude oil and Natural gas, as well as those produced from them, obtained as a result of their refining, or products and components extracted therefrom, including oil, petrochemical and gas chemical products, liquefied gas and other products. ”;
clause 33 – Processing – all types of work on the processing of hydrocarbon resources at all stages to obtain oil, petrochemical and gas chemical products, liquefied natural gas and other products, the construction of facilities for their processing at all stages (production) at the expense of funds wholly owned by foreign investors, as well as all types of activities for the preparation of projects, construction, operation and management of other infrastructure facilities for the storage, preparation, loading, warehousing, transportation, metering, delivery, marketing and sales of products resulting from their processing (including the Concern’s shares), and other types of activities, including the acquisition and rental of tangible and intangible assets, in accordance with the contract and the corresponding License.
The license will be issued for a period of 20 years and can be extended for another 10 years. The government will retain the right to buy the processed product at market price.
The amendments allow for subcontracting of processing activity, and the subcontractor will not be required to obtain the license.
These provisions will come into force on 1 July 2020.
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The immediate backdrop of the president’s remarks is the volatility caused by the Covid-19 pandemic.
The president said on 25 March in his meeting with the DPM for oil and gas and the chairman of Turkmenneft, “The oil prices in the world market are fluctuating constantly and this has consequences for the world economy. There is reduction in the consumption of crude oil and oil products.”
He said that there was the need to keep learning from the world experience, and maintain the tempo of introducing the digital technologies and management solutions, and comprehensive modernization and diversification of the industry.
The crisis driven by Covid-19 is just the immediate background for this line of thought.
Actually, there is also the consciousness that the world is entering a phase of massive transformation and the Corovid-19 will speed up this process.
For instance, just looking at the hydrocarbon sector:
- By 2040, most of Europe will have regulations in place, strongly discouraging the use of automobiles that run on gasoline or diesel. Instead, the electric vehicles will be supported.
- Within the next 2-3 years, the electric cars will become cheaper than the gasoline or diesel driven cars.
- The batteries for the electric cars have improved tremendously during the past three years and new breakthroughs are expected soon. Cheaper and more efficient batteries are the decisive factor for popularization of electric cars.
- The cost of power generation through solar energy is already slightly less than the cost of producing electricity from a combined cycle plant. The gap will keep widening in favour of alternative energies. The technology is moving fast; within the next 7-10 years the alternative energies, particularly solar and wind, will become the most proficient and green source of generating electricity, overtaking the hydrocarbon based plants by a long mile.
Turkmenistan is fully mindful that the use of oil and gas as fuel for transportation will go down. This reduction will not be uniformly gradual; it is quite likely to be exponential. The global demand for gasoline and diesel is bound to shrink at an accelerating pace.
Turkmenistan has also registered that in the foreseeable future the electricity produced from oil or gas powered plants will not be able to compete with the electricity generated from alternative energies in terms of cost and sustainability.
The demand for hydrocarbon resources as fuel will dwindle fast but the outlook is better than ever because the technology for turning oil and gas into highly valuable and useful products is growing just as fast.
The amendments to the law on hydrocarbon resources will open the processing sector to the foreign companies as early as July 2020.
The foreign partners of Turkmenistan, already studying the new and emerging opportunities through their R&D departments, can sharpen their focus by looking at just one word in the remarks of President Berdimuhamedov: Diversification. /// nCa,
To be continued . . .