Following a study which shows Turkmenistan's gas reserves to be much larger than previously thought, NBCentralAsia analysts say the country's energy infrastructure will need to be modernised before these fields can be exploited. Doing this will require the assistance of foreign investors, and they are unlikely to come in unless the government offers better business guarantees.
On October 13, the British company Gaffney, Cline & Associates announced the results of an audit of the South Yolotan-Osman and Yashlar fields in eastern Turkmenistan.
The study showed that Yashlar contains between 0.25 and 1.5 trillion cubic metres of gas, while South Yolotan-Osman has between four and 14 trillion cu m of natural gas. The high-end estimate would make the Yolotan field the fourth or fifth largest in the world.
Speaking on national television on October 14, Odek Odekov, head of the state exploration firm Turkmengeologia, said the new figures would help speed up projects to pipe gas to China, Afghanistan, Pakistan, India, and also via the planned Transcaspian Gas Pipeline to European markets.
Odekov added that the two fields accounted for only a quarter of Turkmenistan's actual reserves.
Until Gaffney, Cline & Associates were brought in, there had been no independent audit of Turkmen gas reserves. The government made ambitious claims of reserves, but conducted few surveys and published none of the results. Prior to the latest study, international estimates suggested that the country had total confirmed reserves of 2.86 trillion cu m.
Turkmengeologia says the country produces 80 billion cu m of gas a year, 20 million of which is consumed domestically and the rest exported to Russia, with a small amount going to Iran.
NBCentralAsia analysts say the long-term contracts that have been signed with Russia, China and Iran are about 30 per cent higher than total current production. Assuming Turkmenistan also takes part in a project to send gas to the West by a separate route, it might have to treble its current export volumes.
Experts caution that an audit is one thing, and getting the gas out of the ground quite another. Production equipment is old and worn-out, and the pipeline network in Turkmenistan is in a similarly sad state and unable to bear much extra load.
"Turkmenistan's production capacity is inadequate, and the country cannot increase this substantially by itself," said Rovshan Ibrahimov, head of the international relations department at Qafqaz University in Baku, the capital of Azerbaijan.
An energy specialist in Ashgabat confirmed that production systems "became obsolete long ago", and many of the pipelines are more or less worn-out. In other words, the Turkmen authorities can talk about new gas sources but they are not yet in a position to raise production.
Foreign investment in the gas industry could change everything. But for that to happen, Turkmenistan would need to offer a more attractive business climate by providing unambiguous legal guarantees that capital can flow freely and profits can be repatriated, and by liberalising the banking system.
That would represent a major change from the current situation, in which power is exercised through a rigid hierarchy and the president single-handedly controls financial and monetary policy.
As a commentator in Dashoguz region put it, "Investors have no confidence because it is dangerous to invest money in a country where everything can suddenly change because of one order issued by the head of state."
(NBCentralAsia is an IWPR-funded project to create a multilingual news analysis and comment service for Central Asia, drawing on the expertise of a broad range of political observers across the region. The project ran from August 2006 to September 2007, covering all five regional states. With new funding, the service is resuming, covering Uzbekistan and Turkmenistan.)