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Economy

Turkmenistan is blessed with major reserves ol oil and, especially, natural gas, and its hydrocarbons wealth forms the bulk of its export earnings. Its oilfields in the west of the country, and offshore in the Caspian, are operated either by the state concern Turkmenneft, or by foreign hydrocarbons companies under production-sharing agreements with Turkmenistan. The government is particularly keen to attract more foreign companies to the Caspian, where the costs and risks associated with the exploration and development of new fields are high. The absence of an agreed demarcation of the Caspian between the five littoral states remains, however, an impediment to new foreign investment in the many disputed areas. Crude oil is either exported or sent to the oil refineries at Turkmenbashy and Seydi, where the government is carrying out a considerable investment programme, aiming to bolster revenues through the production of a wider range of oil products.

Natural gas production is in the hands of Turkmen state concerns. Throughout the post-independence period, the question of export routes for Turkmenistan's gas has remained a major concern of the Turkmen government. With the exception of a small gas pipeline from fields in southwest Turkmenistan to Iran, opened in 1997, the gas pipelines infrastructure remains that of the Soviet period, running north to the countries of the former Soviet Union. Turkmenistan's main customers have been Russia and Ukraine, under deals which have given Turkmenistan a relatively low price for its gas, and often in a formula which has involved part payment in goods, rather than a straight cash arrangement. The state of repair of the pipelines infrastructure, and the claims on the pipelines made by the other gas-producing states of Central Asia, also limit the export capacity of these routes in respect of Turkmen gas.

Possible new pipelines across the Caspian to the South Caucasus and thence to Turkey, and across Afghanistan to Pakistan, have been the subject of feasibility studies and lengthy negotiations, but without as yet any concrete outcomes. The government has responded to its difficulties over gas pipelines by trying to bolster the export of natural gas in other forms, through the development of liquefied gas plants, electricity exports, and industries relying on natural gas as an input, such as fertiliser production.


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