Wednesday, 23 April 2014 07:54

Berdimuhamedov Shakes up the Energy Sector

By Tavus Rejepova (04/23/2014 issue of the CACI Analyst)

On April 10, Turkmenistan’s President, Gurbanguly Berdimuhamedov, chaired a special meeting with the leaders of the oil and gas sector of Turkmenistan. Following a report by the Chairman of the Supreme Control Chamber, Batyr Atdayev, on the results of his agency’s audit of the Ministry of Oil and Gas Industry & Mineral Resources, the State Concerns Turkmennebitgazgurlushyk (Turkmen oil and gas construction), Turkmengaz, Turkmennebit (Turkmen Oil), the State Corporation Turkmengeologiya (Turkmen Geology) and the Turkmenbashy complex of oil refineries, the president reshuffled high level oil sector officials and set a number of priority tasks before these energy sector agencies.

The audit of these state agencies was conducted on President Berdimuhamedov’s orders. Following the findings, the President severely reprimanded the long-serving Deputy Chairman for Oil and Gas Baymyrad Hojamuhamedov for poor performance of his official duties and warned that if he fails to correct the flaws promptly, he will be relieved of his duties. The president also issued a reprimand to Tachberdi Tagiyev, General Director of the Turkmenbashy complex of oil refineries, for poor performance of his duties and shortcomings in his work. The deputy Chairman of the State Concern TurkmenOil, Hydyrberdi Mammetnazarov was fired for what has been officially reported as serious shortcomings in his work. Berdimuhamedov also demoted the Chairman of the State Concern TurkmenOil, Rejepgeldi Ilamanov, to the position Head of the Oil and Gas Department within the Cabinet of Ministers of Turkmenistan. Since the government has not released any information to the public, it is unclear what might have caused such a big reshuffle and reprimands in the energy sector.

Going forward, the president laid out the key priority tasks for each state oil and gas sector agency and also emphasized Turkmenistan’s commitments to completing its international pipeline projects. For instance, the Ministry of Oil and Gas and Mineral Resources of Turkmenistan was given specific instructions to develop strategic plans for the production of petroleum products and other manufactured goods that are in great demand in world markets. The president said that the Ministry should take all necessary measures for the development of the onshore fields and make long-term plans for the development of deposits in the Turkmen sector of the Caspian Sea. Certain foreign analysts claim that negotiations over the Southern Gas Corridor, which includes the Trans-Caspian project and remains a priority for Brussels, might soon be reactivated especially given the renewed Ashgabat-Baku relations and President Berdimuhamedov’s recent invitation to Ilham Aliev to pay an official visit to Turkmenistan.

The State Concern Turkmengas was tasked to fully complete by 2016 the 766 kilometer East-West gas pipeline that will have a capacity to carry 30bcm from the eastern to the western parts of the country. To meet international standards, it is necessary to build gas purification plants on the existing major gas deposits, said the president. Berdimuhamedov also noted that in 2014, Turkmengas needs to fully prepare all the documents associated with the project construction of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline and undertake the necessary work to sign these documents and begin construction of the pipeline in 2015. The President also stressed the importance of continuing work on the Trans-Caspian gas pipeline, completing the fourth line from Turkmenistan to China as scheduled until 2018, and moving forward with connections to Russia and Iran, as per earlier intergovernmental agreements.

To implement the framework agreements reached in September 2013 in Japan, the President instructed the Turkmengas chairman to sign the relevant contracts with Japanese companies before July 1, 2014, and begin construction of two plants for the production of gasoline from natural gas, each with a capacity of 600,000 tons per year. The signing of contracts will also include the construction of a plant for the production of diesel and jet fuel from natural gas with a capacity of 2.6 million tons, and a plant for the production of synthetic crude oil from the associated gas. Turkmengaz was also tasked to ensure the timely construction of a major facility to produce 381 tons of polyethylene and 81,000 tons of polypropylene per year. In addition, the president said, it is necessary to develop an integrated project for the development of the Galkynysh gas field and to ensure the timely completion of the second phase jointly with China’s CNPC for producing 30 billion cubic meters of natural gas by 2018.

The head of state also tasked the State Concern Turkmengaz to work effectively with scientists from the Institute of Oil and Gas under Turkmengaz and their colleagues from leading institutions in the region and other countries in the world. He noted that Turkmenistan’s scientists and experts should also participate in the annual Oil and Gas of Turkmenistan (OGT) conference. Speaking to the chairman of the Turkmen oil and gas construction concern, President Berdimuhamedov ordered the development of capacity for producing fiber out of quartz sand and basalt and supplying the manufacturing enterprises with high quality pipes, the arrangement of export to foreign markets, and setting up production of coating materials for ongoing construction facilities from mining solid materials. 

Published in Field Reports

By Tavus Rejepova (03/19/2014 issue of the CACI Analyst)

During a Cabinet meeting on January 17, President Berdimuhamedov tasked the Deputy Chairman for Oil & Gas, Baymurad Hojamuhamedov, and Deputy Chairwoman for Culture, Byagul Nurmyradova, to prepare a series of TV programs and newspaper articles on the efficient use of natural gas, provided free of charge for the population since 1993. In addition, the President signed a decree on January 31 raising the cost of natural gas from 2 (US$ 0.70) to 20 manat (US$ 7), including the VAT, for the thousand cubic meters of gas used over the free allowed limit of 600 cubic meters per person and year.

According to the presidential decree, the new price for gas over the free limit came into effect on February 1, 2014. The government will calculate the consumption of formerly unlimited natural gas through the gas meters currently being installed in households across the country. President Berdimuhamedov said that the installation of gas meters will allow people to economically use natural gas and that the payment for using the gas will not create difficulties for the families. The president further stressed that the government will always continue the current policy of social support to the population of Turkmenistan.

Meanwhile, the State Concern Turkmengas purchased over 124,000 units of gas meters and has so far installed 61,000 in households, and has also announced an international tender for the purchase of more gas meters. The government has not given any timeframe for completing the installation of gas meters and the State Concern Turkmengas is calling on all households and organizations to support this initiative and install gas meters. The households who already purchased these gas meters several months ago from Turkmengas say the meters cost up to 800 manat (US$ 280) a piece.      

As per the late president Niyazov’s decrees from September 1992 and August 2003, the consumption of natural gas, electricity, cooking salt, drinking water and a limited amount of gasoline is free for the population of Turkmenistan until 2030. The current administration’s recent measures to introduce new fees for over-the-free-limit gas and install gas meters for efficient and rational use of natural gas are aimed at reducing the possible waste of gas and determine the real amount of gas consumed for domestic purposes. According to the president, “nobody monitors the consumption of natural gas in the country. The amount of free gas consumed domestically is increasing year by year and the government loses its earnings.” According to state newspaper reports, Turkmenistan consumes one and a half times more gas than the free limit of 600 cubic meters per person per year.       

In this connection, President Berdimuhamedov also dismissed Kakageldi Abdyllayev, the former chairman of the State Concern Turkmengas who was transferred to another position, and said that the agency failed to take effective measures to boost the export potential to replenish the state earnings in foreign currencies and no measures were taken to improve the status quo. “For example, one can make lots of earnings by increasing the volume of production and sale of liquefied natural gas, which is in high demand in global markets” said the president. He said Turkmenistan’s other state agencies, on the contrary, managed to accumulate earnings in foreign currencies as opposed to Turkmengas. 

This series of new measures intend to ensure the efficient use of natural gas by the population and regulate the payments for gas. In August 2013, Turkmen parliament passed the first ever bill “On hydrocarbon gas and gas supply,” which aims to create the conditions for a functioning gas market and regulate the procedure of gas supply systems in the country. In addition, the President asked Akja Nurberdieva, the speaker of Turkmenistan’s Parliament, to look into drafting additional laws or regulations that control the efficient and economical consumption of natural gas. 

It is expected that rural areas, where gas is used for heating greenhouses, barns for livestock, cottages and garages, might feel the rise in cost of gas more significantly than the urban residents. This might also have an impact on the cost of products like tomatoes, cucumbers, lemons, potatoes and other food products produced in greenhouses across the country.

The government’s measures to regulate the efficient use of free natural gas for the population also follow the latest increase in the level of gasification of homes, increased use of natural gas for industrial enterprises and electricity generation across the country. In addition, the government made it clear that the domestic subsidies are costly for Turkmenistan’s economy. Turkmenistan currently sells its gas to China, Russia, and Iran, and is in the process of forming a consortium for the construction of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline. 

Published in Field Reports

By Tavus Rejepova (the 05/02/2014 issue of the CACI Analyst)

At a December 18 extended Cabinet meeting, President Berdimuhamedov released a major action plan for each government ministry in preparation for hosting the 5th Asian Indoor & Martial Arts Games (AIMAG) 2017 in Ashgabat, Turkmenistan. Representatives of Turkish, Italian and British companies attended the Cabinet session and pitched new project ideas in preparation and organization of the games.

Published in Field Reports

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