Turkmens Gives Itera Gas Block as Exports Stalled

OOO NGK Itera plans to become the first Russian natural-gas explorer in Turkmenistan, as the holder of the world’s fourth-largest reserves seeks income after its main export route exploded in April.

Itera plans to sign a production sharing agreement with the Turkmen government to develop Block 21 in the Caspian Sea on Sept. 13, during a visit by Russian President Dmitry Medvedev to the country, Sergei Prikhodko, a presidential aide, told reporters in Moscow.

The Moscow-based company, once Russia’s biggest gas trader, beat OAO Lukoil, Russia’s biggest non-state oil company, to develop the asset. Turkmenistan’s income has fallen about 40 percent since exports to Russia via an OAO Gazprom pipeline halted.

“It does suggest that whatever its differences with Gazprom over gas sales, Turkmenistan has not completely closed the door on Russia,” Julian Lee, senior energy analyst at the Centre for Global Energy Studies, said in e-mailed comments.

Itera, which accounts for less than 2 percent of Russia’s total gas output and has never worked offshore, set up a venture with Russian state-owned companies OAO Rosneft and OAO Zarubezhneft in 2002 to develop three different blocks in the area. Final contracts are unsigned because of territorial disputes in the Caspian Sea.

Lukoil and partner ConocoPhillips were last year in talks with Turkmenistan regarding offshore blocks, including Block 21, said a Lukoil spokesman, who asked not to be named in line with company policy. Lukoil is no longer negotiating for any blocks in the country, the spokesman said by telephone today.

South Yolotan
Turkmenistan is eager to develop gas fields including South Yolotan-Osman, one of the world’s largest undeveloped deposits. It was promised $4 billion credit by China as it prepares to ship 40 billion cubic meters of fuel annually to the world’s second-biggest energy user by the end of 2009. China National Petroleum Corp. is building the link. Central Asia’s biggest gas producer is losing $1 billion a month from its annual economic output of about $30 billion after an explosion on a Gazprom pipeline to Russia halted exports to its northern neighbor, according to Austin, Texas-based intelligence company Stratfor. Turkmenistan exported about 70 percent of its gas production to Russia before the explosion.

RWE AG, a partner in the OMV AG-led Nabucco pipeline that is meant to cut Europe’s dependence on Russian gas, in July signed a production-sharing agreement for an offshore block in Turkmenistan. Companies including Dragon Oil Plc are also active in the country.