Monument Oil Takes Turkmenistan Gamble

ALMATY, Kazakhstan -- Monument Oil and Gas of Britain has signed an exploration and production-sharing agreement for three oil fields with the government of Turkmenistan.

The government news agency Turkmenpress said Monument would keep 60 percent of oil produced at new wells, a percentage that will gradually drop to 10 percent in coming years. The remainder, along with oil produced at existing wells, will belong to the government.

Monument pledged investments of up to $50 million in the early stages but said total input could rise to $300 million, Reuters quoted company officials as saying. The company hopes to start boosting production at existing wells before the end of the year.

Monument is only the fourth oil company to risk money on existing oil fields in Turkmenistan, a poor desert country bordering the Caspian Sea, with an authoritarian government and a history of reneging on deals. Bridas, of Argentina, and Larmaq, of the Netherlands, both saw their export licenses suspended after the government had second thoughts about contracts it had signed.

Turkmenistan's undeveloped reserves nonetheless have attracted attention. Petronas of Malaysia was among the first to sign a production-sharing deal, pledging to invest $750 million.

Turkmenistan has been lagging behind its neighbors in attracting foreign investment partly because it is landlocked and dependent on Russia for oil and gas exports. Unocal, based in California, hopes to build an oil pipeline and a gas pipeline from Turkmenistan across war-torn Afghanistan to Pakistan.

Last week Unocal and Turkmenistan's president, Saparmurat Niyazov, received cautious support for the pipeline from Gazprom, the Russian gas monopoly that controls Turkmenistan's gas exports.

In return, Turkmenistan formalized Gazprom's stranglehold over its exports by turning them over to a joint venture between Gazprom and its own company.