Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

LUKoil Wins Turkmen Energy Deal

LUKoil has struck its first deal in energy-rich Turkmenistan, winning the right to develop three Caspian offshore fields after CEO Vagit Alekperov held talks with the country's leader in Ashgabat.

The deal came Tuesday as Turkmen President Gurbanguly Berdymukhammedov also held talks with senior TNK-BP officials.

Competition for Turkmen energy resources has become fiercer since the death of longtime Turkmen President Saparmurat Niyazov in December. In a clear break with his predecessor, Berdymukhammedov has welcomed a procession of oil and gas companies for talks in Ashgabat, saying earlier this month that he would "create the most favorable climate" for foreign investors.

Turkmenistan has proven reserves of 2.86 trillion cubic meters of gas and 500 million barrels of oil, according to BP's Statistical Review of Energy. Turkmenistan claims much more, but the country's energy resources remain largely unmapped by outsiders.

In a major coup for the Kremlin, President Vladimir Putin and Berdymukhammedov last month agreed on the building of a pipeline around the Caspian shore. The deal appeared to be a setback for U.S. hopes of an alternative pipeline that would bypass Russia and send gas under the Caspian Sea and on to Western markets via Turkey.

At a meeting with Alekperov and LUKoil vice president Andrei Kuzyayev, Berdymukhammedov gave the company his backing to develop "three promising fields ... in the near future," a statement from the Turkmen state news agency said.

The statement did not specify the fields, however.

In an interview with Turkmen state media, Alekperov stressed the importance of the fields.

"I am sure that this process will be effective as we have professionally prepared for exploiting these unique fields," Alekperov said.

LUKoil spokesman Dmitry Dolgov confirmed that the Ashgabat meeting had taken place but refused to give any further details of the projects discussed. He said a follow-up meeting would be held in Ashgabat, the Turkmen capital, at the end of the month.

Following a visit to Moscow by Berdymukhammedov in April, LUKoil was included in a Kremlin list of companies looking to develop "promising projects" in Turkmenistan.

Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies, said LUKoil's talks were likely to be about oil, rather than gas.

"Turkmen commitments to Russia and a suggested deal with China will probably account for all the gas that the country will have available for the next few years," Stern said by e-mail.

In a separate meeting with Berdymukhammedov on Tuesday, TNK-BP's CEO Robert Dudley, executive director German Khan and vice president Yevgeny Astakhov expressed interest in "projects to develop the extremely rich hydrocarbon resources in Turkmenistan," the Turkmen state news agency said.

Khan was also at Putin's meeting in Moscow with Berdymukhammedov.

TNK-BP spokesman Alexander Shadrin confirmed that the Ashgabat meeting had taken place but refused to give any further details.

According to official Turkmen statements, Russia's ambassador to Turkmenistan, Igor Blatov, was present at both the LUKoil and TNK-BP meetings Tuesday.

A spokesman for the Russian Embassy in Ashgabat directed all inquiries to LUKoil.

A spokesman for BP in Russia, Vladimir Buyanov, said the company was interested in Turkmenistan. He said BP's interest was independent of any moves made by TNK-BP.

Andrei Fyodorov, an oil and gas analyst at Alfa Bank, said LUKoil could be trying to wrap up talks on Caspian fields begun in 2005 with Niyazov. At issue then was the acquisition of a 50 percent stake in Caspian fields being developed by Dragon Oil, a United Arab Emirates-based oil firm, Fyodorov said.

"But the agreement was not reached and now I guess that LUKoil could be looking to finish this deal," he said.

The timing of the two meetings was no coincidence, Fyodorov said, coming hot on the heels of meetings with Putin. The Turkmen leader was among the heads of state at the CIS summit in St. Petersburg this weekend.

Fyodorov also suggested that the Kremlin might be helping TNK-BP win gas deals outside Russia as a way of softening the imminent blow of losing control of the Kovykta field in Siberia.

U.S. oil major Chevron has also joined the race for Turkmen energy assets, winning an invitation from Berdymukhammedov to develop Caspian fields.