Caspian upstream venture

Client  

Itera

Project Value

$ 1 billion USD 

Project Duration

2017 - 2018 

Service Provided

Relationship Management; Capital Introduction; Human Resources

Overview

Natural gas, crude oil and oil products make up about 80% of the Turkmenistan's exports. Therefore, the sustainable capacity development of the oil and gas industry and ensuring sufficient investment flows in energy infrastructure are vital for the country’s economic welfare. Shortly after Russian demand for Turkmen hydrocarbons dropped precipitously in 2009, the Trans-Asia Gas Pipeline came online to carry gas flows to China. Paradoxically, the resultant windfall acted as a disincentive for the government of Turkmenistan to liberalize its policy of denying upstream access to major energy companies. As a result, the country has yet to capitalize fully on its position as a ‘gas giant’ by entering into new partnerships that would allow it to develop its potential and further diversify its customer base. It is this disconnection between opportunity and policy that has provided an exciting opening for Cassia in partnership with the Areti Group. 

 

Rationale 

Cassia’s collaboration with the Areti Group - a former Itera International subsidiary, promises to bring a forecasted 1.3 trillion cubic meters of natural gas online with an estimated annual production of approximately 20 billion cubic meters. Areti’s Production Sharing Agreement for Block 21 in the Turkmen sector of the Caspian Sea - first awarded in September 2009 as a Contractor Exploration License and Operator Exploration License and extended in 2015 – is, of necessity, a joint project with the State Petroleum Resources Management Agency under the President of Turkmenistan. Located in the shallow costal waters of the Caspian Sea off the coast of Turkmenistan, the block is approximately 3.548 square kilometres.

Solution

In theory, Turkmenistan could also export gas to Turkey, Europe and the Indian subcontinent via its southern route to Iran. While the announcement of a framework agreement in April 2015 between the E3/EU+3 and Iran on the latter’s nuclear program could herald Iran’s opening (and boost prospects for Europe to diversify its supply with Iranian gas), in practice, Iran has no real interest in re-exporting Turkmen gas, given its own huge reserves located in its southern regions. Consequently, in the long term, Turkmenistan is more likely to view Iran as a competitor for the same gas markets than as a trade facilitator, as witnessed by Iran’s stated interest in building a rival to TAPI that would deliver gas to the Indian subcontinent. In this instance, Cassia sourced worked with a combination of strategic gulf and chinese investors to partner with Areti to develop Block 21.