Turkmenistan and Germany’s RWE sign oil and gas exploration agreement

Turkmens, RWE sign energy exploration deal

ASHGABAT, Turkmenistan — German energy giant RWE AG has signed a deal with Turkmenistan to develop oil and gas fields off the energy-rich country’s Caspian shore, state-run media said Friday.

The agreement is another breakthrough in European efforts to tap Turkmenistan’s lucrative energy resources and could help efforts to diversify European gas deliveries away from Russia.

“In accordance with the agreement, RWE has secured a license to explore the 23rd block (of Turkmenistan’s Caspian shelf) for a period of six years,” the Turkmen government said in a statement published in the government newspaper Neutral Turkmenistan.

The deal covers an area of around 940 square kilometers (360 square miles), just off Turkmenistan’s Caspian coastline. If the company finds any reserves, it will receive a 25-year production license, the statement said.

No value for the deal was announced, nor estimates on the size of the potential reserves.

European plans to bypass Russia — which currently supplies the continent with around one quarter of its gas needs — have focused on building a pipeline across the Caspian Sea — an option that RWE is studying.

Transporting Central Asian gas to Europe would also require construction of the Nabucco pipeline, a European-backed project that would connect eastern Turkey with European markets.

Nabucco’s prospects got a boost last week, when Turkmen President Gurbanguli Berdymukhamedov said his country was prepared to provide natural gas for the pipeline, and earlier this week, when leaders from Turkey and four European countries signed an intergovernment agreement on the project.

Turkmenistan is the second-largest gas producer after Russia, and Moscow has sought to become the dominant shipper of Turkmen gas to Western markets.

But relations between the two countries have soured in recent months over an explosion on a key pipeline that all but shut off Turkmenistan’s exports to Russia. The two sides are continuing to bicker over the cause and cost for repairs.

Foreign companies have been wary of investing in Turkmenistan because of the erratic behavior of Berdymukhamedov’s eccentric predecessor Saparmurat Niyazov.

RWE chief executive Juergen Grossman said in interview televised on Turkmen state-TV that the deal signaled the start of long-term cooperation between the two sides.

“Our company considers Turkmenistan a reliable partner, so I think that we will be working in this country for a long time,” Grossman said.

Berdymukhamedov has carefully opened up his country to courtship by the West — and China — since coming to power after Niyazov’s death in 2006. While committing to continued gas supplies to Russia, he has expressed increasing interest in diversifying exports.

Last month, China signed a deal to buy 40 billion cubic meters of natural gas per year from Turkmenistan through a pipeline slated for completion this year.

Over the weekend, Turkmenistan also said it has agreed to build a new pipeline to supply natural gas to Iran from a field previously reserved for deliveries to Russia.