UPDATE 3-Turkmenistan welcomes U.S. oil firms, eyes China loan

* U.S. majors win first offshore oil concessions

* Ashgabat sees $4.1 bln China loan for gas field

* President urges progress on Pakistan, India deals

(Adds analyst comment)

By Marat Gurt

ASHGABAT, Aug 13 (BestGrowthStock) – Turkmenistan on Friday offered
U.S. energy majors their first concessions in the Central Asian
state and said it was pursuing a $4.1 billion loan from China to
develop one of the world’s five largest natural gas fields and
ship the gas east.

State television named Chevron Corp (CVX.N: ), ConocoPhillips
(COP.N: ), Houston-based TXOil Ltd and Abu Dhabi-based Mubadala
Oil and Gas as the preferred bidders for two offshore oil blocks
within Turkmenistan’s portion of the Caspian Sea.

It also reported that Turkmenistan expected to secure a loan
from China to develop the lucrative South Iolotan gas deposit,
the second round of financing for a project contracted out to
Chinese state oil and gas firm CNPC and other Asian companies.

Ex-Soviet Turkmenistan is looking to diversify energy sales
from its traditional market, Russia, and is courting investors
from the West, China and other Asian countries keen for a share
of gas to be pumped from the world’s fourth-largest reserves.

“President Kurbanguly Berdymukhamedov gave the order to the
relevant sector leaders to hold productive negotiations with the
State Development Bank of China for the receipt of a favourable
loan of $4.1 billion,” state television reported.

A source in the government, speaking on condition of
anonymity, told Reuters the credit was required for the second
phase of South Iolotan, a deposit that Turkmenistan estimates
could contain up to 16 trillion cubic metres (tcm) of gas.

British firm Gaffney, Cline and Associates audited the field
in 2008 and said at the time it contained between 4 and 14 tcm.

The first pipeline between gas-rich central Asia and
energy-hungry China opened in 2009 and the expanded link should
be able to carry up to 40 bcm of gas a year to China by 2012-13,
if enough gas is pumped out of the ground to fill the
multi-billion dollar pipelines. [ID:nLDE5BD0F2]

“There’s obviously a supply risk involved in that and one
way that they can mitigate the supply risk for this pipeline is
by ensuring that the investment goes into the upstream project,”
Ian Thom, head of Caspian energy research at Wood Mackenzie in
Edinburgh said.

“They can’t build the pipeline and then not have the gas.
This to me just looks like another step in China’s penetration
into the Central Asia energy sphere.”

Firms from China, South Korea and the United Arab Emirates
in December won $9.7 billion worth of contracts to drill and
build gas plants at South Iolotan. [ID:nLDE5BS1CR]

As well as CNPC, South Korea’s LG International Corp
(001120.KS: ), Hyundai Engineering Co (000720.KS: ) and the United
Arab Emirates’ Petrofac Emirates (PFC.L: ) won these tenders.

U.S. PROGRESS

Chevron had earlier held talks about its possible
participation in developing the South Iolotan field, a company
official said in November. [ID:nLI96625]

Its selection among the four companies to drill blocks 9 and
20 in the Caspian Sea marks a step forward for U.S. companies in
the country, which had to date been unable to secure licences.
Richard Morningstar, Washington’s energy envoy for the
Eurasian region, said during a visit to Ashgabat on Aug. 3 that
U.S. companies had made “a lot of progress” with offshore
projects in Turkmenistan. [ID:nLDE6721JW]

The same government source told Reuters that ConocoPhillips
and Mubadala had bid together for access to the Caspian. The two
companies are already working on an offshore oil joint venture
in Kazakhstan’s portion of the sea.

State television, while naming the companies, revealed
neither the size of the blocks nor the investment involved.

Turkmenistan says its portion of the Caspian Sea holds an
estimated 11 billion tonnes of oil and 5.5 tcm of gas, and that
32 licensed blocks are up for tender.

Other Western companies involved in talks with the Turkmen
government include ExxonMobil (XOM.N: ), Marathon Oil Corp
(MRO.N: ), BP (BP.L: ), Total (TOTF.PA: ) and GDF Suez (GSZ.PA: ), local
sources have said.

TRANS-AFGHAN LINK

The same television report also cited an order from
President Berdymukhamedov to conclude a preliminary gas supply
contract with Pakistan and India by the end of this year.

The government source said India and Pakistan had expressed
interest in buying up to 70 billion cubic metres of Turkmen gas
annually via an ambitious trans-Afghan pipeline, known as TAPI
after the four countries through which it would pass.

“This pipeline, at a cost of $3.3 billion, could bring peace
and stability to Afghanistan, as well as jobs and hard
currency,” the Turkmen government source said.

He said gas could be drawn both from South Iolotan and the
existing Dovletabad field. The planned pipeline would run for
nearly 2,000 km (1,250 miles), including 735 km across
Afghanistan and another 800 km through Pakistan.
(Writing by Robin Paxton; additional reporting by Daniel
Fineren in London; editing by James Jukwey)

UPDATE 3-Turkmenistan welcomes U.S. oil firms, eyes China loan