The last week of April can be considered as a week of positive news for the Turkmen energy sector. On April 24-25, the Turkmen Energy Investment Forum (TEIF) was held. The fact that it was held in Paris is a first sign that the Central Asian country is looking to diversify its partner portfolio and reshape its energy sector. However, it is not the only one. Ashgabat is making coordinated efforts to emerge as a regional energy security pillar, but also expand its footprint in the global energy supply chain. As part of that, finding new partners or building upon existing relationships has been a priority for Turkmen officials and one of the less-discussed potential partners that has emerged during TEIF has been ASEAN, through the active participation of Malaysian energy giant PETRONAS. Southeast Asia is a region that can offer a reliable and large demand market for Turkmenistan and, thus, would be of interest to see the actual prospects of such a partnership.
Asserting that Turkmenistan will be connected with every stakeholder in the global energy system after TEIF can be considered overly optimistic. However, further strengthening of existing partnerships might bring positive news in the future. CNPC and Dragon Oil were both partners during TEIF and their officials were active throughout the conference, but this doesn’t come to a surprise, since the Chinese and Emirati energy giants are already major stakeholders in the Turkmen energy sector. Gas exports to China, more precisely, rose to a staggering $2,4 billion in the first quarter of 2024, among the highest figures of the past years. The surprise comes from PETRONAS, who agreed to become a gold partner and, during the conference, discussed involvement in the TAPI pipeline and the Galkynysh gas field expansion. PETRONAS has been involved in the Turkmen gas sector, investing in total $11 billion in exploration and extraction projects in the Caspian Sea ever since 1996, however they were never involved in investment fora related to Turkmenistan. Their involvement in TEIF comes at a great timing, as at the end of 2023, Turkmen Ambassador to ASEAN held a meeting with the Secretary-General of ASEAN to explore further collaboration opportunities with the region, with energy being in the top of the discussion list. The Malaysian energy company might open new opportunities in these projects, both for financing and finding new markets.
The Association of Southeast Asian Nations (ASEAN) is a large regional bloc comprising of more than 660 million inhabitants. Its population growth is constantly on the rise at a rate of 1.2% in 2022, up from a 1% rise in 2021. It is one of the few regions, where the economy has picked up speed after the COVID-19 crisis, as growth has increased more than 5% in 2023, compared to 4% in 2022. Southeast Asia is also one of the very few regions that have managed to create a regional industrial policy and their industrial growth is also substantial over the past decades. Countries like Malaysia, Indonesia and Myanmar might be considered producers of oil,gas and coal, however, due to their huge growth, they still have to import more than 500bcm of natural gas per year annually. They also have to import more than 10 mtpa of coal per month which, despite a very costly process, is also largely harmful to the environment, compared to natural gas. These all constitute excellent conditions for a long-term downstream partner for a large-scale energy producer, such as Turkmenistan.
This is where Turkmenistan has a major role to play. During TEIF, Turkmen authorities proposed investments towards the Galkynysh Gas field expansion, which is bringing 30 bcm per year on the market, but has enough reserves to bring another 60 bcm on the market through investment in extractions. This is only a little of the overall Turkmen proven reserves of 50 Tcf.
PETRONAS officials participated in panels related to methane emissions reductions and the natural gas sector during the energy transition and exchanged views with their TAPI pipeline counterparts. Taking this into account, Malaysia, or other ASEAN states, could get involved in the continuation of the TAPI pipeline and even provide diplomatic support for a resolution in the issue with Afghanistan. Two main challenges exist in this respect. The first one is that the two pathways, namely through the port of Gwadar, Pakistan or through the India-Myanmar border comes with inherent geopolitical challenges. The former can alienate India with respect to TAPI, whilst the latter is difficult due to the heated relations between India and Myanmar. The second challenge has to do with financing, since ASEAN countries are unlikely to provide the bulk of the investment and, hence, external investors might be needed. The positive side to this is that investment prospects, if the problem with Afghanistan is resolved, are much higher, as the return on investment is much more likely, considering that there will, on the demand side, be stability. Another far stretch would be to convert it into a trilateral discussion, with China serving as the intermediary for transportation of natural gas to ASEAN states. This could also increase the prospects for investment, considering that China has the funds to allocate and this project would increase Beijing’s interest. However, this also adds complexity to a larger extent than the previous route and the possibility of achieving such a deal is considerably low.
In effect, TEIF has been an effort from Turkmen authorities to look westward for energy partners. Despite the participation of European and American stakeholders, the Asian ones were the ones that dominated the stage. Among these, PETRONAS showed its strong support for the Turkmen energy sector. This sign of support brings a new perspective in the collaboration with ASEAN and it would be largely beneficial for Asghabat to further pursue cooperation with the region. Challenges related to finding transportation routes and financing mechanisms are a commonality in Central Asia, however ASEAN, with its successful regional integration and stable market has the potential to resolve these issues.
Written by: Dimitris Symeonidis
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