Nicholas Watson in Prague -

Turkmenistan President Gurbanguly Berdymukhammedov's address to the UN on Thursday, September 27 at the same time as a Turkmen oil delegation visited Washington and Houston are the clearest signs yet the country wants to attract Western investment into its energy sector. But with trans-Caspian routes so problematic, Russia and China are likely to continue making the greatest inroads into securing Turkmenistan's oil and gas.

Berdymukhammedov's visit to the US marks the first time that he has visited the West since becoming president following the sudden death of the former dictator Saparmurat Niyazov in December, though he has already made trips to China and Russia.

The news is further evidence that Berdymukhammedov, true to his word, is trying to open up the country after 16 years of isolation under the iron rule of the probably insane Niyazov, and is looking for Western money to help do this.

Certainly competition for Turkmenistan's potentially huge hydrocarbon resources is fierce. The government claims Turkmenistan holds gas reserves of more than 20 trillion cubic metres (cm), which would make it the world's fourth-largest gas-reserves holder. However, given the previous president's predilection for gross exaggeration - in December, Saparmurat Niyazov claimed the South Iolotan field alone holds 7 trillion cm - analysts say a better reserves estimate is Cedigaz' figure of 2.9 trillion cm, which would rank the country 13th in the world in terms of reserves.

Berdymukhammedov says the country will produce 80bn cm of gas this year, of which 58bn cm will be exported, mainly to Russia. In May, Turkmenistan struck a deal with Russia to deliver up to 20bn cm/y of extra gas by 2012 through a new pipeline across Kazakhstan that would link up with the Russian distribution network. A separate deal called for the modernisation and expansion of the existing Central Asia-Centre pipeline to Russia - the only large gas-export route out of the region. Not for much longer, though.

New routes

In August, Berdymukhamedov inaugurated the construction of a 7,000-kilometre gas pipeline to China to be completed by 2009. The 30bn cm/y pipeline will be supplied by new fields in Bagtyyarlyk region, where China National Petroleum has been granted a production-sharing agreement, and from resources being developed elsewhere by the state.

The deal with China - as well as moves to improve the country's human-rights record - suggests to analysts that, rather than simply fall back under the influence of Russia, Berdymukhamedov is trying to mimic what his wily counterpart in neighbouring Kazakhstan, President Nursultan Nazarbayev, has achieved over the past 18 years - playing one big power off against another. Indeed, Nazarbayev visited Ashgabat on September 12 to discuss ways how the two countries can diversify their energy export routes and told reporters after his meeting with Berdymukhamedov that the two countries would cooperate on the "transit of hydrocarbons not only through the existing northern route, but also other transport routes to the east, west and south."

"I suspect he is trying to follow Nazarbayev's lead to some extent," says Martha Olcott, a Central Asian expert at the Carnegie Endowment for International Peace think-tank. "Most importantly, the deal with China will improve [Berdymukhamedov's] negotiating position with Russia over the price of Turkmenistani gas."

Indeed, analysts suspect Turkmenistan is playing hardball in its dealings with Russia. Despite intensive work by officials in the three months since the gas deal was struck between the two countries, the contract was still not ready for signing as planned on September 12 and so President Vladimir Putin had to cancel his pre-arranged visit to Ashgabat that day.

Does this represent an opening for the West?

Seize the day

Experts like Ariel Cohen, senior fellow for International Energy Security at Washington's Heritage Foundation, say Turkmenistan's greater willingness to engage with the West is an opportunity that should be grasped in both hands. "I'm cautiously optimistic about Turkmenistan and there's a window of opportunity there if the US and EU reach out to Ashgabat," says Cohen.

The big challenge for the West, he argues, is getting the long-mooted trans-Caspian gas pipeline back on the table, but this needs more involvement by the heads of state in Europe and the US, which until now he says has not really been forthcoming.

On the face of it, the pipeline deals that Turkmenistan has signed with Russia and China this year make a trans-Caspian pipeline a more distant prospect. However, Berdymukhammedov said in May that Turkmenistan had not excluded the trans-Caspian project and, in August, the US government said it was providing $1.7m to fund feasibility studies for the trans-Caspian gas pipeline from Turkmenistan to Azerbaijan and for an oil pipeline from Kazakhstan to Baku, from where exports could flow to Turkey through the South Caucasus gas pipeline.

However, any plan to build a gas pipeline across the Caspian Sea to carry Turkmenistani gas to the West is largely dependent on an over-arching deal on the division of the Caspian Sea. Russia opposes trans-Caspian pipelines - ostensibly on environmental grounds, but it probably has more to do with its keenness to protect its stranglehold on export routes from Central Asia.

Happily for the West, the new Turkmen administration seems more open to a deal on the division of the sea than its predecessor, which together with Iran were the main holdouts on settling the dispute over who owns what that has festered since the collapse of the Soviet Union in the early 1990s. Azerbaijan, Kazakhstan and Russia agree that the Caspian should be divided according to the Law of the Sea convention, which means the sea is divided along median lines into five sectors determined by the length of each country's shorelines. However, since it would lose out over such a system, Iran wants to keep the Soviet system whereby the sea was jointly owned by the littoral states and the resources shared equally.

A sign of Turkmenistan's readiness to put the Caspian dispute to rest is its resumption in July of talks with Azerbaijan, after a six-year hiatus, over delineating their territorial waters, in particular a disputed offshore oilfield - named Kyapaz by Azerbaijan and Serdar by Turkmenistan - which Ashgabat says it wants Chevron to help develop.

Chevron, which has now opened an office in Ashgabat, is one of several Western majors the Turkmen government is actively courting. Currently, only two foreign companies operate in the Turkmenistani sector of the Caspian Sea - Malaysia's Petronas and the United Arab Emirates' Dragon Oil. However, in recent months, the chances of offshore oil and gas concessions being offered to Western oil and gas firms have increased significantly. BP's chief executive of exploration and production, Andy Inglis, was granted a personal audience with Berdymukhammedov August 24.

"We are confident Turkmenistan has unique oil and gas resources and that our participation in their development could be a profitable business," Inglis said on state-run television, following the meeting.

On August 30, Russia's Lukoil and its US partner, ConocoPhillips, said they hope to obtain licences to explore three blocks in Turkmenistani sector of the Caspian Sea by the end of the year. Foreign companies are, in general, more likely to gain access to offshore prospects than to the less-demanding onshore gasfields.

While all this is encouraging to Western policymakers, experts like Olcott of the Carnegie Endowment for International Peace says Western involvement in Turkmenistan will always be limited because sending exports westwards is simply that much more problematic. "The trans-Caspian pipeline is a political hot potato for Russian-Turkmenistani relations; shipping through Iran is still not feasible for [political] reasons; and there's no serious commercial interest in a trans-Afghanistan pipeline because of the country's internal instability," says Olcott.

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