Turkmenistan opens up economy to foreign business

By bne IntelliNews March 17, 2008

Clare Nuttall in Almaty -

Turkmenistan is opening up its economy to foreign companies in line with its long-term economic reform programme. Other reforms include setting a commercial price for petrol, opening foreign exchange offices and plans to carry out an international audit of the country's oil and gas reserves.

Turkmenistan's Strategic Planning and Economic Development Institute has drawn up a long-term strategy for economic revival. In an interview with Neitralniy Turkmenistan, the institute's director Ashyrguly Gurbangulyev said the importance of the private sector in economic development had been recognized, and that the programme would take its interests into account.

Diversification of the economy was identified as another priority - Gurgangulyev said that opportunities existed across several sectors, in particular in textiles and agro-business.

Reforms have already begun. From January 1, the Turkmen central bank set a commercial exchange rate of 20,000 manats to the US dollar. Some 105 foreign currency exchange offices will be opened in Turkmenistan, of which 20 will be in the capital Ashgabat. On February 11, a commercial price for petrol, 7.75-times higher than the previous price, came into effect. The cost of one litre of Turkmenistan's most popular brand, AI-95, has increased from 400 manats to 3,100 manats.

Following his visit to Moscow in February, President Gurbanguly Berdymukhamedov gave the go ahead for state gas company Turkmengaz to sign an agreement with Russian engineering company Stroytransgaz. Under the agreement, the Russian company will build the 800-kilometre section of the new Turkmenistan-China gas pipeline, between the Malai gas field and the Uzbek border. Stroytransgaz will also build a gas purification and dehydration facility and a gas measuring station. The total value of the contract is around $500m.

Former Turkmenistan despot Saparmurat Niyazov agreed in 2006 that Turkmenistan would supply China with 50bn cubic metres (cm) of gas a year for 30 years. Delivery is due to start in 2009 once the pipeline, which will transport gas from Turkmenistan to Urumchi in northwest China and on to Shanghai, is complete.

Last year, the China National Petroleum Company (CNPC) became the first foreign company to be granted a gas prospecting and gas production licence for Turkmenistan. However, an analyst at China National Offshore Oil Corporation (CNOOC) has complained that the $195 per 1,000 cm that China will be paying for Turkmen gas imports is almost twice as high as the $100 paid by Russia for its imports.

As well as the deal with Stroytransgaz, Turkmen companies have agreed several procurement contracts with foreign companies. Turkmenneft, the state-owned oil and gas company, is to sign a €6.33m contract with Germany-based MAN Ferrostaal Piping Supply for 21,000 metres of steel pipes, following an international tender. The Turkmenbashi oil refining complex is to buy over $30m of foreign equipment, including the purchase of five electric engines from Hong Kong's Enex Process Engineering.

Meanwhile, work has resumed on the construction of a bridge across the Amu-Darya by several Ukrainian construction companies following a meeting between President Berdymukhamedov and Serhiy Taruta, CEO of Industrial Union of Donbass. Taruta visited Turkmenistan on behalf of Ukraine's president, Viktor Yuschenko, to discuss problems with several projects being carried out by Ukrainian companies in Turkmenistan. Berdymukhamedov had criticized the Ukrainian construction companies working on the Amu-Darya bridge and a tunnel in Ashgabat for being behind schedule

In a further sign of the opening of Turkmenistan's economy, the country's state news agency recently reported that the government is in discussions with "a well known international company" to carry out an international audit of its two largest hydrocarbon fields, Gunorta Eloten and Osman. Previously, only official Turkmenistan government data had been available. According to the official 2006 figures, the country has proven reserves of around 5 trillion cm of gas.

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