Gazprom Resumes Exploration And Reaffirms Influence

BMI View : Gazprom is to restart exploration of two blocks in Kyrgyzstan and is also on track to clo se a deal to acquire the country's national gas company. The moves will secure Russian influence in Kyrgyzstan at time when Moscow faces increasing competition for the development of hydrocarbons in a region considered its backyard.

Gazprom is to resume exploration work on two oil and gas field in Kyrgyzstan. Although the company was awarded licences for the Kugart and Mailuu-Suu-4 blocks in 2008, work was suspended following political unrest in the country. According to the Energy Information Agency (EIA) , the count r y had proven gas reserves of just 5.6bn cubic metr e s (bcm ) in 2013, but exploration could see this figure revised upwards with initial estimates of Kugart suggesting a resource potential of 17.3bcm.

The restart of exploration work will be welcome news for Kyrgyzstan , which has suffered from suppl y insecurity in recent years . Both Kazakhstan and Uzbekistan have intermittently halted gas supplies to the country as unpaid gas debts rose . Uzbekistan also temporar ily halted supply in December 2012 as it faced increased domestic demand following below- average temperatures. These events highlight the strategic vulnerability Kyrgyzstan faces in its reliance on imports.

In a bid to improve the reliability of gas supplies, officials were motivated to sell o f f the county's gas network operator and upstream operator Kyrgyzgas . Although the move was opposed by some members of parliament , it was hoped that a sale of the national gas company would see the firm ' s debts paid off and sorely needed funds directed towards upstream exploration and modernisation of the country's pipeline infrastructure.

G iven the state of the company's assets and limited outlook for Kyrgyzstan's upstream - in addition to widespread concerns about the business environment - interest was unsurprisingly limited. However , consistent with Moscow's wider strategy of maintain ing interest in the strategically important Central Asian region, Russia's Gazprom was expected to reach a final agreement on a deal to purchase Kyrgyzgas possibly by the end of March 2013 .

Gazprom Could Help With Import Bill Too
Kyrgyzstan Natural Gas Production, Consumption & Net Imports (bcm)

Russia Losing Iron Grip On Central Asia

Russian influence in these former S oviet states has endured given historic political and economic ties. Landlocked e nergy producing countries such as Turk menistan previously relied exclusively on Russia for access to markets while net importers such as Kyrgyzstan were dependent on imports of refined products.

However , even as Russia attempt s to maintain influence in an area it considers its own backyard, it is facing increasing competition from energy- hungry China. Indeed , exports of Turkmen gas to Russia fell from 40bcm in 2008 to an average of 10.5bcm from 2009 to 2011. Alternatively , planned and proposed pipeline connections could see exports of Turkmen gas to China eventually reach 65bcm under the most ambitious plans.

With rising interest in Central Asia's gas potential, recent major discoveries such as the Ga lyknysh/South Yolotan field in Turkmenistan (estimated to contain up to 560bcm) and the Bokhtar concession in Tajikistan (with an unrisked mean recoverable resources estimate of 3,200bcm) mean Russia will likely face more competition from foreign players , including international oil companies whose pr esence is growing in the region ( see our online service, January 22 2013, 'Total-CNPC Deal Spells Promise ' ) . While Gazprom still has a privileged position in the smaller Central Asian states by virtue of their continued dependence on it for investment and energy supplies, greater fore ign presence could threaten Russian dominance if Gazprom does up step up the gas in exploration and development efforts to maintain its head start.

This article is tagged to:
Sector: Oil & Gas
Geography: Kyrgyzstan

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