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German Energy Company Pulls The Plug On Turkmenistan Operations

German company DEA Deutsche Erdoel AG is set to relinquish its natural gas concession on Turkmenistan’s Caspian Sea shelf over frustration at excess bureaucracy and corruption, according to foreign-based website Alternative News of Turkmenistan (ANT).

The website reported, citing what it claimed were sources inside Turkmenistan’s presidential administration, that the Hamburg-based oil and gas company plans to end its exploration commitments at what is known as Block 23.

DEA AG — formerly RWE Dea AG — was granted exploration rights for Block 23 under a production sharing agreement in 2009 in an agreement that suggested Turkmenistan was readying to open its energy resources up to outsider investors.

Related: Shell’s Scrapped Oil Sands Project Highlights Major Issue For Canada

The ultimate prize has been access to onshore reserves, but Western courtiers have been kept waiting ever since.

ANT cites it sources as saying that DEA AG has grown tired at “bureaucratic complications” in the Central Asian nation.

“For more than two years, the company has not managed to get the exploration drilling permits, even though all the four-year preparatory work envisioned in 2009 had been completed,” the website reported.

According to ANT, Turkmenistan’s State Agency for Management and Use of Hydrocarbon Resources, which answers to the president, insisted on dragging out the process for issuing drilling rights.

One reason offered for the reluctance to issue the license was that the block is adjacent to the Hazar nature reserve, the website reported.

Related: How Long Can OPEC Hold Out?

DEA AG did not respond to EurasiaNet.org’s emailed request for comment on the claims that it is pulling out of Turkmenistan.

In its 2014 annual report, the company did, however, state that “preparations for the exploration well that was planned for Turkmenistan were delayed owing to the lack of permits.”

Work was also held up by the customs service, which held up necessary equipment and thereby drove up project costs, ANT said.

One apparent complication is that drawing the gas from the offshore site was going to require construction of an island-type structure analogous to the ones used at Kazakhstan’s giant Kashagan oil fields. Equipment needed to complete the work was acquired, but it has for two years languished at the port in the city of Turkmenbashi, according to ANT.

“One month of storage of all this property at the port costs the company about $30,000,” the website stated, without citing the source for its information.

Related: NatGas Glut Mirrors The Problems Facing Oil Markets

If confirmed, the development is likely to provoke intense anxiety among authorities in Turkmenistan, where state revenue is presumed to have dropped substantially against the backdrop of falling energy prices over the last year.

Other international companies, such as Malaysia’s Petronas, Dubai-based Dragon Oil, Cyprus-based Buried Hill, and Russia’s Itera and Zarubezhneft have also been involved in developing energy resources in the Turkmen section of the Caspian Sea. But the entry of DEA AG — or RWE Dea AG as it was at the time — into the country marked the arrival of an established Western company onto the scene.

The failure of that brief flirtation could spell bad news for a country eager to diversify its market, but unwilling to undertake the measures required to ensure that actually happens.

By Eurasianet.org

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