6.250
%
Negative
83
mm boe
1
%
Operating in Turkmenistan remains difficult, not only due to the fiscal terms but also the geopolitical uncertainty, which continued to grow.
January 25, 2024
Caspian
mm bbl
bcf
Central Asia, bordering the Caspian Sea, between Iran and Kazakhstan.
PSC/PSA
Upstream operations involving foreign investors are governed by Production Sharing Contract ("PSC") terms. The State normally takes a carried stake in PSC; Turkmengaz currently owns 100% of all onshore gas projects, with IOCs contributing on a service basis only. PSC terms vary due to the ad hoc nature of negotiations and negotiability of the terms (e.g., bonuses, profit splits, etc.). Government share reflects the level of expenditure and risk involved. Royalty varies with production rates, whilst profit oil splits vary on a sliding scale based on the R-Factor.
Turkmenistan is relatively small, but is still sparsely populated, with abundant hydrocarbon resources, particularly natural gas. Turkmenistan’s economy depends heavily on the O&G sector. Many businesses assert the government has not taken serious measures to incentivise FDI outside the petroleum industry and most foreign commercial activity in Turkmenistan is related to exports. A lack of established rule of law, an opaque regulatory framework, and rampant corruption remain serious problems in Turkmenistan. The government strictly controls foreign exchange flows and limits on currency conversion make it difficult to repatriate profits or make payments to foreign suppliers. Turkmenistan has performed poorly with respect to structural reform. Much-needed economic growth is severely constrained by long-standing institutional weaknesses that undermine the foundations of economic freedom. The inefficient legal framework remains highly vulnerable to political interference, and heavy state involvement in the leading economic sectors dampens private-sector dynamism.
Source: ESRI, Heritage Index, HMG Foreign & Commonwealth Office, US Department of State, International Trade Administration, International Law Review, Ernst & Young, Wood Makenzie & OGA data.
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