"Development of Tajikistan's oil and gas industry"

The Canadian company, Tethys Petroleum Ltd. intends to invest in Tajikistan's oil and gas sector, while its subsidiary, Kulob Petroleum Ltd., has been granted a licence to explore five gas fields in the country.

This is what Zumrat Gaybullaeva, head of the Ministry of Energy and Industry's Department of International Affairs, recently told journalists.

She said that the relevant agreement between the Tajikistan's Ministry of Energy and Industry and Kulob Petroleum Ltd. had been signed in Dushanbe (capital of Tajikistan) in mid-June 2008.

According to Sherali Gul, Tajik Minister of Energy and Trade, the agreement licenses Kulob Petroleum Ltd. to explore 5 prospective sites in Tajikistan with estimated reserves of 1.5 trillion cubic metres – an amount that is equal to half the Republic’s gas reserves.

"Once Tethys has recovered its outlay on the development of these gas fields and is able to concentrate exclusively on extracting gas, production will be divided on a 50/50 basis," he commented.

According to David Robson, President of Tethys Tajikistan Limited, Kulob Petroleum Limited intends to allocate $25 million [USD] to the implementation of these projects, $800,000 during the initial stage.

Tajik experts believe that major investment in the development of the country's barely accessible gas fields means Tajikistan can count on increasing its energy independence. In the words of the head of the Department of the Regional Economy, Kholnazar Mukhabatov, “the results of geological explorations could improve the country's situation in terms of its oil and gas reserves.”

But before reserves can be assessed and work can begin on developing the fields, an enormous injection of capital is required. The commercial development of Tajikistan's energy resources demands considerable amounts of capital because its hydrocarbon deposits are found so far beneath the surface.

Tajikistan also signed an agreement with the Russian company, OJSC Gazprom, on 10 June, in relation to geological prospecting projects at four other Tajik gas fields. Gazprom has promised to invest $500 million in their development over the next 5 years. It is estimated that these fields have potential reserves of 100 billion cubic metres.

Tajikistan's Ministry of Energy and Industry estimates that the volume of gas in the Republic's fields is 3 trillion cubic metres. But at present, Tajikistan is itself forced to purchase almost all the gas it uses from neighbouring state, Uzbekistan.

According to the Tajik State Statistics Committee, between January and May 2008 natural gas imports from neighbouring Uzbekistan came to 255,900,000 cubic metres which cost the country $37 million. Compared with the same period in 2007, this represented a cost increase of 24.4 per cent and a decrease in volume of 7.4 per cent.

At the beginning of this year the volume of natural gas being extracted inside the country came to a little over 50,000,000 cubic metres.

Over the last three years, prices for imported gas from Uzbekistan have begun increasing by 50 per cent a year. In 2008, according to agreements between the parties, the tariff for imported gas is $145 per thousand cubic metres.

The General Director of the state monopoly Tajikgaz, Fatkhiddin Mukhsiddinov, comments that, from the beginning of 2009, Uzbekistan also intends to sell gas to neighbouring countries – at European rates in some cases. This means that next year gas prices per thousand cubic metres will reach at least $300.

Asomiddin Saidov, chair of the Committee for International Affairs, Social Groups and Information in the Lower House of the Tajik Parliament, says taking into account the continuous rise in prices and the demand for energy resources, it is essential there be state investment in the oil and gas sector on equal terms with private investors.

At the same time, Mukhabatov comments that only by offering investors favourable customs and tax conditions and attracting the world's largest oil and gas exploration and production companies will the country be able to use the new fields to achieve energy stability.

Saidov believes that such measures will not only reduce Tajikistan's dependence on neighbouring countries for its gas, but will also allow it to become a future gas exporter. This is all the more likely given that initial information suggests the Republic's oil and gas prospective reserves are relatively substantial.

Investors operating in Tajikistan's oil and gas sector, such as Tethys Petroleum Ltd. and OJSC Gazprom, say that if they can cover demand from the local population and the Republic's industry, they will begin exporting gas to neighbouring countries, where demand for energy resources is growing year by year.