2013 Turkmenistan Oil and Gas Market Industry Report Q1

BMI View: Upstream interest in Turkmenistan's growing gas reserves remains strong, with foreignplayers, particularly China, eager to gain access to the country's lucrative gas fields. The energyrelationship between Turkmenistan and China continues to strengthen, with continued upgrades toexisting long-term supply agreements and investment commitments. Turkmenistan has made ambitiousgas production targets, raising their own forecasts of gas production in 2030 to 250bcm from 230bcmpreviously. Although 2030 is outside our forecast period, the ambitious figures highlight the country'soptimism, which is reflected in our forecasts gas production which we expect will more than double from70bcm in 2012 to155bcm in 2021.

The main trends and developments in Turkmenistan's oil & gas sector are:

Turkmenistan and China continued to build on their strong energy relationship with a newcommitment in July 2012 for Ashgabat to supply Beijing with 65bn cubic meters per year(bcm/y) of gas by 2020. Recent analysis conducted by CNPC, found that since the Central Asia-China gas pipeline was inaugurated in 2009, some 30bcm of gas has been supplied to Chinafrom Turkmenistan. Based on the 6.6bcm that have been traded between the two countries in thefirst third of 2012, we expect total volumes to reach around 20bcm this year.

Upstream interest remains strong on the back of the most recent discovery, the South Yolotangas field, which has been confirmed as the world's second largest following an appraisal byauditor Gaffney, Cline & Associates (GCA). The field is thought to contain 13.1-21.2trn cubicmetres (tcm) of natural gas. The former Soviet Republic holds the world's fourth-largest naturalgas reserves and plans to treble annual gas output to 230bn cubic metres (bcm) by 2030, 180bcmof which would be for export.

However, despite strong interest from foreign players, Turkmenistan's business environmentremains challenging with limited opportunities for foreign players. China's CNPC remains theonly foreign player with an onshore PSC, with foreign firm's upstream participation limited toonshore service contracts or PSA's for fields in the Caspian Sea.

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Foreign participation in the oil sector will help raise output, but liquids production continues tostruggle as attentions increasingly shifts to gas. In 2011, Turkmenistan revised downwards itstargeted production number of 1.35mn barrels per day (b/d) by 2030, a reduction from apreviously reported goal of 2.2mn b/d. While oil production will rise to 217,000b/d in 2012, weexpect output to peak in 2017 at 377,000 b/d, well below government targets.

We are much bullish with regard to our forecasts for the country's gas output, which we predictwill increase at an average rate of 9.3% over the course of our forecasting period, rising from70bcm in 2012 to 155bcm in 2021 as production rises with new and enhanced development ofexiting fields. While domestic demand will increase from 23bcm in 2012 to 45bcm in 2021,increased production will still allow for exports of 110bcm.

However while we see significant upside potential to these numbers based on recent discoveries,we highlight that the poor quality of remaining gas deposits will increase the costs ofdevelopment, with sour gas in high pressure, high temperature reservoirs making extensiveprocessing necessary. Increasing foreign participation in the gas upstream would ensureTurkmenistan as access to the technical and capital requirements to best tap its extensive gasresources.

Turkmenistan's dependence on oil prices leads to high volatility in the country's export revenues. Ourassumptions of tight supply due to booming demand in emerging markets is clearly an opportunity for thecountry. We forecast OPEC basket oil prices to remain elevated and average US$107.05 per barrel (bbl)in 2012, a figure similar to the 2011 average of US$107.52/bbl in 2012.

Table Of contents

BMI Industry View

SWOT Analysis

Turkmenistan Oil and Gas SWOT

Industry Forecast Scenario

Oil And Gas Reserves

Table: Turkmenistan Proven Oil And Gas Reserves and Total Petroleum Data, 2010-2016

Table: Turkmenistan Proven Oil And Gas Reserves and Total Petroleum Data, 2015-2021

Oil Supply And Demand

Table: Turkmenistan Oil Production, Consumption And Net Exports, 2010-2016

Table: Turkmenistan Oil Production, Consumption And Net Exports, 2015-2021

Gas Supply And Demand

Table: Turkmenistan Gas Production, Consumption And Net Exports, 2010-2016

Table: Turkmenistan Gas Production, Consumption And Net Exports, 2015-2021

Refining And Oil Products Trade

Table: Turkmenistan Refining - Production And Consumption, 2010-2016

Table: Turkmenistan Refining - Production And Consumption, 2015-2021

Revenues/Import Costs

Key Risks To BMI's Forecast Scenario

Country Risk/Reward Ratings

Turkmenistan Upstream Rating - Overview

Turkmenistan Downstream Rating - Overview

Regional Risk/Reward Ratings

Table: Central And Eastern Europe Risk/Reward Ratings

Table: Upstream Risk/Reward Rating

Table: CEE Downstream Risk/Reward Ratings

Turkmenistan Energy Market Overview

Overview/State Role

Licensing And Regulation

Government Policy

International Energy Relations

Table: Upstream Projects

Oil And Gas Infrastructure

Oil Terminals/Ports

Oil Pipelines

Gas Pipelines

Competitive Landscape

Executive Summary

Table: Key Domestic And Foreign Companies

Table: Key Upstream Players

Table: Downstream Players

Company Monitor

Eni

Dragon Oil

Petronas - Summary

China National Petroleum Corporation (CNPC) - Summary

Gazprom - Summary

Itera - Summary

RWE - Summary

Others - Summary

Service Companies

Regional Energy Market Outlook

Global Market Overview

Table: Global Oil Demand Forecasts - A Comparison

Central And Eastern Europe - Regional Appendix

Table: Oil Consumption - Historical Data & Forecasts, 2009-2016 ('000b/d)

Table: Oil Consumption - Long-Term Forecasts, 2014-2021 ('000b/d)

Table: Oil Production - Historical Data & Forecasts, 2009-2016 ('000b/d)

Table: Oil Production - Long-Term Forecasts, 2014-2021 ('000b/d)

Table: Refining Capacity - Historical Data & Forecasts, 2009-2016 ('000b/d)

Table: Refining Capacity - Long-Term Forecasts, 2014-2021 ('000b/d)

Table: Gas Consumption - Historical Data & Forecasts, 2009-2016 (bcm)

Table: Gas Consumption - Long-Term Forecasts, 2014-2021 (bcm)

Table: Gas Production - Historical Data & Forecasts, 2009-2016 (bcm)

Table: Gas Production - Long-Term Forecasts, 2014-2021 (bcm)

Table: LNG Exports - Historical Data & Forecasts, 2009-2016 (bcm)

Table: Net LNG Exports - Long-Term Forecasts, 2014-2021 (bcm)

Methodology And Risks To Forecasts

Glossary Of Terms

Table: Glossary Of Terms

Oil & Gas Risk/Reward Ratings Methodology

Ratings Overview

Table: BMI's Oil & Gas Business Environment Ratings - Structure

Indicators

Table: BMI's Oil & Gas Upstream Ratings - Methodology

Table: BMI's Oil & Gas Business Environment Downstream Ratings - Methodology

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