German oil company pulls out of Turkmenistan over bureaucratic delays, corruption

German oil and gas company DEA Deutsche Erdoel AG decided to leave Turkmenistan and put an end to plans to explore the Caspian Sea shelf. The decision to abandon commitments the company had made around Block 23 is explained by the company’s frustration with excess bureaucracy and corruption in Turkmenistan. DEA AG acquired rights to explore at the Caspian in the framework of a production sharing agreement in 2009. This agreement included a promise that Turkmenistan would open its energy resources to external investors and grant access to onshore reserves. But western courtiers have been waiting since. Despite completing all the preparatory work, DEA AG has not managed to get exploration drilling permits for two years. One reason that ANT, Turkmenistan’s State Agency for Management and Use of Hydrocarbon Resources provided for dragging out the process of issuing drilling rights, was that the block is close to the Hazar State Nature Reserve. Preparatory works were also held up at the customs service, holding up required equipment and respectively increasing project costs which eventually amounted to $30 000 a month just to keep the equipment at the storage.

Turkmenistan’s energy program also attracted other international courtiers, such as Malaysia’s Petronas, Dubai-based Dragon Oil, Cyprus-based Baried Hill and Russian Itera and Zarubezhneft with the intention of exploring the Turkmen section of the Caspian Sea. But DEA AG’s entrance in the country’s market as an established Western company was another matter.

The development is expected to induce anxiety among Turkmen authorities as the country’s revenue significantly dropped along with falling energy prices. The company’s pull out is also in opposition to Turkmenistan’s desire for market diversification but perceived failure to effectively do so.

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