Remarks by Deputy Assistant Secretary of U.S. State Department Daniel Rosenblum at the Turkmenistan Oil & Gas Conference as delivered

DAS Daniel Rosenblum delivers remarks at the Turkmenistan Oil & Gas Conference on November 17, 2015 (Photo: US Embassy Ashgabat, Turkmenistan)

Thank you. Thank you very much. Thank you distinguished guests and minister Halilov.

It is a great pleasure to be here today to speak at this important conference. I would like to focus my remarks today first on global energy markets, and then I’ll be addressing Turkmenistan’s role and contributions as an important player in those markets.

Global energy markets have proven dynamic in recent years, both in terms of supply and demand. Increasing demand and high energy prices over the last decade led to a lot of new investment in the United States in hydraulic fracturing and horizontal drilling, which unlocked new resources. In the last five years, the U.S. has increased its oil and gas production significantly and went from being a major importer to potentially becoming a major exporter. Oil and gas previously destined for the U.S. is now being shipped elsewhere, allowing Asia and Europe to access more resources. This change, combined with other factors, put downward pressure on prices. And other countries are now looking to repeat the U.S. experience with tight oil and shale gas.

According to BP Global’s statistical review, global gas consumption in 2014 grew well below its 10 year average. However, global liquefied natural gas (LNG) continued to increase and now comprises one-third of the global gas trade. The rise of LNG trade is now making a commodity what was once based on a fixed set of infrastructure into a globally traded and mobile resource.

Over the next decade, we expect to see substantial LNG growth from Australia and may see new LNG exporters, including some from East and West Africa. In the U.S., our Department of Energy has already licensed 9 LNG export projects. If all of these projects are built, the U.S. could be exporting about 130 billion cubic meters per year (bcm/a) of LNG, which is a significant first contribution to new gas on the market.

Another factor to consider on the supply side is Iran’s role as a potential hydrocarbon exporter. The Joint Comprehensive Plan of Action (JCPOA) reached on July, this past July, if fully implemented, will result in the lifting of nuclear-related sanctions on Iran. Iran’s large hydrocarbon reserves – including natural gas – could then potentially add another large source of supply to regional and global natural gas markets.

What about the demand side? If we look out over the next 25-30 years, the greatest source of demand growth for energy throughout the world is going to be from the non-OECD countries. They will be the drivers and price setters of the energy world. This demand will come from China, India, Pakistan, Brazil, and Africa. Even in the face of substantial price declines for both oil and natural gas over the last year-plus, long-term predictions continue to indicate that energy demand will rise over time.

What do these changes mean globally? Traditional producer and consumer roles will shift, bringing in new players and new scenarios. Shortages, price volatility, and supply disruptions will continue to be a threat and hamper economic growth in many countries – particularly as we see the non-OECD world continuing to increase its energy demand. Therefore, it is in everyone’s interest to ensure the security of the world’s energy resources and to promote market efficiency and stability.

Energy efficient technologies will have an impact on energy demand over time, causing producers – whether national or private – to reevaluate the landscape. The ongoing natural gas revolution could catalyze change in the global energy landscape by replacing dirtier fuels, like coal, with cleaner and more environmentally friendly fuels like natural gas. Increased energy demand will also impact not only energy resources, but also the climate and environment.

Now what does all this mean for Turkmenistan? Turkmenistan is well known for its vast hydrocarbon resource potential and is strategically placed at the crossroads of East and West, enabling it to tap many different markets. The growing demand in the non-OECD regions brings huge opportunities and challenges for Turkmenistan.

Land-locked countries with potentially large resources, such as Turkmenistan, need to move expeditiously to capture market opportunities since their competitors are not idle. Steps toward creating new pipelines to diversify regional supply are welcome. But a critical element of success is to create the right mix of incentives to induce private sector investment in such projects. Private sector investment brings not just financing, but also the expertise, technologies, and experience needed to bring large-scale, transnational projects to fruition.

Moreover, there are many more producer countries on the map than there were 20, 10, or even 5 years ago. LNG, in particular, expands the purchasing options for countries with growing markets, such as China, India, and Pakistan, allowing them to import gas from producers around the world, and not just those that can be linked by pipelines. In fact, lowered global oil and gas prices have made LNG an even more attractive alternative. Pakistan, for instance, inaugurated its first LNG terminal recently, allowing that country to access supplies from around the world. So as the global energy market transforms, the window of opportunity for some projects may begin to close. Hesitation or delay might mean that potential buyers could find other solutions to meet their energy needs.

Let me say a few words now about the proposed Turkmenistan-Afghanistan-Pakistan-India pipeline or TAPI. I’ve been following the evolution of this project very closely. And I know that back in 2010, when the Intergovernmental agreement for TAPI was signed here in Ashgabat, there was great excitement over the prospect of the many positive potential benefits of the project for both Central and South Asia.

The U.S. government welcomes the commitment that all four TAPI countries have made to the project. This project, if realized, would further diversify Turkmenistan’s energy market options, provide revenue and jobs for Afghanistan at a critical time in its economic development, and bring clean fuel to the growing economies of Pakistan and India, which have large demands for natural gas.

We congratulate the four TAPI countries on the selection of TurkmenGaz as the head of the consortium to lead the project. We urge the consortium to continue discussions with technically and financially capable commercial partners as planned implementation begins and the project moves into its next phase.

Let me turn also for a moment to the Trans-Caspian Pipeline project, or TCP. The TCP could – if realized – help to diversify Turkmenistan’s energy market options as well as energy sources for downstream consumers. It could also contribute to efforts to expand east-west trade in the region. Key elements critical to TCP project success include both a private sector partner, as well as the necessary political will to reach negotiated agreements acceptable to all parties involved.

There is also another means to monetize natural gas reserves, as the government of Turkmenistan has already begun to demonstrate. In addition to pursuing pipelines, gas suppliers can use natural gas to generate power and export the resulting electricity to their neighbors. For example, Turkmenistan recently reportedly exported over 22 billion kilowatt hours of electricity to Afghanistan and Iran in 2014. One such project in the region is the Turkmenistan-Uzbekistan-Tajikistan-Afghanistan-Pakistan project, or TUTAP. As TUTAP develops, it can provide Turkmenistan with access to an electricity grid to sell power to Afghanistan and eventually Pakistan. The U.S. strongly supports the TUTAP project, and we commend the Turkmen government for its efforts to provide a reliable supply of electricity to its neighbors.

In conclusion, let me underscore the important role that Turkmenistan can play, and is playing, in the global energy picture. Given current global financial and economic conditions, it is more important than ever for countries to have reliable and consistent access to affordable energy supplies, which countries like Turkmenistan can provide. As a result, we look forward to working with our friends and partners in the region to develop and bring those supplies to market.

Thank you very much for your attention and I look forward to a productive conference here in one of Ashgabat’s most beautiful venues. Thank you.