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Bloomberg: IEA Says Caspian Oil, Gas Industry Needs Less Secrecy (Update1)

By Ben Farey

Oct. 8 (Bloomberg) — The International Energy Agency, an adviser to oil-consuming nations, said a lack of openness hampers the development of reserves in the Caspian, a region containing about 5 percent of the world’s oil and gas.

Turkmenistan, the second-largest gas producer in the former Soviet Union, hasn’t had a full, independent audit of its reserves, said the Paris-based IEA. The central Asian nation, along with Azerbaijan and Kazakhstan, ranks among the 31 most corrupt countries in the world, according to annual rankings by Transparency International.

“South Caspian oil and gas market development would benefit from enhanced transparency,” Christof Van Agt, the IEA administrator for Caspian and Central Asian countries, said in a telephone interview from Geneva.

Production from the region could replace dwindling output from aging fields in areas such as the North Sea, said the IEA, which advises 26 developed countries on energy policy. BP Plc, Royal Dutch Shell Plc, Total SA and Chevron Corp. are among oil producers seeking to increase investment in the Caspian region.

The U.K. Foreign Office said in a statement to Bloomberg that “Turkmenistan has substantial oil and gas reserves but an autocratic leadership creates an unattractive investment climate.”

Russia supplies about 25 percent of Europe’s gas consumption. After OAO Gazprom, the country’s gas monopoly, cut supplies to neighboring Ukraine in January 2006 after a price dispute, the European Union examined ways to diversify energy supply. The EU is funding a study into a trans-Caspian gas route, which would avoid transit through Russia.

`Created Opportunities’

“The current gas market situation in Europe has created a number of opportunities for further south Caspian oil and gas market development,” Van Agt said. The present available data implied “considerable gas reserves potential,” and Azerbaijan and Turkmenistan are likely to be able to increase output, he said.

“Investors are taking an interest and governments have to extend their focus beyond pipelines also towards Caspian oil and gas producers,” he said.

Investment in new export pipelines will follow development of the area’s oil and gas fields, Van Agt said.

A pipeline from Kazakhstan, Uzbekistan and Turkmenistan into Europe is opposed by Russia, which currently is the only export route for Turkmen gas to reach Europe. A trans-Caspian pipeline would need agreement on the disputed boundaries of the Caspian Sea.

Such a pipeline, if built, would diversify supplies to Europe and help “ensure competitive energy prices,” a spokesman for U.K. Energy Minister Malcolm Wicks said in a Sept. 27 e-mail.

U.K. Minister Visit

Wicks traveled to Turkmenistan last month, the first official visit by a U.K. minister in about 10 years, to help establish relations. He also visited Azerbaijan, and the two countries were chosen because of their “vital role” in developing a pipeline route from the southern Caspian, the e-mailed statement said.

Turkmenistan’s proved natural gas reserves are estimated at 2.86 trillion cubic meters, according to BP’s annual statistical review, which uses official data and estimates from gas industry association Cedigaz. The Turkmen government has said its reserves may be as large as 23.1 trillion cubic meters, which would make them the world’s fourth biggest, behind Russian, Iran and Qatar.

To contact the reporter on this story: Ben Farey in London [email protected]

Last Updated: October 8, 2007 07:47 EDT

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