Petrofac Back in Favour in Turkmenistan After Falling Foul of Berdimuhamedov

On March 8, official Turkmen media reported that Turkmengaz had awarded an operations contract for the Galkynysh gas field to UAE-based company Petrofac. The publications sycophantically described the company as “a leading provider of services to the international energy sector.” They reported that the chief operating officer of the Petrofac Asset Solutions subdivision, Nick Shorten, referred to the company’s “proud history of working with Turkmengaz.” In fact, the history is not so much proud as dramatic… Here are the details that the official media will certainly not disclose.

In 2009, Petrofac concluded a contract with Turkmengaz for the construction of a desulfurization facility at the Galkynysh field. In 2013 the work was completed… And that was that. For around 10 years there was no question of working together. Why not?

In actual fact, another contract was concluded in 2009 for construction of another two desulfurization facilities at the South Yoloten field with a capacity of 10 billion cubic meters, and also surface production facilities for 20 billion cubic meters of feed gas per year. As part of the works, the company laid a 98-km gas pipeline and also built special flow lines and reservoirs. Financing of almost four billion dollars for the work was provided by a loan from the China Development Bank.

The facilities were handed over in 2015-2016. True, one of the refineries had to be mothballed immediately since the facility required larger volumes of gas than were available at that time. But when it came to the final settling of accounts, Turkmengaz officials suddenly backpedalled. The state concern owed the Emirati company around 300 million dollars. The officials’ response to all enquiries was that the government was not allocating them money.

“The then leadership of the Turkmen oil and gas industry made good money on that contract,” a government source told turkmen.news. “Construction itself cost approximately 2.5 billion, while the rest of the money went to meet the needs of Gurbanguly Berdimuhamedov himself and into officials’ pockets.”

Petrofac tried to extract payment of the debt in every way possible and, finally, in desperation sent an appeal directly to Berdimuhamedov. The letter said that the project had been funded by a loan from a foreign bank, and if the debt were not repaid, the international banking system would lose much of its trust in Turkmenistan.

The then head of state was deeply offended at this letter. As a result, on one hand he demanded that the debt be paid, but on the other gave an unofficial order that Petrofac should not receive another contract on the Turkmen market. The company was blacklisted.

After this, all Petrofac’s bids for contracts were ignored. As a result the company was forced to close its office in Turkmenistan. And the debt was only half-paid… For seven years Petrofac tried to get payment of the remaining sum, showering the Foreign Ministry with letters, but to no avail.

Everything changed in winter 2022-2023 when there was a major accident at Galkynysh, which resulted in a temporary halt to the supply of gas to Uzbekistan. At the same time, China’s interest in buying Turkmen gas increased. And finally, in May 2023, Maksat Babayev was reappointed head of Turkmengaz. He held the post in 2017, and before that had been deputy head of the company for five years.

Babayev remembered Petrofac, as Turkmengaz had worked with the company during his leadership. Together with the president’s adviser on oil and gas, Ashyrguly Begliyev, he began to persuade the new head of state, Serdar Berdimuhamedov, to forgive the Emirati company. Moreover, Begliev is on the young president’s side in the oil and gas industry, competing for influence with the deputy prime minister responsible for the sector, Batyr Amanov, who is an appointee of Berdimuhamedov Senior. In other words, the sector no longer depends purely on the decisions of the former president who took umbrage at the “insulting” letter.

And now a three-year contract worth 200 million dollars has been agreed between Petrofac and the Turkmen state company. Observers say that the price of the work is considerably inflated, as contracts of this type are usually cheaper. The sum probably includes the inevitable 10-percent kickback, and a large profit is planned.

Be that as it may, Petrofac is committed to supporting operations and maintenance at Galkynysh, to providing personnel, and to providing technical support and procurement services. The company’s main task is to develop and implement management systems to support the efficient operation of the central processing facilities.

There ends the more than ten-year history of Turkmen officials’ hatred of Petrofac. It turns out that one accident and an increase in demand for gas were enough to overcome the consequences of the former president’s fit of pique.