Dragon Oil Expects ‘Weak Market’ for Turkmen Gas, Chief Says

Dragon Oil Plc, the U.K. explorer active in Turkmenistan, said it expects a “weak market” for natural gas supplies from the Caspian Sea in the near future.

The company is in talks with the Turkmen government over gas deliveries with a view to sending exports to Russia and Europe, Chief Executive Officer Abdul Jaleel Al Khalifa said today in an interview.

“Now with not so high global gas demand, we don’t anticipate that we are going to receive a good monetization scheme for our gas” in the next one or two years, Al Khalifa said. “It’s a weak market for our gas now.”

OAO Gazprom, Russia’s gas export monopoly, slashed purchases of the fuel from Turkmenistan by about 75 percent on lower demand. Land-locked Turkmenistan has started gas deliveries to China, increased supplies to Iran and has been negotiating a plan to export fuel to Europe bypassing Russia.

Dragon Oil is “pursuing a dual strategy” in gas marketing in anticipation that fuel demand and prices will increase in the longer term, according to a statement released earlier today.

The company plans to invest about $700 million in infrastructure projects through 2013, with output expected to rise by as much as 15 percent a year.

Dragon Oil is also in talks with Iran to resume crude oil swaps to diversify export routes from the Caspian Sea. Iran is under international sanctions over its efforts to develop a nuclear program that the U.S. and its allies accuse of being aimed at developing atomic weapons, an allegation Iran rejects.

“There is potential resumption of exports through Iran sometime in the future,” Al Khalifa said. UN “sanctions are difficulties, but that doesn’t make it impossible.”

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