ARETI and ZARUBEZHNEFT
Due to the close partnership between these two companies in Turkmenistan, Areti and Zarubezhneft are profiled together.
Contact Information
ARETI
http://www.aretigroup.com/
Russian Federation
125 building 1, Profsoyuznaya street, Moscow, 117647, Russian Federation
T: +7 495 783-85-00
F: +7 495 783-85-35
E: ru@nullaretigroup.com
Turkmenistan
594, Bitarap Turkmenistan Avenue, Ashgabat 744000, Turkmenistan
T: +99 312 39 93 10
F: +99 312 39 93 10
E: tm@nullaretigroup.com
Cyprus
313, 28th October Avenue, 3105 Limassol, Cyprus
T: +357 25 96 40 00
F: +357 25 58 41 32
E: cy@nullaretigroup.com
Switzerland
Rue du Rhône 86, 1204 Geneva, Switzerland
T: +41 22 561 89 89
F: +41 22 561 89 03
E: ch@nullaretigroup.com
Zarubezhneft
https://www.nestro.ru/ru/
Building 1, 9/1/1 Armiansky pereulok, Moscow 101990, Russian Federation
T: +7 (495) 748-65-00
F: +7 (495) 748-65-05
E: nestro@nullnestro.ru
Telex: 113303 STEK RU
History in Turkmenistan
Areti is the rebranded successor of Itera, and thus inherits Itera’s history in Turkmenistan.
According to the former Itera USA website, the company was founded in 1992 as a commodities trading business to establish barter transactions with the newly independent states of the former Soviet Union. In 1994, Itera USA provided the government of Turkmenistan with sugar in exchange for the right to natural gas, which was then sold by Itera USA to Ukraine. The Moscow-based Itera Group, of which Itera USA is now a subsidiary, concluded a formal agreement with Turkmenistan for an ongoing gas trade to Ukraine.[i]
In 2001, Itera and Zarubezhneft signed an agreement with the government of Turkmenistan regarding their intent to participate in the development of Turkmenistan’s oil and gas sector.[ii] In 2002, Itera’s subsidiary Gazkhiminvest, Rosneft and, Zarubezhneft formed a joint venture called Zarit, with Gazkhiminvest and Rosneft holding 37% and Zarubezhneft 26%.[iii] In February 2004, Turkmenneft obtained a 15% stake in Zarit, while Rosneft and Itera held onto 31% each, and Zarubezhneft held the remaining 23%.[iv] Zarit’s objective was to develop offshore blocks 29, 30, and 31, which are located in the southeast quadrant of Turkmenistan’s portion of the Caspian shelf, near the Iranian border. A Production Sharing Agreement (PSA) was to be signed between the government of Turkmenistan and Zarit for the development of these three blocks in 2003. However, this failed to materialize after postponement into 2004. Also of note, in March 2004, the government of Turkmenistan and the National Reserve Bank (NRB), a Russian commercial investment bank, agreed that the latter would “organize the finances and handle banking for Zarit.”[v]
The development of offshore blocks 29, 30, and 31 was at a standstill due to the unresolved legal status of the Caspian Sea. One of the blocks extends beyond Turkmenistan’s section of the sea into Iran’s portion.[vi] Nonetheless, the leaders of both Areti and Zarubezhneft consistently maintained that the venture would receive the authorization to go forward. In April 2008, Areti’s General Director, Vladimir Makeev, optimistically announced, “We are in the final stages of talks to sign a PSA for blocks 29, 30, [and] 31.”[vii] In an August 2008 interview with the information agency, Finmarket, Nikolai Brunich, the General Director of Zarubezhneft, was asked whether Zarit had yet received a response from the government of Turkmenistan regarding its application to develop the offshore blocks. He replied, “We have been negotiating this issue for a sufficiently long time. The main obstacle is the territorial disagreements between the countries of the Caspian basin. A meeting is planned for September between all of the governments of this region. After the summit, we hope that there will be the opportunity to approach discussion of a contact and begin conducting geological exploration. But Zarit will exist, and we still plan to obtain the right to develop the three blocks on the Caspian shelf.”[viii]
The border dispute between Iran and Turkmenistan came to resolution in 2018, with the Iranian ratification of the Caspian Convention[ix]. However, a report by Caspian News[x] alleges that Rosneft and Zarubezhneft announced the bankruptcy of Zarit in 2015, followed by Zarubezhneft liquidating its branch in Turkmenistan in 2018[xi] after “Turkmenistan ceased to be a country of potential interest for the company.”
In December 2009, Areti and Zarubezhneft signed a PSA for the development of offshore Block 21, with Zarubezhneft controlling 51% and Areti 49% of the project.[xii] In June 2010, President Berdymukhamedov listed Areti as one of the country’s “reliable partners,” based on its work on Block 21 as well as projects to construct gas pipelines, hippodromes and a hotel in the Avaza tourist complex.[xiii] In April 2010, Igor Makarov, Areti’s Chairman, reported that Block 21 held an estimated 219 million tons of recoverable oil and 92 billion cubic meters of associated gas. As such, Areti and Zarubezhneft conducted exploratory operations in the block until 2012, at a price of approximately $6 billion. In addition to speaking about Block 21, Makarov also noted the following in regards to the long-anticipated development of Blocks 29, 30, and 31: “This project is dormant at present, but sooner or later, Turkmenistan and Iran will agree on the section in the shelf contested by them, and we will start work on these three blocks. Especially given that block 21 is located close to block 29.”[xiv] In December 2010, Wikileaks released a confidential 2008 cable from the US Embassy in Ashgabat in which it is stated that Areti’s business operations also extend to the construction of a stadium in Turkmenabat, a carbamide plant, a 5-star hotel in Avaza and a spa, as well as a contract to build a urea/ammonia plant and a contract to supply ambulances. The cable also stated that Areti had spared little expense in courting the favor of President Berdymukhamedov, most notably by giving him a yacht worth 60 million Euros. The cable concluded that the “company undoubtedly really wants a gas exploration contract, especially onshore, and the gift of the yacht is a nice enticement to move the process along… [Areti’s] business activities are wide-ranging and difficult to isolate, and the reported gift of the yacht serves as a sign that the company’s willingness to go to great lengths to win business should not be underestimated.”[xv]
Current Scope of Operations
While Zarubrezhneft has ceased their operations in Turkmenistan, Areti still remains active. Maintaining block 21, the company also signed a Memorandum of Understanding with State Concern Turkmennebit in 2019 over the development of the newly discovered offshore Uzynada field. According to a state run oil and gas website [xvi], Areti was tasked with a year-long study of the data from the field after successful drilling operations were conducted by state corporations Turkmennebit and Turkmengeology. Areti would then be allowed to enter negotiations on their contract.
In 2020, Areti and Turkmengaz signed a Memorandum of Understanding concerning cooperation between the two on the Galkynysh giant field development project. [xvii]
Areti was a bronze sponsor of the 2010, 2019, 2020, and 2021 Turkmenistan International Oil and Gas Conference. The company was also a silver sponsor of the 2019 International Gas Congress, hosted in Turkmenistan.[xviii]
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[i] IteraUSA, Who We are & What We do, http://www.itera.com/index2.htm. Original weblink no longer active. [ii] http://www.energyland.info/news/2008/05/19/news_6597/. Original weblink no longer active. [iii] http://www.jamestown.org/edm/article.php?article_id=237200. Original weblink no longer active. [iv] New Europe, “Zarit to Sign Oil Agreement with Turkmenistan,” April 3, 2004, http://www.neurope.eu/article/zarit-sign-oil-agreement-turkmenistan. Original weblink no longer active. [v] http://eng.globalaffairs.ru/news/393.html. Original weblink no longer active. [vi] http://eng.globalaffairs.ru/news/393.html. Original weblink no longer active. [vii] New Europe, “Offshore Blocks are Signed up by Russia’s Itera,” May 5, 2008, http://www.neurope.eu/article/offshore-blocks-are-signed-russia-s-itera. Original weblink no longer active. [viii] Финмаркет, “Глава ‘Зарубежнефти’ Николай Брунич уверен в успешной работе компании как в России, так и за рубежом,” August 20, 2008, http://www.finmarket.ru/interview/?id=915782. Accessed February 17, 2022. [ix] Kaleji, Vali. The Jamestown Foundation, Eurasia Daily Monitor, “Iran Balks at Definition of Offshore Territorial Baselines in Caspian Sea,” June 3, 2021, https://jamestown.org/program/iran-balks-at-definition-of-offshore-territorial-baselines-in-caspian-sea/. Accessed, November 15, 2021. [x] Erubaeva, Gaukhar. Caspian News, “Caspian Sea Status May Soon Be Resolved,” July 29, 2018, https://caspiannews.com/news-detail/caspian-sea-status-may-soon-be-resolved-2018-7-29-59/. Accessed November 15, 2021. [xi] Zarubezhneft, “2018 Annual Report: Expanding the Scope,” https://www.zarubezhneft.ru/media/filer_public/2e/88/2e885785-9b9e-499c-838b-8508b1912b2c/zarubezhneft_ar2018_book_en_.pdf. Accessed November 15, 2021. [xii] Turkmenistan.ru, “Igor Makarov Speaks about Itera’s Plans in Turkmen Caspian shelf,” October 4, 2010, https://www.turkmenistan.ru/en/?q=node/14196. Accessed February 17, 2022. [xiii] Itera, “Gurbanguly Berdymukhammedov: ITERA is a Reliable Partner of Turkmenistan,” June 29, 2010, http://www.itera.ru/isp/eng/index/smi/448/13. Original weblink no longer active. [xiv] Turkmenistan.ru (October 4, 2010). [xv] Curran, Syliva. “Expat Sources Say that Itera Gave Turkmenistan a Yacht Worth 60 Million Euro,” October 2008, published by Wikileaks on Dec. 14, 2010, http://wikileaks.blogs.linkbucks.com/archives/1499. Original weblink no longer active but available at: http://www.guardian.co.uk/world/us-embassy-cables-documents/174923. Accessed February 17, 2022. [xvi] Nebit-Gaz, “The head of «ARETI» presented to the President of Turkmenistan new proposals for the development of offshore fields,” August 14, 2021, https://www.oilgas.gov.tm/en/posts/news/3091/the-head-of-areti-presented-to-the-president-of-turkmenistan-new-proposals-for-the-development-of-offshore-fields. Accessed November 16, 2021. [xvii] Orient, “ARETI is the bronze sponsor of the XXVI International Conference ‘Oil and Gas of Turkmenistan,’” August 10, 2021, https://orient.tm/en/post/34740/areti-bronze-sponsor-xxvi-international-conference-oil-and-gas-turkmenistan. Accessed November 16, 2021. [xviii] 26th Turkmenistan International Oil and Gas Conference, https://www.ogt-turkmenistan.com/en. Accessed November 4, 2021.