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Oil report

UPDATE 1-Turkmenistan sees Russia gas deal in Sept - analyst

* Turkmen officials see Russia deal soon - Western analyst

* Failure could put pressure on economy

* Slow to open up onshore gas fields to foreigners

(Adds details, quotes, background)

By Olzhas Auyezov

ALMATY, Sept 10 (Reuters) - Turkmenistan hopes to agree on renewing gas exports to Russia during Russian President Dmitry Medvedev’s visit on Sept. 13, a Western analyst told Reuters after talks with Turkmen officials.

Russia stopped buying Turkmen gas in April, demanding a review to supply terms agreed during a period of higher gas prices. Before the row, Russia's Gazprom GAZP.MM used to buy about 50 billion cubic metres of Turkmen gas a year.

“(Turkmen) officials are optimistic about reaching an agreement this month,” said the analyst, who asked not to be named due to the sensitivity of the issue.

“Everyone seems to expect a deal.”

Medvedev will visit the ex-Soviet Central Asian state on Sunday and meet Turkmen leader Kurbanguly Berdymukhamedov for the first time since the row, which followed a blast five months ago on a pipeline taking Turkmen gas to Russia. [ID:nL9716526]

“I think probably there will be some movements on the price because European demand has slowed down and Gazprom itself is having problems,” said the source, who visited Turkmenistan this month for talks with senior economic officials.

“If Gazprom makes a clear offer on investments into Turkmenistan’s gas sector, it could become more flexible on the price.”

Gazprom declined to comment.

The source said a decrease in gas sales had not caused any serious problems for Turkmenistan so far, thanks to reserves built up in the previous years. “But going forward it all depends on a new agreement being reached with Russia.”

DIVERSIFICATION

Following the dispute, Turkmenistan -- which has the world’s fourth-largest natural gas reserves -- has intensified efforts to diversify gas exports.

Ashgabat has inked a deal with Iran to boost exports, pushed forward with the construction of gas pipeline to China and said it was ready to supply the Nabucco pipeline. [ID:nLA23589]

The planned Nabucco link would help Europe receive gas from the Caspian and Middle East, bypassing Russia. But completing the infrastructure to connect Turkmenistan to Nabucco could take years.

Turkmenistan has been slow to open up its gas fields to foreign investment, offering Western firms the chance to take part only in risky offshore Caspian projects while retaining potentially more lucrative onshore fields, the analyst said.

Germany's RWE AG RWEG.DE signed an agreement in April to develop an offshore gas block and seek new ways to deliver gas from Turkmenistan to Europe. [ID:nLG29522]

But the analyst said: “Onshore there has been no progress in foreign investment, except for China’s PSA (production sharing agreement) to develop the South Iolotan field.”

China won the rights to develop one of the world’s largest gas fields after extending a $5 billion loan to Turkmenistan this year as part of its global strategy to secure energy resources.

“If Turkmenistan opens up onshore fields to foreign investors, that would be a major breakthrough,” the analyst said. “There is no other way to develop them than using foreign investment.” (Editing by Robin Paxton and Keiron Henderson)

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