Geopolitical Report ISSN 2785-2598 Volume 40 Issue 8
Author: Dimitris Symeonidis

The developments of the past weeks are converting 2024 into a green energy bonanza for Central Asia. The first week of March saw Saudi Arabia energy giant ACWA Power announce two wind power plant investments in Karakalpakstan and Bukhara, in Uzbekistan, tallying up to over 1GW of power.

Similar agreements with the government of Kazakhstan followed these for the development of wind power of 1GW in the Jetisu region. However, the critical raw materials front saw the announcement of the most important agreements on green energy. Many have touted Kazakhstan as a lithium powerhouse and, following that estimation, business stakeholders from Germany penned agreements of $500 million for lithium extraction. The lithium industry has also attracted major interest from similar stakeholders from South Korea and China.

This verifies the importance of the extractives industry for the energy transition, something that virtually all energy actors around the world have spearheaded. The extractives industry is the cornerstone of the future energy systems, as it provides the materials necessary to develop all renewable energy sources (e.g. wind, solar), but also play a major role in energy storage means (e.g. batteries, hydrogen), which are paramount to ensure a reliable future energy system.

As part of that, a neighbouring country to Kazakhstan, namely Turkmenistan, shows substantially promising potential to hold similar and even more diverse reserves of all the critical raw materials needed to power the energy transition, which can bring prosperity to the Central Asian nation and put it at the epicentre of the green energy system.

Ashgabat has acknowledged its potential, both in the oil and gas sector, but also on the renewables one, which has made it resort to extroversion activities, such as the Turkmen Investment Forum in Paris in April 2024. This shows that there are all the requirements for Turkmenistan to follow Kazakhstan’s path.

However, at the same time, the lack of full knowledge and disclosure mechanisms regarding the exact figures and locations of the aforementioned reserves creates risks to investors and reduces the possibility for investment and sets the questions of what are the strongest points of Turkmenistan, based on estimations, and how can investors and project developers successfully tap into these precious resources.

The “alternative” riches of Turkmenistan

As mentioned, many consider Turkmenistan to be a “paradise” for the energy sector, because of its oil and gas reserves. However, there is another material that can be deemed as the “oil” of the future because of its high demand, and this material is lithium.

In 2015, the demand for lithium started at 150,000 tons and is expected to skyrocket to as much as 2.4 million tons by 2030. The major driving force behind this increase is the rise in demand for electric vehicles, which are expected to replace the conventional vehicle fleet in the demand-hungry markets, such as the United States, the European Union and China.

While there are numerous countries that have already positioned themselves as suppliers of the element in demand, Turkmenistan has not yet had a specific strategy on lithium and its reserves are unknown. There are, however, strong indications that there is a broad wealth of the material in Western Turkmenistan.

One location that is notoriously rich in lithium is industrial waters with hydromineral raw materials that are characterised by high levels of salinity, a specific high temperature and gas saturation. Western Turkmenistan, including Gogherendag, Kumdag, Uzboy, and Ekizak, showcases these attributes, with the Karabogazgol Bay being the most noteworthy. Especially in the waters of Karabogazgol Bay, the concentration is estimated to be 15-20mg/l, which is much higher than the 1mg/l of lithium that is found in most regions.

However, lithium is not the only material that is important for the energy transition and found in Turkmenistan. Additionally, the country has both iron and copper ores, which are of utmost importance for the development of electricity grids.

 Iron ores have been verified and the initial estimation is 70-75 million tons, again in Western Turkmenistan, in the Gyzylgaya-V section of the Chagyl deposit. However, it is not the only region. In Hajigak, northern Afghanistan, more than 2 billion tons of iron ore have been discovered, with other reserves having been found in Serhetabat as well.

From a geological point of view, Southern Turkmenistan should also have an endowment of iron ore and can collaborate with Afghanistan for exploration activities. Regarding copper ores, it is also important to note that Turkmenistan has been underestimated. Drillholes in the South Turan Platform have revealed Middle Paleozoic granite, gabbroid, metamorphosed volcano-sedimentary rocks, and Late Paleozoic intrusives. It makes sense to perform an exploratory activity in the region to further comprehend how rich the region is in copper, which is paramount for the electricity grid, as iron.

Finally, rare earth metals are also something that Turkmenistan can contribute to. Weathered-crust derivatives of carbonites and alkalines are geological formations that can be considered rich in light rare earth materials and these formations can be found in the Lebap province. There is a high probability that exploration in these regions can uncover quantities of Neodymium and Lanthanum, both used in digital technologies that will be of uttermost importance currently in the Industry 4.0 revolution.

Approach Recommendations – Stakeholder Map

The Turkmenistan Subsoil Law mainly mandated the existing approach by the Turkmen government, adopted in 2015. This differs from the Hydrocarbon Resources Law, which provides some flexibility for public-private partnerships, whereas the Subsoil Law does not allow for any purchasing or selling activity to be taken on Turkmen soil.

This results in a rather complicated procedure to secure permits and licenses, however the framework for licenses is straightforward and, if entrance of the companies within the countries is swift, it allows enough time for exploration, as well as mining, providing 6-year licenses for exploration and up to 20-year licenses for mining. Investments in non-fuel mining are also part of the National Plan for Socio-Economic Development (2011-2030) deployed by Ashgabat, however, so far the country is solely investing in the oil & gas field. The country is expected to diversify and increase competitiveness in mining and extractives, even though it is a lucrative business, to attract even more investments. This is even more important, considering hurdles for infrastructure projects such as the Trans-Caspian Pipeline, the TAPI pipeline and CASA-1000 are mostly of financial nature, as well as political.

Taking this into consideration, we provide several policy recommendations for Turkmenistan to emerge as a champion in renewable energy technology materials, as well as digital materials.

• Non-fuel mining should have a similar regulatory framework to hydrocarbons mining. Long-term leasing should be added in the Subsoil Law as a possibility for the Turkmen government to provide to private entities, but also to research institutes that wish to perform exploratory activities. For that part, legal provisions allowing for collaboration of international research institutes with the Academy of Sciences of Turkmenistan, or the Turkmen State University, should be provided.
• Considering that multiple countries, such as Uzbekistan and Afghanistan share geological formations, it would be interesting to develop international fora and bilateral dialogue platforms with these countries on critical raw materials for the energy transition. This can have dual purpose, helping promote Afghanistan as a trustworthy partner, but also bring the attention of international actors apart from China (which has been the only one engaging with Kabul) to the region for investments related to the energy transition.
• Enable financing frameworks for sustainable development. This will result in the government working with international institutions for the development of green bonds and other financing mechanisms which, with the help of the government and local communities, can lead to mining projects with strong economic, environmental and societal value.
• Development of a database available to all interested parties, such as investors, scientific explorers and mining firms, where all stakeholders will be able to see the verified or estimated reserves of Turkmenistan per mineral and per region. Transparency is expected to increase the flow of investments substantially.

Conclusion

In sum, Central Asia is a region that can easily position itself as a leader of the energy transition. This can be seen in its vast land available for solar and wind power projects, its great solar and wind potential, but also its critical raw materials riches.

Kazakhstan has set the pace to bring sustainable development in the region via lithium mining and Turkmenistan can follow suit, given its geological profile. However, there are still institutional, financial and data availability challenges that make it inherently difficult for stakeholders to get involved.

A revised framework on non-hydrocarbons mining, a sophisticated investment scheme and close collaboration to scientific and technological stakeholders that can provide the equipment and expertise for exploration and extraction is an eminent need. Given the stage of the energy transition that we are currently, it is an eminent need that action must be taken as soon as possible, with the Turkmen Energy Investment Forum on April being the perfect opportunity, as it can function as a starting point.

For those with an interest in acquiring comprehensive insights into economic opportunities in Turkmenistan and Central Asia, we encourage you to reach out to SpecialEurasia by emailing info@specialeurasia.com. We are ready to assist you in evaluating the possibility of acquiring a carefully crafted and customised report to meet your intelligence requirements.