Questions for Michael Liesfeldt

Question 1

Drawing on your experience across petrochemical production and supply chains, what will be the key factors in ensuring that Turkmenistan’s petrochemical products remain competitive in international markets, particularly in terms of feedstock costs, production efficiency, product quality, and supply-chain performance?

Turkmenistan has the resource base. The challenge is to turn that resource into a reliable and competitive product.

Having low-cost gas is a strong starting point, but it is not enough on its own. International customers do not buy gas resources or plant capacity. They buy products of the right quality, delivered on time and at a competitive total cost.

I would focus on four areas: feedstock, operations, quality, and delivery.

Feedstock is the largest variable cost in olefins production. Turkmenistan’s gas resources can therefore provide an important cost advantage.

From a chemicals cost-curve perspective, Turkmenistan is in a relatively advantageous position. Turkmenistan is currently operating in the second quartile of the cost curve, with somewhat lower costs compared with Uzbekistan or Kazakhstan.

North America and the Middle East are among the lowest-cost producers in the world because they use natural gas-based feedstocks such as ethane, propane, and butane to run their chemical plants.

The highest-cost producers use naphtha or heavier feedstocks. Japan and Korea are becoming less competitive, while Europe is also suffering from high energy costs and high conversion costs, as many of its crackers are old and only a limited number are mixed-feed crackers.

The focus should therefore be on four things: feedstock, operations, quality, and delivery.

First, feedstock.

It must be competitively priced and available throughout the full life of the plant.

A low gas price today is not enough. Producers need stable volumes, suitable feedstock quality, and a predictable pricing system.

Second, plants must operate reliably.

A plant earns money from what it actually produces and sells, not from its stated capacity.

Good maintenance, skilled operators, stable utilities, and access to spare parts are therefore essential.

For Turkmenistan, improving the reliable performance of existing assets should be a priority before adding major new capacity.

Third, product quality must be consistent.

Customers buy specific polymer grades for applications such as packaging, pipes, and construction materials.

They need the product to perform in the same way with every delivery.

It is better to supply a focused range of grades reliably than to offer too many products without consistent quality.

Self-sufficiency can also be a priority for Turkmenistan.

China follows a similar approach by using domestic production to cover local requirements. However, China will still need to import polymers over the next decade because demand growth is outpacing capacity.

It also makes economic sense for China to import grades that it cannot always produce competitively.

Finally, supply-chain performance will be decisive.

Turkmenistan is landlocked, so products must cross borders and travel significant distances.

Competitiveness must therefore be measured at the customer’s location, not only at the plant gate.

Transport costs, transit arrangements, and delivery reliability all matter.

The message is simple: low-cost gas creates the opportunity, but reliable production, consistent quality, and dependable delivery create the competitive product.

In summary:

1. Turkmenistan’s gas advantage must pass through the entire value chain. It must survive the cost of production, quality control, and delivery to the customer.

2. Low-cost gas creates the opportunity. But reliable plants, consistent quality, and dependable delivery create the competitive product.

3. That is how Turkmenistan can move from being a country with large gas resources to being recognized as a reliable international petrochemical supplier.

Question 2

As Turkmenistan considers further investment in downstream processing, how can analysis of global demand trends and regional trade flows help identify the most attractive products and determine the right timing and scale of new petrochemical investments?

Petrochemical projects take several years to develop and build.

The market at start-up may therefore be very different from the market at the time of the investment decision.

Turkmenistan should track planned capacity in competing regions, not only existing production.

A country that imports a product today may build its own plant. Another producer may enter the market first. New global capacity may also reduce prices and operating rates.

If a project only works when prices are high and the plant runs at full capacity, it is not a strong project.

My main message is: start with the future customer, not with the plant.

Global petrochemical markets already have excess capacity, and further production capacity is coming.

A project may have low-cost feedstock and still struggle if too many producers are targeting the same customers.

Market analysis should answer four questions:

What product? Which market? When to invest? How large should the project be?

First, Turkmenistan needs to identify what customers will actually need in the future.

It is not enough to forecast total polyethylene demand.

The analysis must identify the required grades, applications, customers, and quality specifications.

Second, regional trade flows can show which markets Turkmenistan can serve competitively.

A nearby market is not always the best market.

Border procedures, railway availability, and transit costs can make delivery difficult.

Turkmenistan must compare its full delivered cost with competing material from Russia, China, the Middle East, and other suppliers.

Third, timing matters.

Petrochemical projects take years to develop.

A market that imports today may have new domestic production by the time Turkmenistan’s plant starts operating.

Investment decisions should therefore include base, stronger, and weaker market scenarios.

Finally, scale must match realistic demand.

A large plant may reduce the cost per tonne, but it must also sell much more product.

Phased expansion may be safer when demand or export access is uncertain.

The right investment is not necessarily the largest project.

It is the project that produces what future customers need, begins at the right time, and reaches those customers at a competitive total cost.