Identifier
Created
Classification
Origin
06ASHGABAT856
2006-08-10 13:43:00
CONFIDENTIAL
Embassy Ashgabat
Cable title:  

PETRONAS POSSIBLY LOOKING TO EXPAND ACTIVITIES IN

Tags:  ECON ENRG EPET MY TX 
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PP RUEHDBU
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ZNY CCCCC ZZH
P 101343Z AUG 06
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 7674
INFO RUEHTA/AMEMBASSY ALMATY 5433
RUEHEK/AMEMBASSY BISHKEK 2860
RUEHDBU/AMEMBASSY DUSHANBE 0025
RUEHKL/AMEMBASSY KUALA LUMPUR 0007
RUEHMO/AMEMBASSY MOSCOW 2937
RUEHNT/AMEMBASSY TASHKENT 4970
RHEBAAA/DEPT OF ENERGY WASHDC
RUEKJCS/SECDEF WASHINGTON DC
RUEAIIA/CIA WASHDC
RHMFISS/CDR USCENTCOM MACDILL AFB FL//CCJ2/HSE/CCJ5//
RUEKJCS/JOINT STAFF WASHINGTON DC//J5/RUE//
RHEFDIA/DIA WASHDC
C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000856 

SIPDIS

SIPDIS

DEPARTMENT FOR EUR/SCA (PERRY),EUR (MBRYZA)

E.O. 12958: DECL: 08/10/2016
TAGS: ECON ENRG EPET MY TX
SUBJECT: PETRONAS POSSIBLY LOOKING TO EXPAND ACTIVITIES IN
TURKMENISTAN


Classified By: Charge Jennifer Brush for reasons 1.4 (B) and (D)

Summary
-------

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000856

SIPDIS

SIPDIS

DEPARTMENT FOR EUR/SCA (PERRY),EUR (MBRYZA)

E.O. 12958: DECL: 08/10/2016
TAGS: ECON ENRG EPET MY TX
SUBJECT: PETRONAS POSSIBLY LOOKING TO EXPAND ACTIVITIES IN
TURKMENISTAN


Classified By: Charge Jennifer Brush for reasons 1.4 (B) and (D)

Summary
--------------


1. (C) Judging by insights provided by the U.S. firm
Transocean, the Malaysian Oil Giant Petronas is both
consolidating and looking to expand its activities in
Turkmenistan. Transocean has drilled four commercially
viable wells for Petronas in offshore Block 1 in the Caspian
Sea. After the discovery of both oil and gas deposits,
Petronas installed an imported offshore production, floating
storage and offloading system to manage its oil production,
but has continued to burn the gas until it can make
arrangements to transport the natural gas onshore. Plans by
Petronas to build a natural gas pipeline to link its offshore
discoveries with the existing onshore network are contingent
on Petronas upgrading the natural gas pipeline to Kazakhstan
at its own expense. End Summary.

Petronas Finds New Gas Reserves
--------------


2. (C) Transocean Turkmenistan Branch General Manager
Vincent Berthou (please protect) briefed Embassy about his
firm's drilling operations under its contract with the
Malaysian firm, Petronas. Houston-based Transocean has been
operating one jack-up rig, the Trident 20, in Turkmenistan's
offshore Block 1 on behalf of Petronas since 2004. Since
signing its seven-year contract with Petronas in 2003,
Transocean has drilled five wells in Turkmen waters. Four of
the five wells struck commercial deposits of hydrocarbons,
mostly natural gas.


3. (C) According to Berthou, Petronas imported a mobile
offshore production unit and a floating storage and
offloading system into Turkmenistan in early 2006 in order to
eliminate the need to lay pipe to transport the oil to shore.
After filling the system in March 2006, Petronas stopped
production because it had no lifting agreement for the
Turkmen portion of the oil. Turkmen media reported that
President Niyazov signed the relevant resolution instructing
Turkmennebit, the state oil company, to lift and offload the

crude oil at the Turkmenbashy refinery. With this, the
offshore production, floating storage and offloading systems
became fully functioning and oil exports to Azerbaijan and
Iran commenced.


4. (C) However, Berthou noted, the unexpected discovery of
large gas deposits had created a mixed blessing for Petronas,
which had no provisions for transporting the gas and was
instead burning the gas until it could construct a system for
getting the gas ashore. Berthou added that Petronas planned
to construct a natural gas pipeline from its offshore
facilities to Kiyanly, a settlement north of Turkmenbashy, by

2009. A Buried Hill Energy representative later informed
Embassy that Petronas would use the government's onshore gas
pipeline network to ship natural gas north into Kazakhstan.
In exchange for access to the pipeline, Petronas would
upgrade the system at its own expense.

Doing Business in Turkmenistan
--------------


5. (C) Transocean, operating under the 1996 Petronas PSA
umbrella, has experienced no significant problems in
Turkmenistan. Berthou commented that procedures for the
import of spare parts and equipment from Scotland and the
United States had eased. However, he noted, the government
was now enforcing a long dormant insurance law, first passed
in 1996, requiring 15 percent of an asset's value to be
insured within Turkmenistan. (Previously, the requirement
had been five percent.) The state-owned insurance company,
the only one licensed to operate in Turkmenistan, provided
the necessary coverage. In recent months, Transocean had run
into a new snag with this arrangement, because the insurance
company could only operate with certification by the Finance
Minister -- something difficult to obtain given that the

ASHGABAT 00000856 002 OF 002


Finance Minister position has been vacant for approximately
the last five months.

Comment
--------------


6. (C) Petronas has consistently avoided direct contact with
embassy personnel and, in fact, is rumored to have released
one AMCIT manager because of his nationality and previous
affiliation with USG-programs in Turkmenistan. Petronas
representatives sit on the Ashgabat International Advisory
Board but have not agreed to meet with Charge to discuss the
school's registration's problems. No Petronas
representatives accepted embassy's invitations to its
Independence Day reception. Embassy will continue to attempt
to engage with Petronas. In order to do business in
Turkmenistan, foreign companies typically do not play by
internationally established rules and continue to operate
based on a personal relationship with the president. Embassy
can only guess that reluctance to interact with us indicates
a reluctance to divulge Petronas's business practices in
Turkmenistan. Plans to upgrade the gas pipeline network may
increase Turkmenistan's ability to export product to Russia
and beyond.

BRUSH