EXPANSION PLANS FOR TURKMENISTAN'S NATURAL GAS

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000905 SIPDIS SIPDIS STATE FOR SCA/CEN (PERRY) E.O. 12958: DECL: 08/24/2016 TAGS: EPET ECON PREL TX SUBJECT: EXPANSION PLANS FOR TURKMENISTAN'S NATURAL GAS INFRASTRUCTURE REF: ASHGABAT 856 Classified By: Charge Jennifer Brush for reasons 1.4 (B) and (D) Summary -------------- ¶1. (C) Petronas subcontractor Bertling Logistics confirmed reftel plans for Petronas to lay two natural gas pipelines from Block 1 to supply a new onshore gas facility in Gyanly, north of the Caspian Sea city of Turkmenbashy. U.K.'s Burren Energy has approached Turkmenistan officials regarding the supply of natural gas from Burren-managed fields into the natural gas network. Rumors persist regarding Russian and Chinese activities in the natural gas sector. End Summary. Petronas Ramping Up Plans for Natural Gas -------------- ¶2. (U) During a recent trip to Turkmenistan's western-most Balkan Welayat (province),which borders the Caspian Sea, embassy personnel discussed oil and gas issues with Turkmenbashy's mayor, the head of the Turkmenbashy refinery, subcontractors of the Malaysian firm Petronas and personnel from the U.K.'s Burren Resources. ¶3. (C) The Amcit managing director of Petronas subcontractor Bertling Logistics, Umit Bayulken (please protect),briefed emboff on Petronas plans to construct an onshore natural gas facility at Gyanly (Kianli) on the coast north of Turkmenbashy. This facility would process gas deposits, discovered by Petronas in Block 1, but which are currently being flared. According to Bayulken, operations are to begin at the facility in 2007 or 2008, with final completion scheduled for 2014. (Bayulken's information correlates largely with information that Petronas subcontractor Transocean's general manager provided embassy reftel.) He noted that the Argentine firm Tenaris is supplying over 75,000 tons of piping for this project, but added that the Italian firm Socometherm, through its Russian subsidiary, would lay the two concrete-encased pipelines to Gyanly from Block 1. All other firms Bayulken identified are Malaysia-based companies. ¶4. (SBU) Turkmenbashy refinery director Tachberdy Tagiev would not comment on Petronas natural gas activities, but told emboff that "Petronas is solely on its own." Burren Resources Operations Manager Ron Gartner, who is based inland near Balkanabat and admittedly more removed from events in Turkmenbashy, offered a slightly different version of Petronas plans. Gartner believed that Petronas planned to pipe its offshore gas finds directly to the pipeline network onshore in Kazakhstan. Burren Wants to Be a Natural Gas Player -------------- ¶5. (SBU) Gartner told emboff his firm's two top executives met President Niyazov in June to discuss proposals regarding natural gas finds at Burren's fields south of Balkanabat. When asked about the natural gas pipeline infrastructure, Gartner turned to his desktop and opened several files with images of crumbling and degraded wide diameter pipes. Gartner expressed his complete dissatisfaction with the existing, local natural gas pipeline network, and added that Burren was prepared to build its own link to the CAC-3 line, which is located 40 kilometers away. He estimated it would take two years to construct a suitable pipeline. ¶6. (SBU) Gartner, however, said Turkmenistan officials were "hot and cold" about Burren's natural gas proposals. He refused to reveal the quantity of natural gas Burren had available, but admitted it was "significantly" less than the rumored one trillion cubic meters Petronas had discovered in Block 1. However, he rationalized the expense of pipeline construction was well worth the value of the natural gas which the firm is currently flaring off in its oil fields. Other Fish in the Sea? -------------- ¶7. (C) Bayulken told emboff that Russian firms in conjunction with Trident Oil had begun exploring for natural gas in the Aral Sea region of Uzbekistan in order to increase ASHGABAT 00000905 002 OF 002 pressure on President Niyazov over long-term natural gas supplies. He also informed emboff that Chinese firms had become interested in the area and had been requesting quotes for various services. However, Bayulken did not believe the Chinese would, in fact, subcontract out work. Turkmenbashy Hakim (mayor) Ashyrniyaz Pomanov told emboff he had not encountered any Chinese firms in the region recently. Comment -------------- ¶8. (C) Bertling's feedback confirms previously reported plans for Petronas to construct a pipeline network linking its offshore gas finds to a new onshore processing and storage facility. Additional storage capacity and the integration of Burren gas production into the pipeline network would be a mixed blessing for President Niyazov. The additional storage and natural gas resources would augment Turkmenistan's capacity to supply natural gas, but the continued reliance on the existing pipeline network through Russia does not enhance Turkmenistan's position at the negotiating table. End Comment. BRUSH