Identifier
Created
Classification
Origin
06ASHGABAT922
2006-08-30 12:11:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Ashgabat
Cable title:  

FOREIGN FIRMS PUMP UP THE VOLUME IN TURKMENISTAN'S

Tags:  EPET ECON PREL TX 
pdf how-to read a cable
VZCZCXRO0540
RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHAH #0922/01 2421211
ZNR UUUUU ZZH
R 301211Z AUG 06
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC 7743
INFO RUCNCIS/CIS COLLECTIVE
RUEHKL/AMEMBASSY KUALA LUMPUR 0011
RUEHLO/AMEMBASSY LONDON 0394
UNCLAS SECTION 01 OF 02 ASHGABAT 000922 

SIPDIS

SIPDIS
SENSITIVE

DEPT FOR SCA/CEN (PERRY)

E.O. 12958: N/A
TAGS: EPET ECON PREL TX
SUBJECT: FOREIGN FIRMS PUMP UP THE VOLUME IN TURKMENISTAN'S
OIL SECTOR

REF: ASHGABAT 905

Summary
-------

UNCLAS SECTION 01 OF 02 ASHGABAT 000922

SIPDIS

SIPDIS
SENSITIVE

DEPT FOR SCA/CEN (PERRY)

E.O. 12958: N/A
TAGS: EPET ECON PREL TX
SUBJECT: FOREIGN FIRMS PUMP UP THE VOLUME IN TURKMENISTAN'S
OIL SECTOR

REF: ASHGABAT 905

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


1. (SBU) Crude oil production figures among foreign oil
firms operating off of Turkmenistan's Caspian Sea coast and
onshore in hydrocarbon-rich Balkan province exceed 85,000
barrels a day. The large Petronas support base in
Turkmenbashy outfits a fleet of 14 support ships, massive
amounts of drill pipe and a non-stop sludge reprocessing
facility. The Turkmenbashy refinery, operating off of
domestic production purchased at roughly two dollars a metric
ton, exports more than 60% of its refined product to generate
several hundred millions of dollars in estimated profits for
the Government of Turkmenistan. End summary.

Show Me the Oil (and Money)
--------------


2. (U) During a recent trip to Turkmenistan's western 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. Specific feedback regarding natural gas
issues appears reftel.


3. (SBU) Foreign oil firms operating in Turkmenistan report
increased daily crude oil output. A Petronas subcontractor
told emboff that Petronas production from offshore wells in
the Caspian Sea is currently 45,000 barrels per day. Latest
data from Dragon Oil's operations around the Celeken (Hazar)
peninsula indicate a daily production figure of approximately
20,000 barrels. Burren Resources Operations Manager Ron
Gartner advised emboff that his company's production is up to
20,000 barrels per day as well.


4. (SBU) The Petronas base camp in the port city of
Turkmenbashy is expanding to accommodate Petronas activity in
the Caspian Sea. On a tour of the base camp, emboff explored
the support facilities and viewed support ships dedicated to
servicing Petronas facilities offshore. According to a
Petronas subcontractor, the fleet of support ships recently
increased from 8 to the present number of 14. (Note: At the
time of emboff's visit on August 20, Petronas was beginning
preparations to reposition its offshore drilling rig to a new
site.) Amidst large stockpiles of piping for drilling
operations, a sludge reprocessing facility, currently
operating full-time at a rate of two-three tons per hour,
towers over the base camp facility.

5. (SBU) Gartner proudly advertised the profitable nature of
Burren's operations in their fields 30 minutes southwest of
Balkanabat. Excluding investment costs, Gartner estimated
his operating costs to be less than $10 per barrel. Burren
shoulders the burden of financing all infrastructure
requirements in accordance with its existing production
sharing agreement with the Government of Turkmenistan.
Gartner added that his operations have benefited from
consistently reasonable and level-headed interaction with
Government of Turkmenistan officials.

6. (SBU) According to Gartner, Burren is in its final stages
of exploration and expects to maintain current levels of
production for the next 15 years. A seismic exploration
study completed three years ago revealed no new reserves.
Burren's current production is handed over to British
Petroleum representatives in the southern Turkmenistan port
of Ekerem.

Refinery Profit Margins Profitable
--------------


7. (SBU) Phase two of the Turkmenbashy refinery's $2 billion
expansion project is nearing completion with refining
capacity approaching nine million tons. According to
Refinery Director Tachberdy Tagiev, only domestically-sourced
crude oil, purchased from state-owned Turkmennebit at 48,000
manat (slightly more than $2/ton using the unofficial
exchange rate),is refined in Turkmenbashy. While Tagiev
refused to identify his operating costs, he revealed that the
refinery has achieved an 85% recovery rate from crude oil
input and exports, mostly via tanker, over 60% of overall
production. With low input and operating costs, and even
allowing for reduced premiums for refined product "trapped"
in the Caspian Sea basin, market-rate exports from the
Turkmenbashy refinery should at least generate several
hundreds of millions of dollars in profits for the

ASHGABAT 00000922 002 OF 002


government.

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


8. (SBU) Embassy is providing this crude oil production and
related information for further analysis in Washington. We
plan to explore septel the reasons for the absurdly
uncompetitive deal that Turkmennebit has with the
Turkmenbashy refinery and the impact of these low revenues
for crude oil on Turkmennebit's ability to finance
exploration and infrastructure activities. End Comment.
BRUSH