Identifier
Created
Classification
Origin
06ASHGABAT997
2006-09-22 13:04:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Ashgabat
Cable title:
TURKMENISTAN'S OIL CHIEF UPBEAT ON OIL AND GAS
how-toVZCZCXRO7204 RR RUEHDBU RUEHLN RUEHVK RUEHYG DE RUEHAH #0997/01 2651304 ZNR UUUUU ZZH R 221304Z SEP 06 FM AMEMBASSY ASHGABAT TO RUEHC/SECSTATE WASHDC 7824 INFO RUCNCIS/CIS COLLECTIVE RUEAIIA/CIA WASHDC RHEFDIA/DIA WASHDC RHEHNSC/NSC WASHDC RUCPDOC/DEPT OF COMMERCE WASHDC RHEBAAA/DEPT OF ENERGY WASHDC
UNCLAS SECTION 01 OF 03 ASHGABAT 000997
SIPDIS
SENSITIVE
SIPDIS
STATE FOR SCA/CEN (PERRY)
E.O. 12958: N/A
TAGS: EPET ECON PREL TX
SUBJECT: TURKMENISTAN'S OIL CHIEF UPBEAT ON OIL AND GAS
SECTOR ACTIVITIES
REF: A.
UNCLAS SECTION 01 OF 03 ASHGABAT 000997
SIPDIS
SENSITIVE
SIPDIS
STATE FOR SCA/CEN (PERRY)
E.O. 12958: N/A
TAGS: EPET ECON PREL TX
SUBJECT: TURKMENISTAN'S OIL CHIEF UPBEAT ON OIL AND GAS
SECTOR ACTIVITIES
REF: A. 1) ASHGABAT 905
B. 2) ASHGABAT 922
C. 3) ASHGABAT 957
Summary
--------------
1. (SBU) Citing Turkmenistan's estimated reserves of 45
billion metric tons of oil equivalent, Garyagdy Tashliyev,
chairman of Turkmenistan's state oil concern, advised emboffs
September 13 that Turkmenistan would avoid the refining, sale
and storage "mistakes" that previously afflicted the sector.
Plans to increase refined product storage capacity, which
augment recent pipeline additions in western Balkan Welayat
(province),are designed to maximize revenues from refined
product sales by allowing Turkmenistan to manage the release
of product into the market. Another natural gas pipeline
could be built along the shores of the Caspian if Russia
guarantees demand at 100 billion cubic meters per year.
Additional foreign investment in offshore oil production
could use idle refining capacity at Turkmenistan's two
refineries. End summary.
Bypassing the Ministry of Oil and Gas
-------------- --
2. (U) Garyagdy Tashliyev, chairman of Turkmenistan's state
oil company, Turkmennebit, met emboffs for an hour at his
Balkanabat headquarters September 13 for a discussion of oil
and natural gas developments in Turkmenistan. Tashliyev
confirmed that Turkmennebit bypassed the Ministry of Oil and
Gas to report directly to the Cabinet of Ministers. In
addition to covering oil production across the country,
Tashliyev is responsible for natural gas production in
western Balkan Welayat (province). (Note: The state natural
gas concern is based in Ashgabat, and handles natural gas
production elsewhere in the country. End Note.)
Crude Numbers
--------------
3. (U) Tashliyev estimated that Turkmenistan's oil and gas
reserves amounted to 45 billion metric tons of oil
equivalent, but noted that more exact data would be provided
at the October 25 meeting of the Halk Maslahaty. (Note: The
Halk Maslahaty is Turkmenistan's supreme legislative
representative body. End Note.) He advised emboffs that
Turkmennebit did not export any of its crude oil, which
instead was directed to Turkmenistan's two refineries. With
an overall 12 million metric ton annual refining capacity at
the two refineries, Tashliyev noted that Turkmennebit only
provided 7 million metric tons to the Turkmenbashy refinery
and 700,000 metric tons to the Seydi facility.
Cutting Out the Azeri Middlemen?
--------------
4. (SBU) According to Tashliyev, refined products are
exported largely to Russia, Iran and "via Baku." He added
that Baku had become a problem as its terminals were "held by
one hand," and anticipated that Azeri tankers would soon be
barred from various ports in the Caspian Sea due to the
tankers' poor physical conditions. Tashliyev did not suggest
alternatives to Baku facilities or Azeri tankers, and lacked
knowledge of the difference between single hull and double
hull tankers. However, Tashliyev proudly noted
Turkmenistan's plans to expand its tanker fleet beyond its
one existing tanker.
Avoiding an Oil Slick
--------------
5. (SBU) Blaming "poor marketing," Tashliyev vowed that
"mistakes" previously highlighted by President Niyazov in the
refining, sale and storage of petroleum products would not be
repeated. Shortcomings in storage capacity forced the sale
of refined products at lower-than-desired prices, and also
hampered refinery operations. In order to maximize higher
profit margins for refined products, Tashliyev noted plans to
construct additional storage facilities so the government
"could hold rather than sell" refined products in the future.
ASHGABAT 00000997 002 OF 003
6. (U) Along with increased storage capacity, Tashliyev
voiced optimism that off-loading capacity for refined product
at Turkmenbashy's port facilities could be doubled by
reducing the transaction time from the sale to loading of
refined products from the current six-month average to two or
three months. He expressed passing interest in the export of
refined products to Afghanistan, but intimated that long
transit times and congested rail routes made significant
sales unlikely.
The Missing Links
--------------
7. (U) In addition to increased storage capacity, Tashliyev
described recent and potential pipeline developments. He
said 170 kilometers of new pipeline, varying from 426 to 508
millimeters in diameter, had been dedicated two months ago to
transport crude oil from collectors located at Kotur Depe,
Vyshka and Gumdag in Balkan Welayat. According to Tashliyev,
the westernmost, Caspian line of the Central Asia Center
(CAC) network in Turkmenistan, CAC III, carries an annual
equivalent of approximately 3.7 billion cubic meters (bcm) of
natural gas. He reiterated suggestions that a 30 bcm
pipeline might be built parallel to the CAC III line, but
linked such plans to increased, guaranteed purchases of
natural gas from Turkmenistan.
Chewing the Fat on Natural Gas
--------------
8. (U) Tashliyev reasoned one possible option to feed a 30
bcm pipeline along the Caspian would be Russia's expressed
desire to purchase annually 100 bcm of natural gas instead of
the recently agreed annual 50 bcm figure (see ref C). He
confirmed plans by the Malaysian firm Petronas to build a
natural gas treatment and LPG tanker terminal at Kianli,
north of Turkmenbashy city (ref A). Tashliyev said Petronas
planned to produce 5 bcm of natural gas a year by 2009 or
2010. He questioned where Petronas would send all its
production, but also held open the possibility that excess
Petronas natural gas production could be absorbed by the
pipeline network supplying Russia.
Turkmen Waters Warming for Foreign Investment?
-------------- -
9. (U) Tashliyev, drawing emboffs' attention to a large map
of Turkmenistan's oil and gas deposits above his conference
table, said there were many offshore opportunities for
foreign firms in Turkmenistan's Caspian waters. He expressed
optimism regarding lucrative offshore blocks running parallel
to existing proven deposits onshore from the Iranian border
north towards the Celeken/Hazar peninsula and offshore from
Celeken towards Azeri fields arcing to Baku. Tashliyev said
that Turkmenistan wanted foreign firms to develop fields
within 10-15 kilometers of the shore via production sharing
agreements or service contracts.
10. (SBU) In response to emboff, Tashliyev said only two
"small" Chinese firms were active in Turkmenistan and were
working in the Gumdag and Kotur Depe fields. He added that
Chinese firms "were more than welcome on the right bank of
the Amu Darya" and in the Yoloten field near Mary. (Note:
Embassy plans to visit the right bank of the Amu Darya later
this month. End Note.) Among exhibitors at Ashgabat's oil
and gas exhibition, which Oil and Gas Minister Gurbanmyrat
Atayev opened September 19, at least three Chinese and two
Iranian firms had stalls alongside larger exhibits by
Malaysia's Petronas, Russia's Lukoil and Gazprom, and
Ukraine's Naftogaz.
Comment
--------------
11. (SBU) The idle capacity of Turkmenistan's two refineries
likely increases the pressure that Turkmennebit and the
separate state exploration concern face to raise domestic
crude oil production. Even though foreign crude oil
producers in Turkmenistan export their product, Tashliyev's
encouragement of foreign investment in oil and gas activities
offshore could generate more crude input for Turkmenistan's
refineries. Existing production sharing agreements with
foreign firms cede roughly half of production to
ASHGABAT 00000997 003 OF 003
Turkmenistan, ostensibly for refining domestically. This
method reduces Turkmenistan's capital expenditure to zero to
bring new production on line, while generating profits from
sales of the refined products.
12. (SBU) Plans to construct additional storage for refined
petroleum products shed new light on the recent natural gas
deal with Gazprom. Concerns about previous mistakes with
pricing and storage indicate Turkmenistan, understandably, is
trying to maximize the value of its refined petroleum
products. However, Niyazov's insistence on $100 per thousand
cubic meters of natural gas in the Gazprom agreement
reflected a pricing decision well below market rates. While
current limitations on natural gas export routes restrict
Turkmenistan's options vis-a-vis the more competitive
marketplace for refined petroleum products in the Caspian Sea
basin, Turkmenistan is still selling its natural gas at a
substantial discount to Gazprom. The pricing concession,
however, generates speculation regarding undisclosed
components of the Gazprom deal. End comment.
BRUSH
SIPDIS
SENSITIVE
SIPDIS
STATE FOR SCA/CEN (PERRY)
E.O. 12958: N/A
TAGS: EPET ECON PREL TX
SUBJECT: TURKMENISTAN'S OIL CHIEF UPBEAT ON OIL AND GAS
SECTOR ACTIVITIES
REF: A. 1) ASHGABAT 905
B. 2) ASHGABAT 922
C. 3) ASHGABAT 957
Summary
--------------
1. (SBU) Citing Turkmenistan's estimated reserves of 45
billion metric tons of oil equivalent, Garyagdy Tashliyev,
chairman of Turkmenistan's state oil concern, advised emboffs
September 13 that Turkmenistan would avoid the refining, sale
and storage "mistakes" that previously afflicted the sector.
Plans to increase refined product storage capacity, which
augment recent pipeline additions in western Balkan Welayat
(province),are designed to maximize revenues from refined
product sales by allowing Turkmenistan to manage the release
of product into the market. Another natural gas pipeline
could be built along the shores of the Caspian if Russia
guarantees demand at 100 billion cubic meters per year.
Additional foreign investment in offshore oil production
could use idle refining capacity at Turkmenistan's two
refineries. End summary.
Bypassing the Ministry of Oil and Gas
-------------- --
2. (U) Garyagdy Tashliyev, chairman of Turkmenistan's state
oil company, Turkmennebit, met emboffs for an hour at his
Balkanabat headquarters September 13 for a discussion of oil
and natural gas developments in Turkmenistan. Tashliyev
confirmed that Turkmennebit bypassed the Ministry of Oil and
Gas to report directly to the Cabinet of Ministers. In
addition to covering oil production across the country,
Tashliyev is responsible for natural gas production in
western Balkan Welayat (province). (Note: The state natural
gas concern is based in Ashgabat, and handles natural gas
production elsewhere in the country. End Note.)
Crude Numbers
--------------
3. (U) Tashliyev estimated that Turkmenistan's oil and gas
reserves amounted to 45 billion metric tons of oil
equivalent, but noted that more exact data would be provided
at the October 25 meeting of the Halk Maslahaty. (Note: The
Halk Maslahaty is Turkmenistan's supreme legislative
representative body. End Note.) He advised emboffs that
Turkmennebit did not export any of its crude oil, which
instead was directed to Turkmenistan's two refineries. With
an overall 12 million metric ton annual refining capacity at
the two refineries, Tashliyev noted that Turkmennebit only
provided 7 million metric tons to the Turkmenbashy refinery
and 700,000 metric tons to the Seydi facility.
Cutting Out the Azeri Middlemen?
--------------
4. (SBU) According to Tashliyev, refined products are
exported largely to Russia, Iran and "via Baku." He added
that Baku had become a problem as its terminals were "held by
one hand," and anticipated that Azeri tankers would soon be
barred from various ports in the Caspian Sea due to the
tankers' poor physical conditions. Tashliyev did not suggest
alternatives to Baku facilities or Azeri tankers, and lacked
knowledge of the difference between single hull and double
hull tankers. However, Tashliyev proudly noted
Turkmenistan's plans to expand its tanker fleet beyond its
one existing tanker.
Avoiding an Oil Slick
--------------
5. (SBU) Blaming "poor marketing," Tashliyev vowed that
"mistakes" previously highlighted by President Niyazov in the
refining, sale and storage of petroleum products would not be
repeated. Shortcomings in storage capacity forced the sale
of refined products at lower-than-desired prices, and also
hampered refinery operations. In order to maximize higher
profit margins for refined products, Tashliyev noted plans to
construct additional storage facilities so the government
"could hold rather than sell" refined products in the future.
ASHGABAT 00000997 002 OF 003
6. (U) Along with increased storage capacity, Tashliyev
voiced optimism that off-loading capacity for refined product
at Turkmenbashy's port facilities could be doubled by
reducing the transaction time from the sale to loading of
refined products from the current six-month average to two or
three months. He expressed passing interest in the export of
refined products to Afghanistan, but intimated that long
transit times and congested rail routes made significant
sales unlikely.
The Missing Links
--------------
7. (U) In addition to increased storage capacity, Tashliyev
described recent and potential pipeline developments. He
said 170 kilometers of new pipeline, varying from 426 to 508
millimeters in diameter, had been dedicated two months ago to
transport crude oil from collectors located at Kotur Depe,
Vyshka and Gumdag in Balkan Welayat. According to Tashliyev,
the westernmost, Caspian line of the Central Asia Center
(CAC) network in Turkmenistan, CAC III, carries an annual
equivalent of approximately 3.7 billion cubic meters (bcm) of
natural gas. He reiterated suggestions that a 30 bcm
pipeline might be built parallel to the CAC III line, but
linked such plans to increased, guaranteed purchases of
natural gas from Turkmenistan.
Chewing the Fat on Natural Gas
--------------
8. (U) Tashliyev reasoned one possible option to feed a 30
bcm pipeline along the Caspian would be Russia's expressed
desire to purchase annually 100 bcm of natural gas instead of
the recently agreed annual 50 bcm figure (see ref C). He
confirmed plans by the Malaysian firm Petronas to build a
natural gas treatment and LPG tanker terminal at Kianli,
north of Turkmenbashy city (ref A). Tashliyev said Petronas
planned to produce 5 bcm of natural gas a year by 2009 or
2010. He questioned where Petronas would send all its
production, but also held open the possibility that excess
Petronas natural gas production could be absorbed by the
pipeline network supplying Russia.
Turkmen Waters Warming for Foreign Investment?
-------------- -
9. (U) Tashliyev, drawing emboffs' attention to a large map
of Turkmenistan's oil and gas deposits above his conference
table, said there were many offshore opportunities for
foreign firms in Turkmenistan's Caspian waters. He expressed
optimism regarding lucrative offshore blocks running parallel
to existing proven deposits onshore from the Iranian border
north towards the Celeken/Hazar peninsula and offshore from
Celeken towards Azeri fields arcing to Baku. Tashliyev said
that Turkmenistan wanted foreign firms to develop fields
within 10-15 kilometers of the shore via production sharing
agreements or service contracts.
10. (SBU) In response to emboff, Tashliyev said only two
"small" Chinese firms were active in Turkmenistan and were
working in the Gumdag and Kotur Depe fields. He added that
Chinese firms "were more than welcome on the right bank of
the Amu Darya" and in the Yoloten field near Mary. (Note:
Embassy plans to visit the right bank of the Amu Darya later
this month. End Note.) Among exhibitors at Ashgabat's oil
and gas exhibition, which Oil and Gas Minister Gurbanmyrat
Atayev opened September 19, at least three Chinese and two
Iranian firms had stalls alongside larger exhibits by
Malaysia's Petronas, Russia's Lukoil and Gazprom, and
Ukraine's Naftogaz.
Comment
--------------
11. (SBU) The idle capacity of Turkmenistan's two refineries
likely increases the pressure that Turkmennebit and the
separate state exploration concern face to raise domestic
crude oil production. Even though foreign crude oil
producers in Turkmenistan export their product, Tashliyev's
encouragement of foreign investment in oil and gas activities
offshore could generate more crude input for Turkmenistan's
refineries. Existing production sharing agreements with
foreign firms cede roughly half of production to
ASHGABAT 00000997 003 OF 003
Turkmenistan, ostensibly for refining domestically. This
method reduces Turkmenistan's capital expenditure to zero to
bring new production on line, while generating profits from
sales of the refined products.
12. (SBU) Plans to construct additional storage for refined
petroleum products shed new light on the recent natural gas
deal with Gazprom. Concerns about previous mistakes with
pricing and storage indicate Turkmenistan, understandably, is
trying to maximize the value of its refined petroleum
products. However, Niyazov's insistence on $100 per thousand
cubic meters of natural gas in the Gazprom agreement
reflected a pricing decision well below market rates. While
current limitations on natural gas export routes restrict
Turkmenistan's options vis-a-vis the more competitive
marketplace for refined petroleum products in the Caspian Sea
basin, Turkmenistan is still selling its natural gas at a
substantial discount to Gazprom. The pricing concession,
however, generates speculation regarding undisclosed
components of the Gazprom deal. End comment.
BRUSH