TURKMENISTAN: PETRONAS HAS BIG PLANS

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 001141

SIPDIS

SIPDIS

STATE FOR SCA/CEN, EUR DAS BRYZA, EEB
PLEASE PASS TO USTDA DAN STEIN
COMMERCE FOR HUEPER
ENERGY FOR EKIMOFF

E.O. 12958: DECL: 07/20/2017
TAGS: PGOV PREL ECON EPET TX
SUBJECT: TURKMENISTAN: PETRONAS HAS BIG PLANS

REF: ASHGABAT 1076

Classified By: Charge Richard E. Hoagland for reasons 1.4 (B) and (D).


1. (C) SUMMARY: Petronas plans to ramp up operations in
Turkmenistan and hopes to process 10 bcm of natural gas per
year by 2012. According to Petronas' Turkmenistan general
manager, Russia is a much more reliable business partner than
Turkey, Azerbaijan, or Iran. Plans to sell gas to Russia
will enable delivery of gas rig parts via Russian waterways.
Petronas' policy of providing advanced training for some of
its Turkmen employees and allowing the government first crack
at hiring the graduates guarantees a better workforce for the
company as well as smooth relations with the government. END
SUMMARY.

MAJOR PLANS IN THE CASPIAN


2. (C) During a dinner on October 18 with econoff, the
General Manager of Petronas in Turkmenistan, Suleiman
Abdullah, reiterated earlier expectations of processing five
bcm of gas per year by 2010 at a new processing plant in
Turkmenbashy (reftel). With the completion of Phase II, to
be completed in 2012, processing would increase to 10 bcm
(reftel). He also repeated Petronas' plans to build four
drilling rigs and operate a collector platform in Block 1.
Petronas has already invested $800 million, and plans to
invest an additional $2 billion, some of the tenders for
which have already been announced. Abdullah said that Russia
is allowing Petronas to ship rigs in several pieces via the
Volga and Don Rivers, because the company plans to sell the
gas to Russia.

PREFERS WORKING WITH RUSSIA


3. (C) Abdullah criticized cooperation with Turkey,
Azerbaijan, and Iran. He said Turkey is unreliable (reftel)
because they don't inform in advance what the transit fee
will be. Although Russia pays less, transit terms are
clearer and Petronas knows that Russia will pay, making them
preferable as partners. Abdullah said the Azeris are not
reliable to work with because of interregional rivalry.
Working with Iran is difficult because "they take two years
(to do) what should take three months."

PETRONAS OPERATIONS IN TURKMENISTAN


4. (C) Abdullah said that 80% of the Petronas workforce is
local. Government officials told Petronas to hire more
ethnic Turkmen engineers, which presents a challenge since
almost all trained engineers in the country are ethnic
Russians. (NOTE: The Turkish and French construction
companies bring in foreign workers. END NOTE.) He stated
that the company does not have plans to increase the number
of Malay employees even with their expanding business,
because salaries are too expensive, and the situation with
schools and wives is complicated. (COMMENT: We have heard
from sources that Petronas contacted the Ashgabat
International School (AIS) twice recently regarding plans to
bring 60 families to Ashgabat. The fact that AIS currently
would have trouble accommodating the children of 60
additional families could be what Abdullah is referring to
regarding a complicated school situation. COMMENT.)

OFFERS OF EDUCATION CARRY OBLIGATIONS


5. (SBU) Petronas has sent three classes of 50 Turkmenistani
students each to Petronas University for training. Abdullah
said the government of Turkmenistan has priority in hiring
the graduates for the first three months after their return

ASHGABAT 00001141 002 OF 002


as part of an agreement the company made with Tukrmenistan in
order to curry favor with the government. Petronas offers
jobs to the remaining graduates. Instead of returning to
Turkmenistan, two former students left for employment in
other countries. Consequently, students and their parents
now sign a promissory note which obligates them to return --
or the parents can be jailed. Abdullah also runs the local
office and serves as Petronas' lead negotiator in
Turkmenistan. He is training local staff in negotiations
himself.

CLUES ABOUT HIS AND PETRONAS' FUTURE


6. (SBU) Abdullah has been in Turkmenistan for six years.
Petronas wants him to return to Malaysia in December, but he
would like to stay longer, and his Turkmenistan government
counterparts also think that he should stay as the Caspian
project ramps up. The president of Petronas is coming in
December to decide this question. While pleased about the
company's success in Turkmenistan, he acknowledges they have
been working in Turkmenistan since 1996 and that it took a
long time to reach this point.


7. (SBU) Regarding the return of major U.S. oil and gas
firms to Turkmenistan, he asked why Chevron and other U.S.
companies would come, citing the great distance from the
United States. He feigned ignorance about the possible
opening of any local offices by U.S. companies (despite the
fact that Chevron's plans have been reported in the
international media).


8. (SBU) COMMENT: Petronas is an adept political animal.
Training Turkmen employees and allowing the government first
crack at hiring the graduates guarantees a better workforce
for the company as well as smooth relations with the
government. END COMMENT.
HOAGLAND