TURKMENISTAN: UNUSUALLY OUTGOING DEPUTY PREMIER

C O N F I D E N T I A L SECTION 01 OF 03 ASHGABAT 001259

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

E.O. 12958: DECL: 11/19/2017
TAGS: PGOV PREL EPET TX
SUBJECT: TURKMENISTAN: UNUSUALLY OUTGOING DEPUTY PREMIER
TAGIYEV ACKNOWLEDGES TO PDAS MANN THE NEED FOR NEW EXPORT
PIPELINE OPTIONS


Classified By: CHARGE RICHARD E. HOAGLAND FOR REASONS 1.4 (B),(D)


1. (C) SUMMARY: During a November 16 meeting with Bureau of
South and Central Asian Affairs Principal Deputy Assistant
Secretary Steven Mann, Turkmenistan's Deputy Chairman of the

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Cabinet of Ministers for hydrocarbon issues, Tachberdi
Tagiyev, was unusually forthcoming, even acknowledging for
the first time that Turkmenistan needs to look for new gas
export routes. Perhaps buoyed by the success of
Turkmenistan's just-concluded oil and gas exhibition and
conference, Tagiyev discussed for almost an hour his
country's plans for developing its hydrocarbon industry,
including plans to allow foreign companies to become involved
in the Yoloten and Osmon gas fields in the Amu Darya basin,
an area from which western companies previously banned from
working. However, it was clear that policy-making power on
all things hydrocarbon continues to rest with the President,
rather than Tagiyev. END SUMMARY.


2. (U) Bureau of South and Central Asian Affairs Principal
Deputy Assistant Secretary Steven Mann met with Deputy
Chairman of the Cabinet of Ministers for hydrocarbon issues
Tachberdi Tagiyev November 16, the day after the Turkmenistan
International Oil and Gas Exhibition (TIOGE) was over, and
congratulated the Deputy Chairman for the event's success.
Tagiyev was visibly gratified by Mann's praise, the fact that
so many foreign companies had participated -- and by U.S.
Secretary of Energy Samuel Bodman's attendance.

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U.S. COMPANIES INTERESTED IN TURKMENISTAN


3. (C) Mann stressed that U.S. companies have world-class
technology, and are interested in investing in Turkmenistan.Qting that some U.S. companies -- such as Parker Drilling --
are already active in Turkmenistan, Tagiyev hoped that more
would begin to do business in his country, and added that
Parker Drilling needs to expand its presence, since it
currently is working only two rigs.

UNITED STATES PROMOTES DEVELOPMENT OF TURKMENISTAN'S
HYDROCARBONS SECTOR


4. (C) Mann briefly reviewed his meetings earlier in the day
with President Berdimuhamedov (which Tagiyev
uncharacteristically did not attend) and with Deputy Chairman
of the Cabinet of Ministers/Foreign Minister Rashit Meredov
(reftels):

-- The United States wants to help support Turkmenistan's
hydrocarbons sector through both private and government
sector programs, and has made some suggestions how that might
be done.

-- The United States considers the announcement that
Turkmenistan is preparing to unify its two currency exchange
rates an important, but not easy, step.

-- The president raised his hopes for delimitation of
Turkmenistan's border with Azerbaijan.

-- The United States wants to respond positively to the
president's request in New York for a team of U.S. financial
and legal experts in the hydrocarbon sector to come to
Turkmenistan to provide training.

-- The president had voiced a plan for development of
Turkmenistan's petrochemical sector and requested U.S.
assistance, and Mann had promised to discuss such a program
with the U.S. Trade and Development Agency (USTDA) and with
businessmen.

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-- The United States does not want to interfere in
Turkmenistan's gas deliveries to Russia. However, it
believes that sending gas west is not just a matter of
profitability, but also of enhancing Turkmenistan's
sovereignty.

PRESIDENT AGREES TO CONSIDER CONNECTOR PIPELINE STUDY


5. (C) Mann added that he had told President Berdimuhamedov
that the United States still would like to see Turkmenistan
send natural gas from its offshore platforms to the West. Of
course, the United States continues to support a
Trans-Caspian pipeline (TCP),but that would be complicated.
For now, the United States understands that the government
controls the gas from the Petronas, Dragonoil and Burren
blocks, and would like to see that gas sent west. The
president had agreed that the United States should study the
possibility of doing so, and had suggested that Mann discuss
with Tagiyev and his colleagues a plan for a connector
pipeline from Petronas' Livonov field in the Caspian Sea.
Mann also noted that he had discussed with Berdimuhamedov and
Meredov the necessary conditions that would need to be
addressed for companies to be willing to do business in
Turkmenistan, including visas, access to Internet and
resolving issues related to the Ashgabat International School.


6. (C) Tagiyev responded by noting the changes that his
government is making to its hydrocarbon structures.
Turkmenistan is establishing a new agency, the Turkmen
Chemicals state concern, which will fall under Tagiyev's
purview. There are also plans to modernize the Seydi Oil
Refinery at Turkmenabat and to strengthen the Institute of
Chemistry, which helps support the country's chemical
industry. Any foreign companies may make proposals for these
projects.

TAGIYEV CLAIMS SIGNIFICANT GAS IN CASPIAN


7. (C) Tagiyev said that Turkmenistan needs to find six
trillion cubic meters of gas and 12 billion tons of oil in
the Caspian over the coming years. Petronas has plans to
start using the gas it currently is flaring by 2010, and
Dragonoil hopes to implement a new collection plan in the
next year for the associated gas it is flaring.
Wintershall/Maersk plans to begin drilling in 2008, and
Western Geco, which laid two-dimensional seismic lines in the
block being worked by Wintershall/Maersk, believes that there
could be up to six trillion cubic meters of gas there. In
order to get a clearer picture of how much gas might be
contained in the Caspian, Turkmenistan is planning to carry
out three-dimensional surveys, which it will tender out.


8. (C) Tagiyev noted that one problem his country faces is
that it does not produce oil equipment, and will likely have
to switch to a price formula for its gas in order to help pay
for needed equipment. It has been discussing this
possibility with Russia and Iran.


9. (C) Stating that "some think we do not have enough gas,"
Tagiyev noted that there had been recent discoveries in the
Yoloten and Osmon fields. Estimated gas resources in these
fields are at three trillion cubic meters. Turkmenistan
wants to develop those new fields and to invite foreign
companies to work there.


10. (C) Agreeing that Turkmenistan has to look at other
export routes for its gas without disturbing its imports to
Russia, Tagiyev noted that planning for the Trans-Afghanistan
pipeline is going ahead and the TCP also has great potential.

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In response to a question, he added that Petronas plans to
produce 5 billion cubic meters (bcm) of gas by 2010, and 10
bcm by 2011. Wintershall/Maersk will have received its
drilling results by that time. In addition,
ConocoPhillips/Lukoil is just about ready to sign a
production sharing agreement (PSA) contract for blocks 19 and

20. Other companies are looking at other blocks.

MEETINGS WITH AZERBAIJAN: MUTUAL UNDERSTANDING


11. (C) Tagiyev told Mann that Turkmenistan has reached
"mutual understanding" in its meetings with Azerbaiijan's
SOCAR. Both sides had tabled proposals. Asked by Mann about
his thinking regarding joint projects, Tagiyev said "we are
oilmen, and do not object to working together jointly (with
the Azerbaijanis)." But, he added, no joint projects are
currently under consideration. Tagiyev also indicated that
Turkmenistan has already met with officials from Kazakhstan,
Azerbaijan and Uzbekistan on energy issues, and has had
several meetings with Afghanistan.

TAGIYEV ENCOURAGES U.S. PARTICIPATION IN AVAZA FREE TOURIST
ZONE


12. (C) When Mann hoped the president would seriously
consider U.S. suggestions for improving the foreign
investment climate, Tagiyev (who is now spearheading the
Avaza Free Tourist Zone development project on the Caspian
coast) started praising the Avaza project, promising that
companies that invest in the project will "get all the
documents." Mann responded that he always asks three
questions for any new issue: what are the benefits of the
project, what market exists, and what competition is there in
the region. But Avaza is an interesting project, and he
wishes Turkmenistan great success with the project. Tagiyev
stated that Turkmenistan hopes to hold the TIOGE in Avaza in
three years.


13. (C) COMMENT: This was one of Mann's most successful
meetings yet with Tagiyev, an oilman and technical expert
rather than a strategic thinker),who frequently comes off as
hopelessly old-school. Tagiyev's increased confidence
following the TIOGE's success may have been the reason that
he was (for Tagiyev, normally a monosyllabic interlocutor)
unusually forthcoming. The fact that Tagiyev was willing,
for the first time, to acknowledge to Mann the need to look
at alternative export pipeline options and to state that
Turkmenistan is considering allowing foreign companies to
work in the Amu Darya basin is a big step forward that
demonstrates that lower, technical echelons in Turkmenistan's
hydrocarbon sector are finally beginning to get the
president's message that some things must change. END
COMMENT.


14. (U) PDAS Mann has cleared this cable.
HOAGLAND