Information on Malaysian Oil Company Petronas

UNCLAS SECTION 01 OF 02 ASHGABAT 000309

SIPDIS

SENSITIVE

SIPDIS

STATE FOR SCA/CEN (PERRY) AND EEB; KUALA LUMPUR PLEASE PASS TO SCA
PDAS MANN

E.O. 12958: N/A
TAGS: EPET ECON ENRG TX MY
SUBJECT: Information on Malaysian Oil Company Petronas


Summary
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1. (SBU) Malaysian oil company Petronas, which signed a 25-year
production sharing agreement (PSA) in 1996 to develop the offshore
Block 1 in the Caspian Sea, has a large and expanding presence in
Turkmenistan. Block 1 resources have been estimated at a level of:
1 trillion cubic meters (tcms) of gas, 200 million tons of oil and
300 million tons of gas condensate. In addition to its Block 1
hydrocarbon extraction activities, Petronas also is building an
onshore LNG gas treatment plant and gas terminal at Kiyanly.
Petronas reportedly is considering construction of a new pipeline to
Kazakhstan. Post estimates Petronas investment in Turkmenistan may
have surpassed $350 million. End Summary.

Petronas Investment Estimated at $350 Million
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2. (SBU) Embassy Ashgabat provides the following in response to SCA
PDAS Mann's request for information on the scope and size of
Malaysian oil company Petronas' activities in Turkmenistan. Post
estimates Petronas may have invested over $350 million in its
operations in Turkmenistan.

History of Petronas Presence in Turkmenistan
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3. (U) Petronas, the National Malaysian Petroleum Corporation,
signed a 25-year PSA to develop the offshore Block 1 in the Caspian
Sea in 1996. The initial exploration license was issued to the
Malayan firm for six years, until 2002. In 2002, the company
received a three-year extension to complete its exploration
activities. In 2003, after an unsuccessful experience with an
Iranian drilling subcontractor, Petronas signed an eight-year
drilling agreement with Transocean, a U.S. company. By the end of
2005, Petronas had six exploration wells and one production well in
Turkmenistan. As part of its exploration effort, the company also
conducted 2D and 3D seismic surveys from 1998 to January 2005.

Block-1 Resources: At Least 200 Million Tons of Oil
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4. (SBU) In 2005, Russian periodical "Neftegazovya Vertical" quoted
Petronas geologists, who estimated Block-1 resources as "no less
than 1 trillion cubic meters (tcms) of gas, 200 million tons of oil
and 300 million tons of gas condensate." The same magazine also
stated that, after exploratory drilling in 2005, the company planned
to increase the estimates of its reserves in the Caspian by 5
billion cubic meters (bcms) of gas and 2 million tons of condensate.
In May 2006, a Transocean representative informed embassy that four
of the five wells it had drilled had struck commercial deposits of
hydrocarbons, mostly natural gas. Petronas contracted the U.K.
firm, Gaffney Cline and Associates, to certify its discovered
resources.

Petronas Puts in Place Mobile Offshore Production Unit
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5. (SBU) Early in 2006, Petronas brought into the country a mobile
offshore production unit (MOPU) and a Floating Storage and
Off-loading system (FSO). The systems, which allowed Petronas to
offload the oil to tankers, eliminated the need to lay an oil
pipeline to transport oil from the offshore rigs to the shore.
Petronas has not yet announced its 2006 production statistics.

Expansion Includes Gas Treatment Facility, Gas Terminal
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6. (SBU) In 2004 Petronas and Turkmenistan announced their plans to
build a gas treatment facility and an onshore gas terminal for 10
bcm a year in Kiyanly, north of Turkmenbashy. The facilities were
intended to be connected to the CAC-3 main line. These plans were
later confirmed on different occasions by Transocean and Turkish
construction firm Gap Insaat. Transocean informed embassy that, by
2009, Petronas will build a natural gas pipeline from its offshore
facilities to Kiyanly. Gap Insaat has been preparing earth works
for the onshore gas treatment facility and gas terminal for over a
year. The company told embassy officers that most engineering would
be done by Malaysian companies, including Malaysia Marine and Heavy
Engineering Sdn.Bhd.

ASHGABAT 00000309 002 OF 002



Arrangements to Transport Petronas Gas North
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7. (U) The IEA (International Energy Agency) mission report of
September 2005 mentioned that mission members had learned that the
Government of Turkmenistan had requested Petronas to look into the
feasibility of rehabilitating the Turkmenistan sector of the Central
Asia Center system, or to construct a new pipeline. In June 2006,
the KazTransGaz (the Kazakh state-run gas transport company, part of
the KazMunayGaz National Oil and Gas Company) and Petronas Carigali
(Turkmenistan) Sdh.Bhd signed a memorandum of understanding on the
transportation of natural gas from Turkmenistan via the Kazakh net
of pipelines, Okarem-Beyneu and Central Asia-Centre 3, to Russia.
(Note: CAC-3 and CAC-1, -2, and -4 merge in Beyneu. End Note.)


8. (U) Burren Energy's interim 2006 annual report stated that the
company was discussing with the Government of Turkmenistan the
possible export of gas from the Burun field. Another company report
further specified that Burren was considering either linking
directly to the CAC-3 or arranging a tie-in with Petronas and Dragon
Oil to a pipeline to Kazakhstan.


9. (U) According to "Neftegazovya Vertical," Petronas will build
two pipelines to the shore by 2008: a 26-inch gas pipeline and a
12-inch gas condensate line. For further transportation of
commercial gas, Petronas plans to build a 24-inch connect to CAC-3.
The built-in capacity of CAC-3 is 10 bcm a year.

2006 Meeting with Niyazov: No Concrete Developments
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10. (U) On September 8, 2006, Petronas' leadership met with
President Niyazov to discuss further cooperation. There were no
reports of new substantive developments coming from that meeting.

HOAGLAND