CANARGO PROSPECTS FOR GAS IN DUSHANBE

UNCLAS DUSHANBE 000935 SIPDIS SENSITIVE SIPDIS STATE FOR SCA/CEN COMMERCE FOR ITA/RISD/DSTARKS E.O. 12958: N/A TAGS: ENRG EINV EIND TI PGOV SUBJECT: CANARGO PROSPECTS FOR GAS IN DUSHANBE ¶1. (SBU) Summary. The heads of U.S. oil and gas prospecting company CanArgo recently visited Tajikistan in order to push the Tajik government to sign a contract on development of oil and gas fields in the southern Kulob region. CanArgo has signed a protocol with the government on development of these fields, and is now seeking a production sharing agreement. While the gas fields have real potential, CanArgo has discovered that the Tajik tax code prohibits payment of taxes in-kind, precluding the kind of production sharing agreement they had hoped to sign. End Summary. ¶2. (SBU) The president of CanArgo Energy Corporation, Dr. David Robson, flew EconOffs to Kulob June 21 to check out a gas field and a gas processing facility. Robson, a geologist, discussed technical details with local engineers, and seemed satisfied at the prospects. While the gas contains 15% sulfur, the Canadian-built 10-year old gas cleaning facility produces clean gas. As a goodwill gesture, CanArgo plans to bring in a portable 4MW gas-powered generator that would provide electricity to the Kulob region this winter. (Kulob typically demands 40-60MW, but supplies fell to 20MW last winter.) The mayor of Kulob seemed very pleased at this prospect, and looked forward to cooperating with CanArgo. ¶3. (SBU) CanArgo representatives described moving forward on the legislative fix necessary for the production sharing agreement as "one step forward, two steps back." They are working principally with the State Committee on Investments, and with Minister of Energy and Industry Gulov, but they have the sense no one is pushing from the Tajik side. We put them in touch with USAID-funded Pragma which is providing legal advice to the Investments Committee on making Tajik legislation more amenable to investment. CanArgo hopes that Deputy Prime Minister Ghulomov will push the whole project along, but is afraid Gazprom's influence with the government may prove to be problematic for CanArgo. ¶4. (SBU) CanArgo is spinning off its Central Asian company, Tethys Petroleum Limited, next week. Tethys will be listed on the Canadian stock exchange, and it is Tethys that would be working here (they have about 8 million USD to invest if things work out). We told them they would need to re-qualify with the Department of Commerce as an American company based on ownership for us to be able to do direct advocacy. If that happens, we told them we would be happy to raise specifics with government officials, both orally and in writing, as needed. ¶5. (SBU) CanArgo is thinking about whether a government decree on the production sharing agreement would be enough of a guarantee to start work, with the legislation to come later. Of course, the Tajik side would like CanArgo to get to work right away, and settle the details about production sharing after production has begun. Who would pay for any gas produced is also up in the air, as any near-term production would go to the Tajik market. CanArgo has made several trips to Tajikistan, however, and have shown that their interest in developing gas in Tajikistan is genuine. JACOBSON